As filed with the Securities and Exchange Commission on March __, 2000.
Registration No. 333______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TTR TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
3577
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(Primary Standard Industrial Classification Code Number)
11-3223672
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(I.R.S. Employer Identification No.)
2 HaNagar Street, Kfar Saba, Israel 011-972-9-766-2393
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(Address and Telephone Number of Registrant's Principal Executive Offices)
The Corporation Trust Company
1209 Orange Street, Wilmington, Delaware, 19801 302-658-7581
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(Name, address and telephone number of agent for service)
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Copies to:
JAY WEIL, ESQ.
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
(212) 986-1116
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effectiveness of this registration
statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of each class of Amount to offering price per aggregate offering Amount of
securities to be registered be registered share price registration fee(1)
- --------------------------- ----------- ----- ----- ----------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.001 per share 4,722,206(2) $8.6875(3) $41,024,165(3) $10,831
380,000(4) $8.6875(3) $3,301,250(3) $ 872
990,000(4) $8.84(5) $8,751,600(5) $ 2,311
495,000(4) $21.22(5) $10,503,900(5) $ 2,773
---------- ------ ----------- -------
Total Fee $16,787
=======
</TABLE>
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(1) Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus also
relates to an aggregate of 3,881,299 shares of common stock previously
registered pursuant to Registration Statement No. 333-85085 which remain
unsold and for which the filing fee has previously been paid at the time
such registration statement was originally filed (including pre-effective
amendments thereto).
(2) Represents shares of common stock held by certain selling stockholders.
(3) Estimated solely for the purpose of calculating the registration fee on
the basis of the average of the closing bid and ask prices of the common
stock on March 10, 2000, as reported on the OTC Electronic Bulletin Board.
(4) Represents shares of common stock issuable upon exercise of warrants held
by certain selling stockholders. In accordance with Rules 416 and 457
under the Securities Act of 1933, this Registration Statement also covers
such indeterminate number of additional shares of common stock which may
be issued upon exercise of such warrants to prevent dilution arising from
stock splits, stock dividends or similar transactions.
(5) Based upon the exercise price of the warrants on the date hereof.
----------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Registration Statement is a combined Prospectus and relates to
this Registration Statement and those shares of Common Stock previously
registered under the Registration Statement on Form SB-2 (Registration No.
333-85085) which remain unsold (including such indeterminate number of
additional shares of Common Stock as may be issuable upon exercise of certain
warrants held by certain of the selling stockholders referred to in the
Registration Statement on Form SB-2 to prevent dilution resulting from stock
splits, stock dividends or similar transactions).
This Registration Statement also constitutes Post-Effective Amendment No.
1 to Registration Statement No. 333-85085. Such Post-Effective Amendment No. 1
shall hereafter become effective concurrently with the effectiveness of this
Registration Statement in accordance with Section 8(c) of the Securities Act of
1933.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH __, 2000
TTR TECHNOLOGIES, INC.
10,468,505 shares of Common Stock
We design and develop anti-piracy technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet.
Holders of our common stock identified in this prospectus are offering all
of the shares to be sold in the offering. These shares may be offered any time
after the date of this prospectus in one or more types of transactions,
including through broker-dealers, in over-the-counter market or directly by the
selling stockholders in negotiated transactions. Prices for the shares may be
the market prices prevailing at the time of sale or may be negotiated by the
selling stockholder and the buyer. For additional information on the methods of
sale, you should refer to the section entitled "Plan of Distribution." We will
not receive any of the proceeds from the offering.
Each of the selling stockholders may be deemed to be an "underwriter," as
such term is defined in the Securities Act of 1933.
Shares of our common stock trade on the OTC Electronic Bulletin Board
under the symbol "TTRE". The closing sale price of the common stock on March 10,
2000 on the OTC Electronic Bulletin Board was $8.6875 per share.
----------------------
This investment involves a high degree of risk. You should purchase shares
only if you can afford a complete loss of your investment. See "Risk Factors"
beginning on Page 2 of this Prospectus.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
The information in this prospectus is not complete and may be changed. The
stockholders selling our common stock pursuant to this prospectus may not sell
these shares until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these
shares and it is not an offer to buy these shares in any state where the offer
or sale is not permitted.
----------------------
The date of this prospectus is _______________, 2000
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary............................................. 1
Risk Factors................................................... 2
Disclosure Regarding Forward-Looking Statements ............... 10
Dividend Policy................................................ 10
Use of Proceeds ............................................... 10
Price Range of Common Stock.................................... 10
Selected Consolidated Financial Data........................... 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 12
Business....................................................... 15
Conditions in Israel........................................... 23
Management..................................................... 25
Certain Relationships and Related Transactions................. 30
Principal and Selling Stockholders............................. 31
Description of Securities...................................... 35
Plan of Distribution........................................... 37
Legal Matters.................................................. 38
Experts........................................................ 38
Where to Find More Information................................. 39
Index to Financial Statements.................................. F-1
<PAGE>
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, especially the
risks of investing in our common stock discussed under "Risk Factors." Except as
otherwise noted, the information in this prospectus does not give effect to the
conversion of outstanding convertible securities or to the exercise of
outstanding options and warrants. Unless otherwise noted, references in this
prospectus to "TTR," "we," "our" and "us" refer to TTR Technologies, Inc., a
Delaware corporation, and our wholly owned subsidiary, TTR Technologies, Ltd.,
an Israeli company.
We design and develop anti-piracy software technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet. Our proprietary anti-piracy technology, MusicGuard(TM), is a unique
hardware-based technology designed to prevent the unauthorized copying of audio
content distributed on CDs. Our copy protection technologies are designed to be
transparent to the legitimate end-user.
As of November 24, 1999, we entered into an agreement with Macrovision
Corporation to jointly design and develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. The new product will be based primarily upon our MusicGuard
technology as well as related Macrovision technology and will be jointly owned
by us and Macrovision. We expect that the immediate application of the
technology we are developing with Macrovision will be of interest for the music
distribution business and recording studios whose products are customarily
distributed on CDs. We granted to Macrovision an exclusive world-wide royalty
bearing license to design, develop and market the copy protection technology
which we are jointly developing.
Our immediate goal is to establish the proposed audio content protection
technology which we and Macrovision are developing as the leading product in the
target market of audio content copy protection for the high-volume recording
industry. Additionally, we are actively developing other technologies and
looking to acquire technologies which are synergistic with our current business
and will enable us to leverage our knowledge base and skill.
We were organized in July 1994. We have an Israeli subsidiary, organized
in December 1994, through which we conduct research and development. Our
principal executive offices are located at 2 HaNager Street, Kfar Saba, Israel,
telephone 011-972-9-766-2393. We also have a mailing address at 67 Wall Street,
Suite 2411, New York, New York 10005 and can be reached by telephone in New York
at 212-323-8284. Our Web site is www.ttrtech.com. Information contained on our
Web site is not, and should not be deemed to be, a part of this prospectus.
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The Offering
<TABLE>
<S> <C>
Securities offered..................10,468,505 shares of common stock. (1)
Shares outstanding..................15,967,890 shares of common stock. (2)
Use of proceeds.....................We will not receive any proceeds from the sale of
common stock by the selling stockholders. We may,
however, receive proceeds from the sale of certain of
the warrants held by certain of the selling
stockholders.
</TABLE>
- ----------
(1) Includes (i) 7,552,493 shares of common stock held by certain selling
stockholders, and (ii) 2,916,012 shares of common stock issuable upon exercise
of certain warrants and options held by certain selling stockholders.
(2) Does not include (a) up to an aggregate of 1,166,400 shares of our common
stock issuable upon exercise of options granted under our 1996 Stock Option
Plan, (b) any of the shares described in clause (ii) in footnote (1) above, or
(c) 95,000 shares issuable upon exercise of certain outstanding options and
warrants that are not held by the selling stockholders.
We are registering the shares offered hereby in order to satisfy various
obligations to the selling stockholders to register their resale of our common
stock. See "Plan of Distribution."
RISK FACTORS
This offering involves a high degree of risk. You should be able to bear a
complete loss of your investment. You should carefully consider the risks
described below and the other information in this prospectus before deciding to
invest in shares of our common stock. If any of the following risks actually
occur, our business, financial condition and results of operations would likely
suffer. In such case, the market price of our common stock could decline, and
you may lose all or a part of the money you pay to buy our common stock.
Our relationship with Macrovision is very important to us, since it will
be the exclusive licensee of our anti-piracy products and it is responsible for
marketing them.
As of November 24, 1999, we entered into a ten year agreement with
Macrovision to jointly develop a commercially viable anti-piracy protection
technology and product for audio content distribution on optical media. We
granted to Macrovision exclusive worldwide royalty bearing rights to our
proprietary anti-piracy technology, MusicGuard, which serves as the primary
basis for the proposed audio content protection technology. Under the terms of
our agreement, Macrovision is responsible for promoting and marketing the
proposed music protection technology or product. Macrovision has the discretion
to determine the staffing and resources it allocates to commercialize the
technology consistent with Macrovision's good faith determination as to the
technology's commercial potential. We also granted to Macrovision exclusive
rights to our proprietary CD software anti-piracy protection technology,
DiscGuard, which is the only commercially available product we currently have.
Only a limited portion of the license for DiscGuard is royalty bearing and
Macrovision is not required to pay any minimum royalties in order to retain its
exclusivity. We
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expect that sales through Macrovision will account for most of our revenues for
at least the next two years. We believe that the rapid penetration of the
proposed music protection technologies in the recording industry in the United
States and Europe to be crucial to our success. If we are unable to effectively
manage and maintain our relationship with Macrovision or for any reason
Macrovision cannot successfully market MusicGuard, our business will be
materially adversely affected. In addition, our condition could be adversely
affected by changes in the financial condition of Macrovision or by any other
changes to Macrovision's business.
We do not currently have any commercially viable products or technologies
and we cannot assure you that we will develop any.
MusicGuard, our proprietary anti-piracy protection technology for audio
content distributed on CDs, is not currently commercially viable but will serve
as the primary basis for the proposed music protection technology that we and
Macrovision are jointly designing and developing. Under the terms of our
agreement with Macrovision, we will work jointly with Macrovision to complete a
product suitable for commercial launch. We estimate that this project will take
nine months, six months until the commercial launch and three months following
the commercial launch. We have also given to Macrovision an exclusive worldwide
partially royalty bearing license to DiscGuard, which we launched commercially
in February, 1998. We expect that Macrovision will use components of DiscGuard
to support its CD-ROM product, SafeDisc(TM). Although we are working to develop
technologies with applications in other areas, these technologies are at an
early stage. Currently, we have no other commercially viable product or
technology.
Even if we develop other commercially viable technologies, the right of
first refusal we have granted to Macrovision with respect to certain products
may impair our ability to exploit them.
Under the terms of our agreement with Macrovision, we have granted to
Macrovision first refusal rights until December 31, 2009 with respect to any
music protection technology we develop which is not included in the license to
Macrovision and any Internet digital rights management technologies we develop
which are applicable to music, music video, video, software or data publishing
products or markets. These rights include rights of ownership if we decide to
sell the technology or worldwide exclusive marketing or distribution rights if
we decide to license the technology. Our obligation is to negotiate a sale or
license to Macrovision in good faith should we receive a bona fide offer from a
third party to purchase or license the technology and should Macrovision notify
us of its interest in acquiring the technology. As is ordinarily the case where
a right of first refusal is granted, the existence of this right may impair our
ability to fully exploit the commercial potential inherent in other technology
we may develop which is subject to this right by creating the possibility that
an interested third party may abstain from making an offer for our technology
due to a possible concern on the part of such third party that its offer will be
utilized by us solely for negotiating an offer from Macrovision on more
favorable terms.
We have lost money in every quarter and year, and we expect these losses
to continue in the foreseeable future.
Since we began our operations in 1994, we have lost money in every quarter
and year. As of December 31, 1999, we had an accumulated deficit of
approximately $24.8 million. If our revenue does not increase and we cannot
adjust our level of spending adequately, we may not generate sufficient revenue
to become profitable. Even if we do become profitable, we may not be able to
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<PAGE>
sustain or increase profitability on a quarterly or annual basis in the future.
Our ability to generate revenue depends primarily upon our ability to jointly
develop with Macrovision the audio content copy protection technology to the
point it becomes commercially viable and Macrovision's success in promoting and
marketing the technology.
We have only been in business for a short period of time, so your basis
for evaluating us is limited.
We are a development stage company with a limited history of operations.
Prior to the commencement of our joint efforts with Macrovision to develop a
commercially viable audio content protection product and before our software
product, DiscGuard, first became commercially available in February 1998, we
were engaged primarily in research and development. As a result, there is a
limited history of operations for evaluating our business. You must consider the
risks and difficulties frequently encountered by early stage companies in new
and rapidly evolving markets, including the audio content copy protection and
anti-piracy market. Some of these risks and uncertainties relate to our ability
to:
o complete, together with Macrovision, the design and development of audio
content protection technology of a commercially viable product or
technology;
o stay ahead of the efforts of hackers and counterfeiters to circumvent our
copy protection technologies;
o respond effectively to actions taken by our competitors;
o build our organizational and technical infrastructures to manage our
growth effectively;
o design, develop and implement effective products for existing clients and
new clients;
o extend MusicGuard protection to DVDs; and
o attract, retain and motivate qualified personnel.
If we are unsuccessful in addressing these risks and uncertainties, our
business, financial condition and results of operations will be materially and
adversely affected.
The market for audio content copy protection technology is unproven.
The market for copy protection technology for audio content distribution
on CDs, especially in the consumer multi-media market, is unproven. For us to be
successful in entering this market, recording studios and artists must accept
copy protection generally and also adopt the solution that we are developing
with Macovision. There can be no assurance that copy protection of multi-media
audio content distributed on CDs will be widely commercially accepted. For
example, consumers may react negatively to the introduction of copy protected
CDs if they are prevented from copying the content of their favorite audio
content. Moreover, copy protection may not be effective or compatible with all
hardware platforms or configurations or may prove to be easily circumvented.
Further, the technology we are developing with Macrovision may not achieve or
sustain market acceptance under emerging industry standards. If the market for
copy protection of audio content distributed on CDs fails to develop or develops
more slowly than expected, or if MusicGuard does
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<PAGE>
not achieve or sustain market acceptance, our business, financial condition and
results of operations would be materially adversely affected.
You should not rely on our quarterly operating results as an indication of
how we will do in the future.
Our quarterly operating results may vary significantly in the foreseeable
future due to a number of factors that could affect our revenue, expenses or
prospects during any particular quarter. These factors include:
o the success of Macrovision in promoting and marketing any music protection
technology developed through our joint efforts.
o the demand for audio content anti-piracy protection in general and for CDs
in particular, and, potentially, for DVDs;
o the degree of acceptance of our copy protection technologies by recording
studios and artists;
o changes in our operating expenses;
o changes in fees paid for copy protection of audio content distributed on
CDs resulting from competition or other factors;
o economic conditions specific to the recording industry;
o anticipated seasonality of revenues relating to sales of music CDs to
consumers in our target market.
In any given quarter, we may expend substantial funds and management
resources and yet not obtain adequate revenue, and we may not be able to adjust
spending in a timely manner to compensate for any unexpected shortfall in our
revenue. Any significant shortfall could have an immediate material and adverse
effect on our business, financial condition and results of operations.
Due to all of the foregoing factors, and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our operating results will be below the expectations of public
market analysts and investors. In this event, the price of our common stock
would likely fall.
For at least the next two years, we expect to derive most of our net
revenues and operating income from royalties collected from Macrovision in
respect of sales of copy protection technology or products. We cannot assure you
that we will receive any revenues from these royalties or if revenues are
received, that they will grow significantly or at all. Any growth in revenues
from these fees will depend on the use of our copy protection technology by a
larger number of recording studios and artists. In order to increase our market
penetration, we must persuade recording studios and artists that the cost of
licensing our technology is outweighed by the increase in revenues from
additional sales of the copy protected material that the recording studios and
artists would achieve as a result of using copy protection.
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<PAGE>
There are many competitors in the copy protection industry and we may not
be able to compete effectively against them.
There is currently no commercially available technology which prevents the
faithful copying of compact discs. There can be no assurance that companies with
substantially greater financial, technological, marketing, personnel and
research development resources than ours will not develop and begin marketing a
similar technology. While no technology is currently available, the Secure
Digital Music Initiative is a forum of companies who have agreed to develop a
standard for copy protection of digital music. The standard developed and being
improved upon by the Initiative will apply to next generation portable playback
devices. There can be no assurance that if and when the standard is implemented,
the MusicGuard technology will be able to effectively compete against copy
protection technologies based on the Initiative's standard.
Third parties may be able to circumvent our anti-piracy technology.
We must continually enhance and upgrade audio content protection
technology to stay ahead of the efforts of counterfeiters and hackers to
circumvent our technologies, even in the face of the new United States Digital
Millennium Copyright Act. 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. It is conceivable that counterfeiters and hackers could develop a
way to circumvent our copy protection techniques, which may result in a
potentially substantial decrease in the demand for our products. Additionally,
music rights owners could choose not to use our anti-piracy technology if they
believe that our technology will be unable to deter counterfeiters or if they
believe it interferes with legitimate consumer use of the original copyrighted
product. In this regard, the copy protection technologies are intended to
prevent both consumer copying and professional remastering and replication. Any
reduction in demand for our products could have a material adverse effect on our
business, financial condition and results of operations.
We are vulnerable to technological obsolescence.
The proposed audio protection technology is based upon a single set of
core technologies. The market for this technology and products is characterized
by rapid change, often resulting in product obsolescence or short product life
cycles. Although we are not aware of any developments in the audio content
protection industry which would render our planned products less competitive or
obsolete, there can be no assurance that future technological changes or the
development of new or competitive products by others will not do so.
We have very few employees and are particularly dependent on our Chief
Technology Officer.
We have a small number of employees. Although we believe we maintain a
core group sufficient for us to effectively conduct our operations, the loss of
certain of our key personnel could, to varying degrees, have an adverse effect
on our operations and product development. The loss of Dr. Baruch Sollish, our
Chief Technology Officer, would have a material adverse affect. We have not
obtained "key-man" life insurance on the life of Dr. Sollish. Our key employees
and corporate officers all reside in Israel.
6
<PAGE>
We are subject to risks associated with international operations.
We conduct business from our facilities in Israel and the United States,
and through our exclusive licensee, Macrovision. Our international operations
and activities subject us to a number of risks, including the risk of political
and economic instability, difficulty in managing foreign operations, potentially
adverse taxes, higher expenses and difficulty in collection of accounts
receivable. In addition, although we receive most of our revenue in U.S.
dollars, a substantial portion of our payroll and other expenses are paid in the
currency of Israel, where most of our employees reside and our research and
development operations are located. Because our financial results are reported
in U.S. dollars, they are affected by changes in the value of the various
foreign currencies that we use to make payments in relation to the U.S. dollar.
We do not currently cover known or anticipated operating exposures through
foreign currency exchange option or forward contracts.
We are subject to risks associated with operations in Israel.
Our Israeli subsidiary maintains offices and research and development
facilities in Israel and is directly affected by prevailing economic, military
and political conditions that affect Israel.
We need to establish and maintain licensing relationships with companies
in related fields.
Our success in developing and commercializing other technologies will
depend in part upon our ability to establish and maintain licensing
relationships with companies in related business fields, including international
distributors. We believe that these relationships can allow us greater access to
manufacturing, sales and distribution resources. However, the amount and timing
of resources to be devoted to these activities by these other companies may not
be within our control. We may not be able to maintain relationships or enter
into beneficial relationships in the future. Other parties may not perform their
obligations as expected. Our reliance on others for the development,
manufacturing and distribution of our technologies and products may result in
unforeseen problems. There can be no assurance that our licensees will not
develop or pursue alternative technologies either on their own or in
collaboration with others, including our competitors, as a means of developing
or marketing products targeted by the collaborative programs and by our
products.
Our efforts to protect our intellectual property rights may not be adequate.
Our success depends on our proprietary technologies. We rely on a
combination of patent, trademark, copyright and trade secret laws, nondisclosure
and other contractual provisions, and technical measures to protect our
intellectual property rights. Our patents, trademarks or copyrights may be
challenged and invalidated or circumvented. Any patents that issue from our
pending or future patent applications or the claims in pending patent
applications may not be of sufficient scope or strength or be issued in all
countries where our products can be sold or our technologies can be licensed to
provide meaningful protection or any commercial advantage to us. Others may
develop technologies that are similar or superior to our technologies, duplicate
our technologies or design around our patents. Effective intellectual property
protection may be unavailable or limited in certain foreign countries. Despite
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy or otherwise use aspects of processes and devices that we regard as
proprietary. Policing unauthorized use of our proprietary information is
difficult, and there can be no assurance that the steps we have taken will
prevent misappropriation of our technologies. In the event that our intellectual
property protection is insufficient to protect our intellectual property rights,
we could
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face increased competition in the market for our products and technologies,
which could have a material adverse effect on our business, financial condition
and results of operations.
Litigation may be necessary in the future to enforce any patents that may
issue and other intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. There can
be no assurance that any litigation of these types will be successful.
Litigation could result in substantial costs, including indemnification of
customers, and diversion of resources and could have a material adverse effect
on our business, financial condition and results of operations, whether or not
this litigation is determined adversely to us. In the event of an adverse ruling
in any litigation, we might be required to pay substantial damages, discontinue
the use and sale of infringing products, expend significant resources to develop
non-infringing technology or obtain licenses to infringed technology. Our
failure to develop or license a substitute technology could have a material
adverse effect on our business, financial condition and results of operations.
The rights of first refusal we have granted to Macrovision relating to the
sale of our equity securities may impair our ability to obtain other financing.
In the January 12, 2000 stock purchase agreement under which we sold to
Macrovision $4 million of our common stock, we granted to Macrovision rights of
first refusal to purchase equity securities (including securities convertible or
exchangeable into common stock) we propose to sell to third parties if the
amount of the securities to be sold would constitute a majority of our
outstanding common stock. Subject to some exceptions, we further granted to
Macrovision a right to purchase its pro rata share (based on Macrovision's then
current ownership of common stock) of any equity securities we offer in private
transactions above a certain amount. The existence of these rights may impair
our ability to obtain equity financing from third parties on terms satisfactory
to us or at all because investors may be reluctant to devote the time and
expense necessary to negotiate the terms of a transaction which we may not be
able to consummate with them if Macrovision elects to exercise its rights.
However, Macrovision waived its right of first refusal with respect to our
private placement in February 2000 of 1,800,000 shares of Common Stock and
900,000 Class A Warrants for an aggregate purchase price of $10 million.
We face Year 2000 risks.
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates
because such systems may have been developed using two digits rather than four
to determine the applicable year. This 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. Some of these concerns have continued to persist after
January 1, 2000. Our business depends on the operation of numerous systems that
could potentially be affected by Year 2000 related problems. Those systems
include hardware and software systems used internally by us in the management of
our business; hardware and software products developed by us; the internal
systems of our customers and suppliers; and non-information technology systems
and services used by us in the management of our business, such as telephone
systems and building systems. Success of our Year 2000 readiness efforts may
depend on the success of our customers in dealing with their Year 2000 issues.
Although we believe that our Year 2000 readiness efforts are designed to
appropriately identify and address those Year 2000 issues that
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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. 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.
Future sales of our common stock by our holders of outstanding stock, options
and warrants could have an adverse effect on the market price of our common
stock.
We anticipate that some or all of the selling stockholders may from time
to time sell all or part of the shares offered hereby. In addition, there are
currently outstanding options or warrants to purchase 3,682,412 shares of our
common stock (comprised of 1,166,400 options granted under our 1996 Stock Option
Plan, 2,421,012 options and warrants held by selling stockholders with exercise
prices ranging from $1.50 to $8.84 per share and 95,000 options and warrants not
held by selling stockholders) and warrants to purchase an additional 495,000
shares of our common stock which are issuable upon exercise of certain
outstanding warrants with an exercise price of $21.22 per share. The market
price of our common stock could decline as a result of sales by our existing
stockholders of a large number of shares of common stock in the market after
this offering, or the perception that these sales may occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate.
Our stock price is volatile and could continue to be volatile.
Investment interest in our common stock may not lead to the development of
an active or liquid trading market. The market price of our common stock has
fluctuated in the past and is likely to continue to be volatile and subject to
wide fluctuations. In addition, the stock market has experienced extreme price
and volume fluctuations. The stock prices and trading volumes for many "high
tech" companies fluctuate widely for reasons that may be unrelated to their
business or results of operations. The market price of our common stock may
decline below the offering price. General economic, market and political
conditions could also materially and adversely affect the market price of our
common stock and investors may be unable to resell their shares of common stock
at or above the offering price.
It may be difficult for a third party to acquire us.
Provisions of Delaware law could make it more difficult for a third party
to acquire us, even if it would be beneficial to our stockholders.
Penny Stock Regulation may be applicable to investment in our shares.
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current
prices and volume information with respect to transactions in such securities
are provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must
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<PAGE>
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes "Forward-Looking Statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this prospectus, including statements
regarding our future financial position, business strategy, budgets, project
costs and plans and objectives of management for future operations, are
Forward-Looking Statements. In addition, Forward-Looking Statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "except," "should," "intend," "estimate," "anticipate," "believe," or
"continue" or their negatives or variations of these terms or similar
terminology. Although we believe that the expectations reflected in such
Forward-Looking Statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Important factors (or Cautionary
Statements) that could cause actual results to differ materially from our
expectations are disclosed under "Risk Factors" and elsewhere in this
prospectus. All subsequent written and oral Forward-Looking Statements
attributable to us, or to persons acting on our behalf, are expressly qualified
in their entirety by the Cautionary Statements.
DIVIDEND POLICY
We have never paid a cash dividend on our common stock. Payment of
dividends is at the discretion of the board of directors. The board of directors
plans to retain earnings, if any, for operations and does not intend to pay
dividends in the foreseeable future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholders. We may receive up to $11,557,865 in proceeds from the
exercise by certain of the selling stockholders of warrants to purchase up to an
aggregate of 2,421,012 shares of our common stock and an additional $10,503,900
upon exercise of 495,000 warrants issuable upon exercise of certain outstanding
warrants. The warrants have exercise prices ranging from $1.50 to $21.22 per
share and are exercisable until various dates through February 28, 2005 (and
with respect to the warrants issuable upon exercise of certain outstanding
warrants, three years after the issuance date). The resale of the common stock
underlying these warrants has been registered in the registration statement of
which this prospectus is a part.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the OTC Electronic Bulletin Board of the
National Association of Securities Dealers, Inc., under the symbol "TTRE".
Although trading in our common stock has occurred on a relatively consistent
basis, the volume of shares traded has been sporadic.
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There can be no assurance that an established trading market will develop, that
the current market will be maintained or that a liquid market for our common
stock will be available in the future. Investors should not rely on historical
stock price performance as an indication of future price performance.
The following table summarizes the high and low bid prices of TTR's common
stock as reported on the OTC Electronic Bulletin Board for the periods
indicated. The closing price of our common stock on March 10, 2000 was $8.6875
per share.
Common Stock
Quarter Ended High Low
1999 ---- ---
----
December 31 $6.00 $2.45
September 30 $4.80 $2.45
June 30 $3.125 $ .75
March 31 $1.4375 $ .75
1998
----
March 31 $6.00 $4.00
June 30 $5.50 $2.625
September 30 $3.25 $ .875
December 31 $3.0625 $ .6875
The foregoing represent inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
As of March 9, 2000 there were approximately 173 holders of record of our
common stock. We believe that there are a significant number of shares of our
common stock held either in nominee name or street name brokerage accounts and
consequently, we are unable to determine the number of beneficial owners of our
common stock.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our consolidated financial data for
the five years ended December 31, 1999. The selected consolidated financial data
for the years ended December 31, 1997, 1998 and 1999 are derived from our
consolidated financial statements for such years, which have been audited by
Brightman Almagor & Co., a member of Deloitte Touch Tohmatsu, independent
auditors. The selected consolidated financial data for the years ended December
31, 1995 and 1996 are derived from our consolidated financial statements for
such period and years, which have been audited by Schneider Ehrlich & Associates
LLP (formerly known as Schneider Ehrlich & Wengrover LLP), independent auditors.
The consolidated financial data set forth below should be read in conjunction
with our Consolidated Financial Statements and related Notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
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<TABLE>
<CAPTION>
Year
Ended December 31, From Inception
---------------------------------------------------------------------- (July 14, 1994) to
Income Statement Data: 1995 1996 1997 1998 1999 December 31, 1999
---------- ----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues -- -- -- 54,922 68,803 123,725
Total expenses 692,801 790,108 3,784,635 5,178,872 7,944,252 18,424,000
Operating loss (692,801) (790,108) (3,784,635) (5,123,950) (7,875,449) (18,300,275)
Net loss (896,663) (1,121,211) (4,119,612) (5,578,540) (13,072,237) (24,830,348)
Net loss per share (0.37) (0.62) (1.35) (1.54) (2.07)
Weighted average shares outstanding 2,399,793 1,801,366 3,054,519 3,615,908 6,321,719
<CAPTION>
December 31,
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency) (616,839) (2,563,908) 448,679 (2,834,448) (494,744)
Total assets 403,204 1,191,688 1,188,627 490,545 467,867
Total liabilities 1,274,427 2,785,545 278,898 3,588,712 798,863
Total Stockholders' equity (deficit) (871,223) (1,593,857) 677,229 (3,098,167) (330,996)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS 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
We design and develop anti-piracy software technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet. Our proprietary anti-piracy technology, MusicGuard, is a unique
hardware-based technology designed to prevent the unauthorized copying of audio
content distributed on CDs.
As of November 24, 1999, we entered into an agreement with Macrovision
Corporation to jointly design and develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. Optical media store data which may be retrieved by utilizing a
laser and include compact discs which are commonly referred to as CDs and
digital versatile discs which are commonly referred to as DVDs. The new product
will be based primarily upon our MusicGuard technology, as well as related
Macrovision technology, and will be jointly owned by us and Macrovision. We
expect that the immediate application of the technology we are developing with
Macrovision will be of interest for the music distribution business and
recording studios whose products are customarily distributed on CDs. We granted
to Macrovision an exclusive world-wide royalty bearing license to design,
develop and market the copy protection technology which we are jointly
developing. The license to Macrovision relates to all technologies and products
designed to prevent the illicit duplication of audio programs (including the
audio portion of music videos, movies and other video or audio content)
distributed on optical media (not limited to CDs and DVDs) and technologies for
Internet digital rights management for audio applications. The proposed copy
protection technology we are developing with Macrovision will be transparent to
the legitimate end-user.
Our immediate goal is to establish the proposed audio content protection
technology which we and Macrovision are developing as the leading product in the
target market of audio content copy protection for the high-volume recording
industry. Additionally, we are actively developing other technologies and
looking to acquire technologies which are synergistic with our current business
and will enable us to leverage our knowledge base and skill.
We have not had any significant revenues to date. As of December 31, 1999,
we had an accumulated deficit of approximately $24.8 million. Our expenses have
related primarily to expenses related to and expenditures on research and
development, marketing, recruiting and retention of personnel, costs of raising
capital and operating expenses.
Revenue Sources
We expect, for the near-term, that our primary source of revenue will be
royalties under our license agreements with Macrovision. We are currently
seeking to develop or
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acquire other technologies that will provide other sources of revenue. However,
there can be no assurance that we will develop or acquire other technologies or
if we do, that such technologies will generate any revenue or profits.
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 1997, 1998 and 1999.
Results of Operations
Year Ended December 31, 1999 Compared to Year December 31, 1998.
Revenues for the year ended December 31, 1999 and 1998 were $68,803 and
$54,922, respectively and were derived from licensing fees of our DiscGuard
product.
Research and development costs for the year ended December 31, 1999 were
$345,989 as compared to $1,017,073 for 1998. These decreases are attributable
primarily to reduced staffing effected in the latter part of 1998.
Sales and marketing expenses for the year ended December 31, 1999 were
$815,586 as compared to $1,155,998 for 1998. This decrease was primarily due to
reduced staffing in 1999.
General and administrative expenses for the year ended December 31, 1999
were $630,090 as compared to $1,663,912 for 1998. This decrease was primarily
due to reduced staffing in 1999.
Stock-based compensation for the year ended December 31, 1999 was
$6,152,587 as compared to $1,341,889 for 1998. Due to the shortage of available
funds in 1999, we compensated employees and other consultants by issuing common
stock, warrants and options.
Amortization of deferred financing costs for the year ended December 31,
1999 period was $4,180,540 as compared to $72,288 for the same period in 1998.
As a result of the issuance of 1.3 million warrants in connection with the sale
of our 10% Convertible Debentures, we recognized significant non-cash financing
costs. Using the Black-Scholes model for estimating the fair value of the
warrants, we recorded $3,845,400 as deferred financing costs and charged the
entire balance to operations when the debentures were converted.
Interest expense for the year ended December 31, 1999 increased to
$1,019,937 as compared to $410,715 during 1998. Included in interest expense is
non-cash amortization of note discount in the amount of $272,009 and $214,454
for the years ended December 31, 1999 and 1998, respectively. Note discounts
were imputed to reflect the equity component of the related financings. Also
included in interest expense for 1999 was
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$572,505, which represents the value of the beneficial conversion feature
relating to the conversion of outstanding debt into shares of our Common Stock.
We reported a net loss for the year ended December 31, 1999 of $13,072,237
or $(2.07) per share on a basis and diluted basis, as compared to a net loss of
$5,578,540 or $(1.54) per share for the year ended December 31, 1998.
Year Ended December 31, 1998 Compared to Year 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
$1,017,073 as compared to $957,232 for 1997. Research and development costs in
1998 were expended in developing improved versions of DiscGuard following its
commercial introduction in February 1998.
Sales and marketing expenses for the year ended December 31, 1998 were
$1,155,998 as compared to $914,060 for 1997. This increase reflects our
intensified marketing activities when DiscGuard became commercially available in
the first quarter of 1998.
General and administrative expenses for the year ended December 31, 1998
were $1,663,912 as compared to $604,151 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.
Stock-based compensation for the year ended December 31, 1998 was
$1,341,889 and $1,309,192 for 1997.
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.
We reported a net loss for the year ended December 31, 1998 of $5,578,540,
or $(1.54) per share on a basic and diluted basis, as compared to a net loss of
$4,119,612, or $(1.35) per share for the year ended December 31, 1997.
Liquidity and Capital Resources
At December 31, 1999, we had cash of approximately $210,000, representing
an increase of approximately $135,000 over December 31, 1998. In February 2000,
we completed a private placement of 1,800,000 shares of our common stock and
900,000 Class A Warrants for an aggregate purchase price of $10,000,000. The
Class A Warrants are exercisable for a period of five years at an exercise price
of $8.84 per share and upon exercise, we will issue Class B Warrants for an
additional
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495,000 shares. The Class B Warrants are exercisable for a period of three years
from the date of issuance at an exercise price of $21.22. Under certain
circumstances the Class A and Class B Warrants may be redeemed.
In November 1999, we signed an agreement with Macrovision Corporation
("Macrovision") to jointly develop and market music copy protection technology
for optical based media. In connection with the agreement, We granted to
Macrovision an exclusive world-wide, royalty-bearing license to use our
proprietary technology through December 31, 2009. We will be entitled to a 30%
royalty which may be adjusted to twenty five 25%, under certain conditions. Also
under certain conditions, the exclusive license may revert to a non-exclusive
license as of the second anniversary of the commercial launch of the product
that we are jointly developing. If certain conditions relating to the timing of
such commercial launch transpire, We will be entitled to minimum annual
guaranteed royalty advances, commencing on the first anniversary of the
Commercial Launch and continuing through the ninth year, aggregating $25
million.
Also under the Agreement, in January 1999, Macrovision made a $4 million
equity investment in the Company for an 11.4% interest and received an exclusive
license to our proprietary DiscGuard(TM) technology.
In the fourth quarter of 1999, we significantly reduced our accrued
interest and long-term debt through a series of conversions to Common Stock. We
also realized proceeds of approximately $1.4 from the exercise of outstanding
warrants and options.
BUSINESS
Introduction
We design and develop anti-piracy technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet. Optical media store data which may be retrieved by utilizing a laser
and include compact discs which are commonly referred to as CDs and digital
versatile discs which are commonly referred to as DVDs. Our technologies utilize
both encryption and non-standard codewords on the optical media. As a result of
our research and development efforts we believe we have become the technological
leader in optical media authentication and verification. Our proprietary
anti-piracy technology, MusicGuard(TM), is a unique hardware-based technology
designed to prevent the unauthorized copying of audio content distributed on
CDs. MusicGuard leverages know-how we gained during the development of our
DiscGuard(TM) software protection product. Our copy protection technologies are
designed to be transparent to the legitimate end-user. Copy protected CDs are
compatible with and are designed to play on currently existing compact disc
players.
As of November 24, 1999, we entered into an agreement with Macrovision
Corporation to jointly design and develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. The new product will be based primarily upon our MusicGuard
technology as well as related Macrovision technology. We granted to Macrovision
an exclusive world-wide royalty bearing license to market the copy protection
technology which we are jointly developing. The license to Macrovision relates
to all technologies and products designed to prevent the illicit duplication of
audio programs (including the audio portion of music videos, movies and other
video or audio content) distributed on optical media (not limited to CDs and
DVDs) and technologies for Internet digital rights management for audio
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applications.
We are entitled to thirty percent (30%) of the net revenues collected by
Macrovision or its affiliates from any products or components incorporating the
proposed music protection technology. Under certain conditions, our share of the
net revenues may be readjusted to twenty-five percent (25%) of net revenues. We
agreed to reimburse Macrovision for up to $1 million of its costs incurred in
the twelve months ending December 31, 2000 in co-developing and commercially
launching MusicGuard.
As part of the agreement, we granted to Macrovision an exclusive
world-wide license to modify and market DiscGuard, our software anti-piracy
product. Part of the DiscGuard technology license is royalty free. The
encryption portion is royalty bearing. Macrovision has its own proprietary
software anti-piracy product known as Safe Disc. For five years we are entitled
to 5% of Macrovision's net revenues, if any, collected by Macrovision from the
licensing of Safe Disc to customers located in the Peoples Republic of China.
Other than for these revenues we do not anticipate that we will receive any
significant revenues as a result of our license of DiscGuard to Macrovision.
Macrovision develops and markets content copy protection and rights
management technologies and products to prevent the illicit duplication,
reception or use of video and audio programs and computer software. Macrovision
provides its products and services primarily to the consumer multimedia and
business software publishers, home video, pay-per-view, cable, satellite and
video security markets. Macrovision has its headquarters in Sunnyvale,
California with subsidiaries in London and Tokyo.
Our immediate goal is to establish the proposed audio content copy
protection technology which we and Macrovision are developing as the leading
product in the target market of audio content copy protection for the
high-volume recording industry. Additionally, we are actively developing other
technologies and looking to acquire technologies which are synergistic with our
current business and will enable us to leverage our knowledge base and skill.
Industry Background
Losses related to the unauthorized reproduction and use of music CDs
present a continuing concern for the recording industry as well as performing
artists. According to the Recording Industry Association of America, a national
trade organization, the recording industry loses about $5 billion annually to
global piracy of recorded music. Losses of up to $1 million a day have been
estimated in the U.S. alone. Two recent developments have exacerbated the
problem of piracy, causing it to become one the highest priorities of the
industry.
First, the cost of producing good quality copies of CDs has been
drastically reduced. Until recently, to produce good quality CDs required a
significant investment. Recent developments in consumer electronics technology
have enabled consumers to purchase, for as little as $180, a CD burner
(recorder) from a local retail outlet. CD burners now often are bundled with new
computers. Blank recordable discs are widely available for less than $1. With
this technology, even the casual user can easily copy unprotected CDs.
Second, it is now possible to easily download pirated music via the
Internet because of the acceptance and widespread use of MP3 compression
technology. This technology has made the
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Internet a feasible vehicle for the electronic transmission of music. Today
there are thousands of websites offering music in MP3 format. Most of the music
being downloaded is pirated; i.e., no royalties are being paid to the artists or
to the record companies which produced this music. This form of piracy is
rapidly growing.
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 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 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 music piracy have not served as an effective
deterrent and the effect of the new legislation cannot yet be ascertained,
recording studios and artists are seeking more effective methods to prevent the
replication of unauthorized copies of their proprietary products. To combat
music piracy, leaders of the music recording industry have cooperated with
leaders of more than 120 companies and organizations representing a broad
spectrum of information technology and consumer electronics businesses, Internet
service providers and security technology companies to form the Secure Digital
Music Initiative. The Initiative is a forum for these industries to develop the
voluntary, open framework for playing, storing and distributing digital music
necessary to enable a new market to emerge. The Initiative has already produced
a standard, or specification, for portable devices. The longer-term effort is
focused upon completion of an overall architecture for delivery of digital music
in all forms which system will include anti-piracy protection.
The standard developed by the Initiative is intended to be applied to the
next generation of portable playback devices. It will not prevent currently
existing playback devices from playing pirated music. Since these devices will
likely be in use for quite some time we believe that there will be a need for
copy protection on the products played on the devices. To our knowledge there
are no commercially available technologies or products providing copy protection
for audio content distributed on CDs.
Our Solution
We believe that the audio content copy protection which we and Macrovision
are jointly developing will offer recording studios and artists the most
effective solution to protect works distributed on CDs, while offering
convenience and cost effectiveness to the music rights owner and end-user. We
believe that the proposed technology embodies unique know-how designed to
prevent the unauthorized copying of CDs. The proposed music protection
technology will be based primarily on our proprietary technology, MusicGuard, as
well as related Macrovision technologies.
Most music is currently offered for sale on a CD. To our knowledge, there
is no existing commercially available technology except MusicGuard, which
protects content on the original CD. Software-based technologies available today
claim to protect music during electronic transmission, but we believe that these
technologies are easily overcome. For example, according to an article appearing
in the August 18, 1999 edition of "Wired News", one month after Microsoft
released its software-based protection technology, Windows Media Audio, a
program was available on the Internet that removed the copying protection
afforded by the software. MusicGuard protection is embedded on the CD itself and
is introduced as part of the production process. The production process includes
the creation of a glass master from which metal molds, or stampers, used to mass
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produce, or replicate, CDs are made.
During the glass mastering process, a specially modified CD-encoder
introduces selective alternative alterations to the data placed on the glass
master. These alterations do not affect the audio quality of the original CDs in
any manner. CDs that will be protected by music copy protection technology we
are developing with Macrovision will be designed to play normally in the
currently existing CD and DVD players around the world. Music quality will not
be degraded as compared to the original. The technology will be designed so that
when one tries to make a copy of a protected CD with any of the many CD-to-CD
copying programs or "track rippers", the copy will be unusable. Either the
copying process itself will abort or the quality of the unauthorized copy will
be unacceptably inferior to the original music. Similarly, attempts to produce
MP3 files from a protected CD will either fail or result in inferior and
unusable audio. We will design the technology so that it will be easy to apply
and use. Record companies or recording studios need only inform an authorized
glass mastering facility that it wishes to protect against copying with the
technology. We don't envision any special preparation or changes that will be
needed to be made to the data which the recording mastering studio supplies to
the glass mastering facility. The technology will leverage existing encoder
technology used in our DiscGuard(TM) software protection product. Glass
mastering facilities worldwide will be able to simply, cheaply and immediately
upgrade their existing encoders to enable the use of the copy protection
technology. Since the protection will be applied only during the glass mastering
process, once a glass master and stampers have been produced, protected discs
can be mass-produced by any replicator. We are working together with Macrovision
and the encoder manufacturers to develop the most efficient and effective
manufacturing solution.
Mastering Equipment Manufacturers
In order to produce protected CDs, modifications to the encoder portion of
the laser optics system in CD mastering equipment are required. Under our
contract with Macrovision, Macrovision is responsible for coordinating with the
companies which produce and sell these encoders. We believe that three
companies, Doug Carson & Associates, Media Morphics and Eclipse, effectively
control the market for encoders. We will work with Macrovision and these encoder
producers to develop the necessary modifications to produce protected CDs.
We envision that Macrovision will authorize licensed CD replicators to
replicate protected CDs. Macrovision has licensing arrangements in place with
more than 75 replication facilities worldwide including the largest
multinational replicators such as, Sonopress, MPO, Americ Disc, Nimbus, Cinram,
and JVC. Therefore, we believe that Macrovision is in a good position to
leverage its current business relationships to the benefit of the audio content
copy protection technology we will develop with Macrovision.
Marketing and Sales
Under our agreement with Macrovision, Macrovision will be responsible, at
its expense, for the marketing of the proposed audio content copy protection
technology and will determine the staffing and other resources to be allocated
to the commercialization of the technology consistent with Macrovision's good
faith determination of its commercial potential.
Macrovision markets its products, including video cassettes, digital PPV
and DVD copy protection and video scrambling technologies, through a combination
of direct sales and licensing
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as well as through independent distributors. Macrovision has a network of
authorized duplication, authoring and replication facilities throughout the
world.
We are entitled to thirty percent (30%) of the net revenues received by
Macrovision from customers, distributors, OEM partners or other sublicensees of
the jointly developed technology. Under certain conditions, our share of net
revenues may be adjusted to twenty-five percent (25%) of the net revenues. Under
certain circumstances, the exclusive license relating to MusicGuard and the
jointly developed technology which we granted to Macrovision reverts to a
non-exclusive license as of the second anniversary of the commercial launch.
Under our agreement with Macrovision, commercial launch is deemed to occur when
a certain pre-designated number of protected music CDs are manufactured, with a
certain specified number being manufactured by at least one of certain
designated major commercial music labels. If certain conditions relating to the
timing of the commercial launch transpire, we will be entitled to minimum annual
guaranteed royalty advances, recoupable against royalties actually earned by us,
commencing on the first anniversary of the commercial launch and continuing
through the term of the development agreement which ends on December 31, 2009.
Macrovision markets its video and consumer protection technologies
internationally from its Sunnyvale, California headquarters and through its
subsidiaries in Japan and the United Kingdom. It supplements its direct sales
efforts with a variety of marketing initiatives, including trade show
participation, trade advertisements, industry education and news letters.
Macrovision provides technical support to its licensed duplicators, including
hardware installation assistance and quality control. As of December 1, 1999,
Macrovision employed 33 sales and marketing personnel and 38 additional
employees who assisted in customer support and operations.
We have only a limited internal sales and marketing capability. 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
expanding our marketing capability until we are in a position to commercialize
products other than MusicGuard.
Research And Development
We intend to maintain our position as the technological leader in
anti-piracy products by leveraging our existing knowledge base and skillset and
exploiting to the fullest our existing technologies. We are interested in
acquiring or establishing business arrangements with other parties which have
promising technologies that offer synergy to our technological and commercial
expertise. We are particularly focusing upon companies in Israel due to their
geographic proximity and because Israel has a large pool of startup companies
with raw technologies from which to choose.
The software and entertainment industries in general are 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 anti-piracy products will depend
in large part on our ability to develop and apply our proprietary technology and
know-how. We believe that the key to ensuring that the audio content copy
protection technology we are developing with Macrovision becomes the industry
standard for CD copy protection lies in our and Macrovision's ability to
continually enhance and upgrade our unique anti-piracy technologies.
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<PAGE>
New Products and Technologies
We intend to extend our range of activities in two specific directions:
o Exploiting existing technologies and expertise - the development and
commercialization of products which are similar to and share common
distribution channels with MusicGuard.
o Other technologies - the result of cooperation with outside parties,
including applications which offer synergy with MusicGuard.
We have developed other technologies with applications in the following areas:
o DiscAudit - a system for identifying genuine disc replicas. During
the mastering process, a special non-reproducible authenticating
mark is embedded outside the data portion of the disc. The
authenticating mark is not present in unauthorized replicas. By
means of a laptop with CD or DVD drive and software supplied by us,
law enforcement authorities, including customs inspectors, can
quickly determine the authenticity of a disc. DiscAudit is
applicable to CD and DVD, including both software and audio discs.
The product has been tested with fully satisfactory results. Unlike
the following three technologies, this technology is not subject to
the right of first refusal we have granted to Macrovision to acquire
rights in the technology if we decide to license or sell our rights
in it.
o Encryption Engine - a strong encryption engine for a variety of
applications including electronic software distribution, secure
electronic music distribution, dedicated music and video playback
devices and dedicated games machines. We can supply the encryption
technology and software library for the content to be protected.
o Smart Card Application Binding - Our DiscGuard technology "binds" a
protected application to a signature on an authentic optical disc so
that the protected application runs correctly only in the presence
of the disc. In many applications, it would be desirable to run the
protected application on any PC. This can be accomplished by
transferring binding information to the user's smart card. Use of
smart cards is expected to grow substantially. Reading devices are
inexpensive and readers are included in Microsoft's PC hardware
specifications. The binding could be by direct download via the
Internet. For example, an end user can download a demo version of
sample music. If he chooses, he can unlock the application by an
on-line registration process that transmits the unlock key directly
to the end users's smart card. As a result, the end user has
complete mobility - he can run the application from any Internet
connected PC, while the music publisher has no concerns about
unauthorized replication.
o Dedicated Playback Devices with Smart Card - GSM (Global System for
Mobile Communications) modules throughout the world work with small
smart card modules containing the user's authorization and personal
preferences. We intend to extend this concept to a wide range of
consumer devices, including computers, video and audio playback
devices and game stations. In all cases, protected content such as
software, video, audio or games, must be bound to the user's smart
card before it can be played correctly. The binding can be achieved
by leveraging our existing encryption and binding
20
<PAGE>
mechanisms.
Under our agreement with Macrovision, we granted to Macrovision an
exclusive right of first refusal through December 31, 2009, to any music copy
protection technology that we develop which is not included in the license to
Macrovision, and any Internet digital rights management technologies developed
by us which are applicable to music, music video, video, software or data
publishing products or markets. We are required to notify Macrovision of the
details of any bona- fide third party offers to purchase or license such
technologies. If Macrovision notifies us of its interest in such purchase or
license within 10 business days of Macrovision's receipt of our notification, we
are required to negotiate in good faith with them such purchase or license. The
encryption engine, smart card application binding and the GSM systems are
subject to Macrovision's first refusal rights.
A major part of future business strategy will be the identification and
setting up of cooperation arrangements with the developers of technologies,
including those that share our anti- piracy theme.
We are already active in the process of screening potential partners. The
model will be to invest in such companies and to allow them to benefit from our
strengths - technical knowledge (especially in optical media), professional
management, market awareness and established relationship with Macrovision and
other marketing partners. We believe that we can identify several early stage
technology companies and can provide the added value necessary to achieve
success and cut time to market.
In connection with the design and development of DiscGuard, our
proprietary software anti- piracy product, our Israeli subsidiary has received a
grant of $210,000 from the Chief Scientist of the State of Israel. We are
required to 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. For example, royalties will be payable to the Chief Scientist based on
royalties we receive from Macrovision relating to DiscGuard. We do not believe
that any royalties are payable to the Chief Scientist in respect of the proposed
audio content protection technology. 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 December 31, 1999, we have expended
approximately $3 million on research and development activities, including
approximately $2.6 million through the year ended December 31, 1998, and
approximately $.4 million for the year ended Dectember 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.
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<PAGE>
Competition
We are not aware of the existence of any commercially available
anti-piracy technologies in the area of copy protection for electronic content
distributed on optical media. There can be no assurance that other companies
will not enter the market in the future, particularly if the audio content
protection technology we are developing with Macrovision is successfully
commercialized. 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. We have filed patent applications in the United States
and Israel and under the Patent Cooperation Treaty with respect to the
technology underlying DiscGuard and in Israel for MusicGuard. We have also
applied for a United States trademark registration of MusicGuard. There can be
no assurance that any patent or trademark 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.
We believe that our software and audio content protection products and
technologies 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.
Our policy is to require our employees, consultants, and other advisors to
execute confidentiality agreements upon the commencement of employment,
consulting or advisory relationships with us. These agreements generally provide
that all confidential information developed or made known to the individual by
us during the course of the individual's relationship with us is to be kept
confidential and not to be disclosed to third parties except in specific
circumstances. In the case of employees and consultants, the agreements provide
that all inventions conceived by the individual in the course of their
employment or consulting relationship with us shall be our exclusive property.
There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for our trade secrets in the event of
unauthorized use or disclosure of such information.
Employees
We have 5 full-time employees, all of whom work in Israel. 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 consider
our relations with our employees to be good.
Our future performance depends highly upon the continued service of
members of our senior management and of Dr. Baruch Sollish, our
Vice-President-Research and Development, in particular.
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<PAGE>
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.
Properties
We lease a 2400 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 $2292 and an expiration date of May 31, 2000
subject to one optional annual renewal through May 2001. We have improved this
facility to meet the requirements of our research and development activities. We
believe that this facility is sufficient to meet our current and anticipated
future requirements. We believe that we will be able either to renew our present
lease or obtain suitable replacement facilities. In the opinion of management,
our leased facility is adequately covered by insurance.
CONDITIONS IN ISRAEL
The following information discusses certain conditions in Israel that
could affect our 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 --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 of this prospectus, although Israel and Syria
have resumed negotiations, 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 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 us, 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 our 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 our
Israeli subsidiary currently are obligated to perform annual reserve duty. While
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<PAGE>
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 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
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<PAGE>
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
Our Israel subsidiary is subject to various Israeli labor laws and
collective bargaining agreements between Histadrut and the federation of
industrial 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 our Israel subsidiary are covered by individual employment
agreements.
MANAGEMENT
Directors and Officers
Our directors, officers and key employees are as follows:
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Name Age Position
- ---- --- --------
Marc D. Tokayer 43 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 an 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.
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, Marc
Tokayer and Baruch Sollish. All directors hold office until the next annual
meeting of stockholders and the election and
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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.
Summary Compensation Table
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to, or earned by, our Chief Executive
Officer and to all other executive officers serving as such at the end of 1999
whose salary and bonus exceeded $100,000 for the year ended December 31, 1999 or
who, as of December 31, 1999, was being paid a salary at a rate in excess of
$100,000 per year.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
------ Payouts
Name and Restricted Securities LTIP
Principal Position Salary Bonus Other Stock Payouts All Other
- ------------------ Year ($) ($) ($) Underlying ($) Compensation
---- -------- --- ------- Awards(#) Options(#) --- ------------
--------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Marc D. Tokayer 1999 $108,075 -- $27,676(1) -- -- -- --
Chairman and 1998 $ 64,430 $12,019 $14,423(1) -- -- -- --
President 1997 $ 73,850 $ 7,647 $26,307(1) -- -- -- --
Emanuel Kronitz(2) 1999 $ 35,915 -- $ 7,158 304,500 --
Chief Operating 1998 -- -- -- -- -- -- --
Officer 1997 -- -- -- -- -- -- --
Baruch Sollish 1999 $110,522 -- $21,886(1) -- 80,000 -- --
Vice-President- 1998 $ 91,678 $42,105 $13,927(1) -- -- -- --
Research & 1997 $ 99,931 $50,000(3) $24,875(1) -- -- -- --
Development
</TABLE>
- ----------
(1) Includes contributions to insurance premiums, car allowance and car
expenses.
(2) Mr. Kronitz' employment by TTR commenced on June 1, 1999.
(3) Comprises a one-time payment made in consideration of Dr. Sollish's waiver
of incentive bonus payments due to him under his employment agreement.
Options Granted in Last Fiscal Year
The following table sets forth certain information concerning options
granted during 1999 to the executive officers named in the Summary Compensation
Table. Since January 1, 2000 we have also granted options to Mr. Tokayer and Dr.
Sollish, which grants are discussed in "Certain Relationships and Related
Transactions" below.
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<PAGE>
<TABLE>
<CAPTION>
Market Potential Realizable Value
Percentage Price of At Assumed Annual Rates
Number of of Total Common of Stock Price
Securities Options Stock on Appreciation for
Underlying Granted to Exercise Date of Option Term
Name Options Employees Price Grant Expiration -------------
Granted (#) in 1999 ($/Share) ($/Share) Date 5% ($) 10%($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marc Tokayer 0 -- -- -- -- -- --
Emanuel Kronitz 235,000 31.7% $. 01 $2.906 2009 $1,110,038 $1,768,943
Emanuel Kronitz 69,500 9.4% $. 01 $ 2.56 2009 $ 289,118 $ 460,784
Baruch Sollish 20,000 2.7% $. 01 $ 2.56 2009 $83,999 $ 132,600
Baruch Sollish 60,000 8.1% $2.56 N/A 2009 $96,598 $ 244,799
</TABLE>
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, 1999 and the number and value of
options outstanding at December 31, 1999 held by the executive officers named in
the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Number of Un-exercised In-the-money Options at
Acquired on Value Options at December 31, 1999 December 31, 1999(1)
Name Exercise Realized (#) ($)
(#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------- ----------- -------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
Emanuel Kronitz -- -- 108,666/195,834(2) $650,909/$1,173,045
Baruch Sollish -- -- 20,000/60,000 $119,800/$206,400
</TABLE>
(1) Based upon the difference between the exercise price of such options and the
closing price of the common stock ($6.00) on December 31, 1999, as reported on
the OTC Electronic Bulletin Board.
(2) On January 12, 2000, the terms of options to purchase an aggregate of
235,000 shares were amended to provide that options to purchase 150,000 shares
became immediately vested and exercisable.
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 and level of performance shown during the year. Stock
options are intended to improve loyalty to the company and help make each
employee aware of the importance of our business success.
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<PAGE>
We have adopted our 1996 Incentive and Non-Qualified Stock Option Plan.
The 1996 Option Plan provides for the grant to qualified employees (including
officers and directors) of options to purchase shares of our common stock. A
total of 1,500,000 shares of our common stock have been reserved for issuance
upon exercise of stock options granted under the 1996 Option Plan.
The 1996 Option Plan is administered by the Board of Directors. The board
has discretion to select the optionee and to establish the terms and conditions
of each option, subject to the provisions of the 1996 Option Plan. Options
granted under the 1996 Option 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 incentive stock
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 stock 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 stock option to any employee who owns
more than 10% of the outstanding common stock). The board may, in its discretion
(i) accelerate the date or dates on which all or any particular option or
options granted under the 1996 Option Plan may be exercised, or (ii) extend the
dates during which all, or any particular, option or options granted under the
1996 Option Plan may be exercised, provided, that no such extension will 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 Exchange Act of 1934, as
amended. Except as otherwise determined by the board at the date of the grant of
the option, and subject to the provisions of the 1996 Option 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 us 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 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
will expire immediately upon such termination. Options granted under the 1996
Option 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 Option 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 January 31, 2000, options to purchase 1,166,400 shares of our common
stock were outstanding under the 1996 Option 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 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 our 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 a
person's services as a director, the options expire within two months of such
termination. The exercise price of the option will be the fair market value of
our 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
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<PAGE>
of March 1, 2000, no options were outstanding under the Directors Plan.
Employment Agreements
Our Israeli subsidiary signed 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 currently receives an annual salary of $120,000,
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.
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 by either party upon 90 days prior
notice. Mr. Kronitz is paid a monthly salary of $5,000 plus benefits.
Our Israeli subsidiary entered into an employment agreement with Dr.
Baruch Sollish in December 1994 which was amended in July 1998. Pursuant to the
agreement Dr. Sollish is employed as Director of Product Research and
Development of our Israeli subsidiary. The agreement is renewable for terms of
three years, subject to termination by either party on not less than 60 days
notice prior to the end of any term. The current term expires on December 1,
2001. Dr. Sollish currently receives an annual base salary of $120,000 subject
to increase and the grant of a performance bonus in the board's discretion.
Each of the executives with an agreement has agreed to certain customary
confidentiality and non-compete provisions that prohibit him from competing with
us for one year, or soliciting our employees for one year, following the
termination of his employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, we issued to Mr. Tokayer, options under the 1996 Stock
Option Plan to purchase 347,000 shares of our common stock at an exercise price
per share of $4.00, of which options to purchase 173,000 shares were vested upon
issuance and options to purchase 174,000 shares will vest over 12 months.
In February 1999, we issued to Dr. Sollish options to purchase 50,000
shares of our common stock. All of the options vested at the time they were
issued. In November 1999, we issued to Dr. Sollish options to purchase 80,000
shares of our common stock under the 1996 Stock Option Plan, with 20,000 of
these options being vested upon issuance with an exercise price of $.01 per
share and 60,000 of these options vesting over a 3 year period with an exercise
price per share of $2.56. In January 2000, we issued to Dr. Sollish additional
options to purchase 70,000 shares of our common stock under our 1996 Stock
Option Plan, of which 30,000 options were fully vested upon grant at an exercise
price of $4 per share, 20,000 options were fully vested upon grant at an
exercise price of $.01 per share and the remaining 20,000 options with an
exercise price of $.01 per share will vest upon the commercial launch of the
audio content protection product being jointly developed by us and Macrovision.
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<PAGE>
In June 1999, we granted options to purchase 235,000 shares of our common
stock under the 1996 Stock Option Plan to Emanuel Kronitz, our Chief Operating
Officer, which options were to vest, subject to Mr. Kronitz's continued
employment with us, in 36 equal monthly installments and have an exercise price
of $.01 per share. On January 12, 2000, at the direction of the board, the
options were amended to provide that 150,000 of Mr. Kronitz's options became
vested and the balance of 85,000 options will vest in one lump sum on November
12, 2000. In November, 1999, we issued to Mr. Kronitz fully vested options to
purchase an additional 69,500 under the 1996 Stock Option Plan at an exercise
price of $.01 per share.
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 our 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.
In November 1999, we issued to Gershon Tokayer, our sales manager and the
brother of Marc D. Tokayer, the Chairman of the Board, options to purchase
249,500 shares of our common stock under the 1996 Stock Option Plan, of which
options to purchase 209,500 shares were immediately vested upon issuance at an
exercise price of $.01 per share and 40,000 options were to vest over a 3 year
period at an exercise price of $2.56 per share.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table provides information as of March 1, 2000 concerning
the beneficial ownership of our common stock by (i) each director, (ii) each of
the Named Executive Officers, (iii) each stockholder (or group) known to us to
be the beneficial owner of more than 5% of the outstanding common stock, (iv)
the directors and officers as a group and (v) each selling stockholder.
<TABLE>
<CAPTION>
Common Stock
To be Beneficially
Owned if All Shares
Name of Shares of Shares Hereunder are sold
Beneficial Owner(1) Common Stock Percent of Offered -----------------------
- ------------------- Beneficially Class(2) Hereby Shares(3) Percent(2)(3)
Owned(1) -------- ------ ------ -------------
--------
<S> <C> <C> <C> <C> <C>
Macrovision Corporation 1,880,937 11.78 1,880,937 0 0
Wall & Broad Equities, Inc. 1,300,000(4) 7.89 1,300,000 0 0
Machtec Limited 1,202,000 7.53 1,202,000 0 0
Marc D. Tokayer(5) 766,547(6) 4.75 0 766,547(6) 4.75
Dimensional Partners, Ltd. 1,260,000(7) 7.63 1,260,000 0 0
Econor Investment Corporation 442,810 2.77 256,060 186,750 1.28
Dimensional Partners, L.P. 315,000(8) 1.96 315,000 0 0
Bentley Equity Partners, L.P. 299,250(9) 1.86 299,250 0 0
L&H Foundation 281,736 1.76 281,736 0 0
Madison Trading 269,613 1.69 269,613 0 0
Robert Sussman 204,750(10) 1.28 204,750 0 0
Mantle International
Investment Ltd. 200,000(11) 1.24 200,000 0 0
Inglewood Holdings Inc. 200,000(11) 1.24 200,000 0 0
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Baruch Sollish(5) 195,000(12) 1.21 0 195,000(12) 1.21
Emanuel Kronitz(5) 194,500(13) 1.20 0 194,000(13) 1.20
Burstein & Lindsay Securities
Corp. 174,310 1.09 174,310 0 0
Gotham Holdings, L.P. 157,500(14) * 157,500 0 0
The dotCOM Fund L.L.C 157,500(14) * 157,500 0 0
American High Growth 157,500(14) * 157,500 0 0
Oak Creek Capital L.P. 126,000(15) * 126,000 0 0
Dalimore Consulting Limited 125,000 * 125,000 0 0
Steven L. Barsh 120,000 * 120,000 0 0
Manhattan Group Funding-
Partnership 110,250(16) * 110,250 0 0
Silver Cloud L.P. 110,250(16) * 110,250 0 0
H.C. Wainwright & Co., Inc. 126,000(17) * 126,000 0 0
Jarvis Developments Limited 105,000 * 105,000 0 0
Robert Friedman 100,000(18) * 100,000 0 0
Biscount Overseas Ltd. 83,000(18) * 83,000 0 0
Gerald Levine 78,750(19) * 78,750 0 0
Bentley International Equity
Ltd. 78,750(19) * 78,750 0 0
Mathew Balk 82,250(20) * 82,250 0 0
Jason T. Adelman 87,500(21) * 87,500 0 0
SDM Partners 63,000(22) * 63,000 0 0
Abraham Stephansky 51,637 * 51,637 0 0
Neve Yerushalayim 43,750 * 43,750 0 0
Scott Weisman 50,750(23) * 50,750 0 0
Yeshiva Darchei Torah
(Rabbis Fund) 42,250(24) * 42,250 0 0
Yeshiva Darchei Torah
(Building Fund) 40,393 * 40,393 0 0
Mordecai Lerer 35,000 * 35,000 0 0
Mylock Holdings Inc. 31,500(25) * 31,500 0 0
Yaakov Bender 27,096 * 27,096 0 0
Plans Inc. 25,000 * 25,000 0 0
Schneider Ehrlich &
Associates 25,000 * 25,000 0 0
Wayne M. Wilde Revocable
Trust 23,000(26) * 23,000 0 0
Mitchell Hirth 15,947 * 15,947 0 0
CYGNI S.A 12,500 * 12,500 0 0
Bnos Bais Yaaakov 12,497(27) * 12,497 0 0
Cherson Ltd. 17,250(28) * 17,250 0 0
Catamaran Corp. 11,500(29) * 11,500 0 0
Solomon Mayer 74,625(30) * 74,625 0 0
Abraham & Barabara
Stefansky 15,613 * 15,613 0 0
Philip Kenneth Wood 14,000(31) * 14,000 0 0
Jerome Todder 15,000 * 15,000 0 0
Yitzchak Stefansky 11,772 * 11,772 0 0
Earl Freeman 11,500(32) * 11,500 0 0
Donald K. Currie 11,500(32) * 11,500 0 0
Ralph Falk 11,500 * 11,500 0 0
Murray Kimmel 11,500 * 11,500 0 0
Robert D. Zucker 11,500(32) * 11,500 0 0
Ralph Cotton 8,625(27) * 8,625 0 0
Lawrence & Karen
Dalessandri 7,000(33) * 7,000 0 0
PJ Realty Trust 7,000(33) * 7,000 0 0
Tom McCann IRA
CIBA Oppenheimer
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Corp., as Cust 7,000(33) * 7,000 0 0
Leon Goldstein 5,750(34) * 5,750 0 0
K. David Isaacs 5,750(34) * 5,750 0 0
Judith Wohlberg 5,750(34) * 5,750 0 0
Jack's Coffee House
Inc. 5,750 * 5,750 0 0
Rothschild & Banks,
Inc. 5,750(35) * 5,750 0 0
William T. Grifffin 5,750(35) * 5,750 0 0
Tim Martin 5,750(35) * 5,750 0 0
Sarki Galbut 5,250 * 5,250 0 0
Estee Margules 5,250 * 5,250 0 0
Shana Margules 5,250 * 5,250 0 0
Rena Margules 5,250 * 5,250 0 0
Raphael Margules 5,250 * 5,250 0 0
Abe Katzman 2,875(36) * 2,875 0 0
Eliot Brody 2,000(36) * 2,000 0 0
Kanan Corbin Schupak &
Aronow, Inc. 1,269 * 1,269 0 0
Parnell Limited 750 * 750 0 0
All directors and officers
as a Group(37) 1,156,047 10.25 0 1,156,047 10.25
</TABLE>
* Indicates less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the 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
within 60 days after the date of the information in the table are deemed to be
outstanding, but not for the purpose of calculating the percentage ownership of
any other person.
(3) Assumes the sale of all of the shares offered hereby.
(4) Includes 503,202 shares issuable upon exercise of warrants. As required by
SEC rules, the number of shares shown as beneficially owned includes shares
which could be purchased within 60 days after the date of this prospectus.
However, the terms of the warrants held by this selling stockholder specify that
the stockholder can not exercise its warrants to the extent that such exercise
would result in the selling stockholder and its affiliates beneficially owning
more than 4.99% of our then outstanding common stock. Thus, although some of the
shares listed in the table might not be subject to purchase by the selling
stockholder during that 60 day period, they are nevertheless included in this
table. The actual number of shares of common stock issuable upon the 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 significant of these factors is the
future market price of our common stock.
(5) The address of such person is c/o TTR Technologies Ltd., 2 Hanagar Street,
Kfar Saba, Israel.
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<PAGE>
(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. Also
includes 173,000 shares issuable upon the exercise of fully vested employee
stock options issued from the Company 1996 Employee Stock Option Plan. Does not
include 249,500 shares issuable upon exercise of options held by Gershon
Tokayer, Mr. Tokayer's brother, as to which shares Mr. Tokayer disclaims
beneficial ownership.
(7) Includes 360,000 shares issuable upon exercise of Class A Warrants and
180,000 shares issuable upon the exercise of Class B Warrants, which warrants
are to be issued upon the exercise of the Class A Warrants.
(8) Includes 90,000 shares issuable upon exercise of Class A Warrants and 45,000
shares issuable upon the exercise of Class B Warrants, which warrants are to be
issued upon the exercise of the Class A Warrants.
(9) Includes 85,500 shares issuable upon exercise of Class A Warrants and 42,750
shares issuable upon the exercise of Class B Warrants, which warrants are to be
issued upon the exercise of the Class A Warrants.
(10) Includes 58,500 shares issuable upon exercise of Class A Warrants and
29,250 shares issuable upon the exercise of Class B Warrants, which warrants are
to be issued upon the exercise of the Class A Warrants.
(11) Represents shares issuable upon exercise of warrants.
(12) Includes 120,000 shares issuable upon exercise of fully vested options.
(13) Represents shares issuable upon exercise of fully vested options.
(14) Includes 45,000 shares issuable upon exercise of Class A Warrants and
22,500 shares issuable upon the exercise of Class B Warrants, which warrants are
to be issued upon the exercise of the Class A Warrants.
(15) Includes 36,000 shares issuable upon exercise of Class A Warrants and
18,000 shares issuable upon the exercise of Class B Warrants, which warrants are
to be issued upon the exercise of the Class A Warrants.
(16) Includes 31,500 shares issuable upon exercise of Class A Warrants and
15,750 shares issuable upon the exercise of Class B Warrants, which warrants are
to be issued upon the exercise of the Class A Warrants.
(17) Represents shares issuable upon exercise of warrants.
(18) Represents shares issuable upon fully vested options.
(19) Includes 22,500 shares issuable upon exercise of Class A Warrants and
11,250 shares issuable upon the exercise of Class B Warrants, which warrants are
to be issued upon the exercise of the Class A Warrants.
(20) Includes 9,000 shares issuable upon exercise of Class A Warrants and 4,500
shares issuable upon exercise of Class B Warrants, which warrants are to be
issued upon exercise of Class A Warrants. Includes 50,750 shares issuable upon
exercise of other warrants.
(21) Represents shares issuable upon exercise of warrants.
34
<PAGE>
(22) Includes 18,000 shares issuable upon exercise of Class A Warrants and 9,000
shares issuable upon the exercise of Class B Warrants, which warrants are to be
issued upon the exercise of the Class A Warrants.
(23) Represents shares issuable upon exercise of warrants.
(24) Includes 17,250 shares issuable upon exercise of warrants.
(25) Includes 12,875 shares issuable upon exercise of warrants.
(26) Includes 17,250 shares issuable upon exercise of warrants.
(27) Includes 5,750 shares issuable upon exercise of warrants.
(28) Includes 11,500 shares issuable upon exercise of warrants.
(29) Includes 5,750 shares issuable upon exercise of warrants.
(30) Includes 25,875 shares issuable upon exercise of warrants.
(31) Includes 4,000 shares issuable upon exercise of warrants.
(32) Includes 8,625 shares issuable upon exercise of warrants.
(33) Includes 2,000 shares issuable upon exercise of warrants.
(34) Includes 2,875 shares issuable upon exercise of warrants.
(35) Includes 4,312 shares issuable upon exercise of warrants.
(36) Includes 1,437 shares issuable upon exercise of warrants.
(37) See Footnotes 6, 12 and 13.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 25,000,000 shares of common stock, $.001 par
value per share, of which 15,967,890 shares were outstanding and held of record
as of March 8, 2000 by approximately 173 stockholders of record. A significant
portion or our common stock is held in either nominee name or street name
brokerage accounts. Holders of shares of common stock are entitled to one vote
for each share held of record on all matters to be voted on by stockholders.
There are no preemptive, subscription, conversion or redemption rights
pertaining to the shares of common stock. Holders of shares of common stock are
entitled to receive dividends when, as and if declared by the Board of Directors
from funds legally available therefor and to share ratably in our assets
available upon liquidation, dissolution or winding up. The holders of shares of
common stock do not have cumulative voting rights for the election of directors
and, accordingly, the holders of more than 50% of the shares of common stock are
able to elect all directors.
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<PAGE>
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock, $.001 par
value per share, of which no shares are issued and outstanding. 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. 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.
Effect of Delaware Anti-takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law (the
anti-takeover law), which regulates corporate acquisitions. The anti-takeover
law prevents certain Delaware corporations from engaging under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder. For purposes of the anti- takeover law, a "business combination"
includes, among other things, a merger or consolidation involving us and the
interested shareholder and the sale of more than 10% of our assets. In general,
the anti-takeover law defines an "interested stockholder" as any entity or
person beneficially owning 15% or more our outstanding voting stock and any
entity or person affiliated with or controlling or controlled by such entity or
person. A Delaware corporation may "opt out" of the anti-takeover law with an
express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of our outstanding
voting shares. We have not "opted out" of the provisions of the anti-takeover
law.
Anti-takeover Effects of By-laws
Under Delaware law, all stockholder actions must be effected at a duly
called annual or special meeting or by written consent. Our by-laws provide
that, except as otherwise required by law, special meetings of the stockholders
can only be called by the president, the Board of Directors, the Chairman of the
Board, the President or the holders of a majority of all shares entitled to vote
at the meeting.
Transfer Agent
North America Transfer Co., 147 W. Merrick Road, Freeport, New York, is
the transfer agent for our common stock.
Certain Limited Liability and Indemnification Provisions
Pursuant to our Certificate of Incorporation and By-laws, as amended, our
officers and directors shall be indemnified by us to the fullest extent allowed
under Delaware law for claims brought against them in their capacities as
officers and directors. Indemnification is not allowed if the officer or
director does not act in good faith and in a manner reasonably believed to be in
our best interests, or if the officer or director had no reasonable cause to
believe his conduct was lawful. Accordingly, indemnification may occur for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for our directors,
officers and controlling persons pursuant to the foregoing provisions or
otherwise, we have been advised that in the opinion of the SEC, such
36
<PAGE>
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
PLAN OF DISTRIBUTION
As used in this prospectus, stockholders selling our shares pursuant to
this prospectus includes donees and pledgees selling shares received after the
date of this prospectus from a selling stockholder named in this prospectus.
Upon our being notified by a selling stockholder that a donee or pledgee intends
to sell more than 500 shares, a supplement to this prospectus will be filed.
We have agreed to bear all costs, expenses and fees of registration of the
shares of common stock offered by the selling stockholders for resale other than
the legal fees and expenses of counsel or other advisors to the selling
stockholders. Any brokerage commissions, discounts, concessions or other fees,
if any, payable to broker-dealers in connection with any sale of the shares of
common stock will be borne by the selling stockholders selling those shares or
by the purchasers of such shares.
Sales of shares may be effected by selling stockholders from time to time
in one or more types of transactions, including block transactions,
over-the-counter markets, negotiated transactions, put or call options on the
shares and short sales of shares. Shares may be sold at market prices prevailing
at the time of sale or at negotiated prices. The stockholders selling shares
pursuant to this prospectus may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers as principals or agents
or to broker-dealers who may purchase shares of common stock as principals and
thereafter sell the shares from time to time in any one or more of such
transactions. In effecting sales, broker-dealers engaged by a selling
stockholder may arrange for other broker-dealers to participate. Such
brokers-dealers may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders and/or the purchasers of the shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation, as a particular broker-dealer, might be
in excess of customary commissions). The selling stockholders have advised us
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
The selling stockholders and any broker-dealers that act in connection
with the sale of shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. We have agreed to indemnify those
selling stockholders who were issued common stock upon conversion of 10%
Convertible Debentures due April 30, 2001 against certain liabilities, including
liabilities arising under the Securities Act. The selling stockholders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
Selling stockholders also may resell all or a portion of the shares under
this prospectus in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of that rule.
Upon our being notified by a selling stockholder that any material
arrangement has been entered
37
<PAGE>
into with a broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Act, disclosing:
o The name of each such selling stockholder and of the participating
broker-dealer(s);
o The number of securities involved;
o The price at which such securities were sold;
o The commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o That such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
o Other facts material to the transaction.
We have agreed to indemnify certain selling stockholders or their
transferees or assignees against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to payments to which such
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest may be required to make in respect thereof.
Certain of our stockholders holding a total of approximately 991,800
shares have agreed not to sell more than 25% of the shares offered by such
selling stockholder under this prospectus in any 30 day period. Each of such
other selling stockholders who holds warrants has also agreed not to sell any of
the common stock underlying such warrants for 30 days after the effective date
of this prospectus. Each of our directors and principal officers has undertaken
that, without the prior consent of these stockholders, he will not sell or
otherwise transfer or offer to sell or otherwise transfer (except in a private
transaction in which the transferee agrees to be bound by such restriction) any
shares of common stock directly or indirectly held by him prior to April 6,
2000.
All of the purchasers of an aggregate of 1,800,000 shares of our Common
Stock and 900,000 Class A Warrants sold in a private placement closed on
February 25, 2000 have agreed not to sell such shares or shares of Common Stock
issuable upon exercise of such warrants until after May 25, 2000.
LEGAL MATTERS
The legality of the securities offered by this prospectus will be passed
upon for us by Wolf, Block, Schorr and Solis-Cohen LLP, New York, New York.
EXPERTS
The consolidated financial statements of TTR Technologies, Inc. for the
three years ended December 31, 1999, included in this prospectus, have been
included in reliance upon the report of Brightman Almagor & Co., a member of
Deloitte Touche Tohmatsu, independent certified public accountants, given upon
the authority of said firm as experts in accounting and auditing.
38
<PAGE>
Auditor Change
On June 30, 1998, we appointed Brightman Almagor & Co. to re-issue a
report on our consolidated financial statements for the year ended December 31,
1997. On July 3, 1998, Schneider Ehrlich & Wengrover LLP (or SE&W) resigned as
our independent auditors by mutual agreement. The decision to change accountants
was approved by the Board of Directors.
During the fiscal years ended December 31, 1997 and 1996 and the period
between January 1, 1998, up to and including the day of its resignation, there
were no disagreements between us and SE&W on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures
which if not resolved to SE&W's satisfaction would have caused them to make
reference in connection with their opinion to the subject matter of the
disagreement. SE&W's report on our financial statements for such fiscal years
indicated that substantial doubt exists regarding our ability to continue as a
going concern.
The audit of Brightman Almagor & Co., a member of Deloitte Touche
Tohmatsu, as our independent accountants did not result in any changes to such
financial statements, and the related audit report of Brightman Almagor & Co., a
member of Deloitte Touche Tohmatsu, also states that substantial doubt exists
regarding our ability to continue as a going concern.
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information on file at the SEC's public reference room in Washington, D.C. You
can request copies of those documents, upon payment of a duplicating fee, by
writing to the SEC.
We have filed a registration statement on Form S-1 with the SEC. This
prospectus, which forms a part of the registration statement, does not contain
all of the information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document, such references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract or document. You may review a copy of the registration statement
at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.,
20549 and at the SEC's regional offices at CitiCorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and at 7 World Trade Center, Suite 1300,
New York, New York 10048. You can call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings and
the registration statement can also be reviewed by accessing the SEC's Internet
web site at http://www.sec.gov.
39
<PAGE>
TTR TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors F-2
Consolidated Financial Statements
Balance Sheets as of December 31, 1998 and 1999 F-3
Statements of Operations for the years ended December 31, 1997, 1998
and 1999 and the period from July 14, 1994 (inception) to
December 31, 1999 F-4
Statements of Comprehensive Loss for the years ended December 31, 1997,
1998 and 1999 and the period from July 14, 1994 (inception) to
December 31, 1999 F-5
Statements of Stockholder's Equity (Deficiency) for the years ended
December 31, 1997, 1998 and 1999 and the period from July 14, 1994
(inception) to December 31, 1999 F-6
Statements of Cash Flows for the years ended December 31, 1997, 1998
and 1999 and the period from July 14, 1994 (inception) to
December 31, 1999 F-8
Notes to the Consolidated Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and
Shareholders of 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 1999, and the related consolidated
statements of operations, comprehensive loss, stockholders' deficit and cash
flows for the three years ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. 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 the Company's management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 1998 and 1999, and the consolidated results of
operations, and its cash flows for the three years ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu
Tel-Aviv, Israel
March 1, 2000
F-2
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 74,445 $ 209,580
Accounts receivable 7,793 10,103
Other current assets 21,250 38,630
------------ ------------
Total current assets 103,488 258,313
Property and equipment - net 311,493 205,854
Deferred financing costs, net 70,712 --
Other assets 4,852 3,700
------------ ------------
Total assets $ 490,545 $ 467,867
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current liabilities
Current portion of long-term debt $ 873,153 $ 7,764
Short-term borrowings, net of discount 264,335 --
Accounts payable 744,103 409,521
Accrued expenses 1,056,345 335,772
------------ ------------
Total current liabilities 2,937,936 753,057
Long-term debt, less current portion 594,011 8,219
Accrued severance pay 56,765 37,587
------------ ------------
Total liabilities 3,588,712 798,863
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred Stock, $ 0.001 par value;
5,000,000 shares authorized; none issued and outstanding -- --
Common stock, $ 0.001 par value;
15,000,000 shares authorized; 4,176,326 and 10,653,560
issued and outstanding, respectively 4,177 10,654
Additional paid-in capital 9,170,585 24,710,602
Other accumulated comprehensive income 79,415 56,971
Deficit accumulated during the development stage (11,758,111) (24,830,348)
Less: deferred compensation (594,233) (278,875)
------------ ------------
Total stockholders' deficit (3,098,167) (330,996)
------------ ------------
Total liabilities and stockholders' deficit $ 490,545 $ 467,867
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From
Inception
Year Ended (July 14,
December 31, 1994) to
---------------------------------------------- December 31,
1997 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ -- $ 54,922 $ 68,803 $ 123,725
Expenses
Research and development 957,232 1,017,073 345,989 2,940,847
Sales and marketing 914,060 1,155,998 815,586 3,319,442
General and administrative 604,151 1,663,912 630,090 3,340,770
Stock based compensation 1,309,192 1,341,889 6,152,587 8,822,941
------------ ------------ ------------ ------------
Total expenses 3,784,635 5,178,872 7,944,252 18,424,000
------------ ------------ ------------ ------------
Operating loss (3,784,635) (5,123,950) (7,875,449) (18,300,275)
Other (income) expense
Legal settlement 232,500 -- -- 232,500
Loss on investment -- -- -- 17,000
Other income (50,000) (25,000) -- (75,000)
Amortization of deferred financing costs 81,101 72,288 4,180,540 4,516,775
Interest income (42,069) (3,413) (3,689) (61,995)
Interest expense 113,445 410,715 1,019,937 1,900,793
------------ ------------ ------------ ------------
Total other (income) expenses 334,977 454,590 5,196,788 6,530,073
------------ ------------ ------------ ------------
Net loss $ (4,119,612) $ (5,578,540) $(13,072,237) $(24,830,348)
============ ============ ============ ============
Per share data:
Basic and diluted $ (1.35) $ (1.54) $ (2.07)
============ ============ ============
Weighted average number
of common shares used in
basic and diluted loss per share 3,054,519 3,615,908 6,321,719
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
From
Inception
Year Ended (July 14,
December 31, 1994) to
---------------------------------------------- December 31,
1997 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss $ (4,119,612) $ (5,578,540) $(13,072,237) $(24,830,348)
Other comprehensive income (loss)
Foreign currency translation adjustments (19,667) 41,386 (22,444) 56,971
------------ ------------ ------------ ------------
Comprehensive loss $ (4,139,179) $ (5,537,154) $(13,094,681) $(24,773,377)
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
Common Stock Subscribed Paid-in Translation
Shares Amount Shares Amount Capital Adjustment
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 14, 1994
(date of inception) -- $ -- -- $ -- $ -- $ --
Issuances of common stock, par value $ 0.001
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
Issuances of common stock, par value $ 0.001
Services rendered 361,453 361 17,712
Stock options and warrants granted 600
Foreign currency translation adjustment 22,652
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1995 2,200,000 2,200 -- -- 42,673 22,652
Issuances of common stock, par value $ 0.001
Cash, net of offering costs of $ 11,467 850,000 850 362,683
Foreign currency translation adjustment 35,044
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996 3,050,000 3,050 -- -- 405,356 57,696
Common stock contributed (135,000) (135) 135
Issuances of common stock, par value $ 0.001
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 (19,667)
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 4,271,548 4,272 16,000 100,000 8,117,275 38,029
<CAPTION>
Deficit
Accumulated
During
Development Deferred
Stage Compensation Total
----------- ----------- -----------
<S> <C> <C> <C>
Balances at July 14, 1994
(date of inception) $ -- $ -- $ --
Issuances of common stock, par value $ 0.001
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
Issuances of common stock, par value $ 0.001
Services rendered 18,073
Stock options and warrants granted 600
Foreign currency translation adjustment 22,652
Net loss (896,663) (896,663)
----------- ----------- -----------
Balances at December 31, 1995 (938,748) -- (871,223)
Issuances of common stock, par value $ 0.001
Cash, net of offering costs of $ 11,467 363,533
Foreign currency translation adjustment 35,044
Net loss (1,121,211) (1,121,211)
----------- ----------- -----------
Balances at December 31, 1996 (2,059,959) -- (1,593,857)
Common stock contributed
Issuances of common stock, par value $ 0.001
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)
Net loss (4,119,612) (4,119,612)
----------- ----------- -----------
Balances at December 31, 1997 (6,179,571) (1,402,776) 677,229
</TABLE>
F-6
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
Common Stock Subscribed Paid-in Translation
Shares Amount Shares Amount Capital Adjustment
---------- ------------ -------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Common Stock Subscriptions 16,000 16 (16,000) (100,000) 99,984
Common Stock Forfeited (1,000,000) (1,000) 1,000
Transfer of Temporary Equity to Permanent Capital 15,000 15 77,141
Issuances of common stock, par value $ 0.001
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 41,386
Net loss
---------- ------------ -------- ------ ------------ ---------
Balances at December 31, 1998 4,176,326 4,177 -- -- 9,170,585 79,415
Issuances of common stock, par value $ 0.001
Cash 314,774 315 225,140
Services rendered 1,227,000 1,227 1,669,548
Exercise of options 1,714,952 1,715 1,401,660
Stock options granted (cancelled) 4,449,015
Conversion of debt into common stock 3,220,508 3,220 3,376,749
Fair value of warrants associated
with financing agreement 3,845,400
Amortization of deferred compensation
Value assigned to beneficial conversion feature
of convertible notes 572,505
Foreign currency translation adjustment (22,444)
Net loss
---------- ------------ -------- ------ ------------ ---------
Balances at December 31, 1999 10,653,560 $ 10,654 $ -- $ -- $ 24,710,602 $ 56,971
========== ============ ======== ====== ============ =========
<CAPTION>
Deficit
Accumulated
During
Development Deferred
Stage Compensation Total
------------- ----------- ------------
<S> <C> <C> <C>
Common Stock Subscriptions
Common Stock Forfeited
Transfer of Temporary Equity to Permanent Capital 77,156
Issuances of common stock, par value $ 0.001
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
Net loss (5,578,540) (5,578,540)
------------- ----------- ------------
Balances at December 31, 1998 (11,758,111) (594,233) (3,098,167)
Issuances of common stock, par value $ 0.001
Cash 225,455
Services rendered (445,725) 1,225,050
Exercise of options 1,403,375
Stock options granted (cancelled) (613,435) 3,835,580
Conversion of debt into common stock 3,379,969
Fair value of warrants associated
with financing agreement 3,845,400
Amortization of deferred compensation 1,374,518 1,374,518
Value assigned to beneficial conversion feature
of convertible notes 572,505
Foreign currency translation adjustment (22,444)
Net loss (13,072,237) (13,072,237)
------------- ----------- ------------
Balances at December 31, 1999 $ (24,830,348) $ (278,875) $ (330,996)
============= =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From
Inception
Year Ended (July 14,
December 31, 1994) to
-------------------------------------------- December 31,
1997 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $ (4,119,612) $ (5,578,540) $(13,072,237) $(24,830,348)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 184,290 187,298 4,273,778 4,901,407
Amortization of note discount -- 272,009 214,454 486,463
Translation adjustment -- -- -- (1,528)
Amortization of deferred compensation 972,567 1,173,139 1,374,518 3,520,224
Beneficial conversion feature of convertible debt -- -- 572,505 572,505
Stock and warrants issued for services
and legal settlement 565,125 -- 4,891,880 5,475,678
Payment of common stock issued with
with guaranteed selling price -- (155,344) -- (155,344)
Increase (decrease) in cash attributable
to changes in assets and liabilities
Accounts receivable 478 (8,480) (2,305) (10,622)
Other current assets (7,204) 99,113 (4,081) (30,886)
Other assets (72,700) 69,000 (3,700)
Accounts payable (72,401) 624,547 (694,469) 204,596
Accrued expenses 22,297 958,098 (109,220) 803,914
Accrued severance 26,299 33,009 (19,332) 58,238
Interest payable (234,508) 90,920 160,099 251,019
------------ ------------ ------------ ------------
Net cash used by operating activities (2,735,369) (2,235,231) (2,414,410) (8,758,384)
------------ ------------ ------------ ------------
Cash flows from investing activities
Proceeds from sales of fixed assets -- -- 6,098 6,098
Purchases of property and equipment (175,507) (64,363) (6,822) (682,585)
Increase in organization costs -- -- -- (7,680)
------------ ------------ ------------ ------------
Net cash used by investing activities (175,507) (64,363) (724) (684,167)
------------ ------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock 5,520,837 125,000 1,628,830 7,664,400
Proceeds from officer loan 10,000 16,000 -- --
Stock offering costs (309,565) -- -- (475,664)
Deferred financing costs (19,000) (143,000) (276,901) (682,312)
Proceeds from short-term borrowings 200,000 206,553 -- 1,356,155
Proceeds from long-term debt -- 1,737,688 -- 2,751,825
Proceeds from convertible debentures -- -- 2,000,000 2,000,000
Repayment of short-term borrowings (1,049,602) -- (307,480) (1,357,082)
Repayments of long-term debt (1,053,455) (15,839) (494,207) (1,599,517)
------------ ------------ ------------ ------------
Net cash provided by financing activities 3,299,215 1,926,402 2,550,242 9,657,805
------------ ------------ ------------ ------------
Effect of exchange rate changes on cash (1,955) (2,403) 27 (5,674)
------------ ------------ ------------ ------------
Increase in cash and cash equivalents 386,384 (375,595) 135,135 209,580
Cash and cash equivalents at beginning of period 63,656 450,040 74,445 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 450,040 $ 74,445 $ 209,580 $ 209,580
============ ============ ============ ============
Supplemental disclosures of
cash flow information
Cash paid during the period for:
Interest $ 345,258 $ 42,609 $ 50,046 $ 472,157
============ ============ ============ ============
Transfer of common stock issued with
guaranteed selling price to permanent capital $ 77,156
============
Non cash financing activity:
Conversion of debt and accrued interest to common stock $ 3,379,969
============
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
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.
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. Certain
consolidated amounts have been reclassified for consistent presentation.
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 equivalents, current receivables, accounts payable and
accrued expenses, are carried at, or approximate, fair value because of
their short-term nature or because they carry market rates of interest.
F-9
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd.)
Revenue Recognition
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-2, "Software Revenue Recognition".
SOP 97-2 provides guidance in recognizing revenue on software transactions
and is required for transactions entered into after December 15, 1997.
Subsequently, in March 1998 and December 1998, the AICPA issued SOP 98-4
and SOP 98-9, respectively, which defer until the Company's fiscal year
beginning January 1, 2000, the application of several paragraphs and
examples in SOP 97-2. Management does not believe that the adoption of the
remaining portions of SOP 97-2, which were deferred by SOP 98-4 and SOP
98-9, will have a material impact on the Company's financial statements.
Revenues are generated from licensing software and are recognized upon
delivery to the customer, provided no significant obligations of the
Company remain and collection for the resulting receivable is probable.
Stock Based Compensation
The Company accounts for stock based compensation under the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). As permitted by SFAS 123, the
Company has elected to continue to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for stock based compensation to
employees. Accordingly, compensation cost for stock options granted to
employees is measured as the excess, if any, of the quoted market price of
the Company's Common Stock at the measurement date (generally, the date of
grant) over the amount an employee must pay to acquire the stock. This
amount is recognized over the vesting periods of the related grants.
Stock options granted to non-employees are valued using a Black-Scholes
option pricing model with appropriate assumptions for risk free investment
rates, expected lives, dividend yields and volatility factors. The value
of options granted to non-employees is charged to appropriate asset or
expense accounts when the options are granted.
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 statements 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).
F-10
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd.)
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 have been included in the net loss per share
computation for the period, because their inclusion would be
anti-dilutive.
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 fourteen 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.
F-11
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd.)
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
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.
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.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for all derivative
instruments. SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999. The Company believes that the adoption of SFAS No. 133 on
January 1, 2000 will not have a significant effect on its financial
statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
----------------------
1998 1999
-------- --------
Computer equipment $205,477 $186,690
Leasehold improvements 109,350 114,928
Office equipment 150,608 140,242
Vehicles 84,601 93,585
-------- --------
550,036 535,445
Less: Accumulated depreciation 238,543 329,591
-------- --------
$311,493 $205,854
======== ========
Depreciation expense was $ 88,311, $ 113,858 and $ 107,010 for the years
ended December 31, 1997, 1998 and 1999.
F-12
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
------------------------
1998 1999
---------- ----------
Accrued payroll and related amounts $ 749,371 $ 66,868
Taxes 24,257 4,738
Accrued interest 90,920 --
Settlement (a) -- 125,000
Other 191,797 139,166
---------- ----------
$1,056,345 $ 335,772
========== ==========
(a) In June 1999, the Company received notice from a shareholder,
threatening to commence litigation, alleging that the Company failed
to register its stock. The shareholder was seeking the return of its
investment in the amount of $ 400,000 plus interest to date. In
November 1999 the Company settled the matter, and agreed to pay a
total of $ 200,000 over specified periods, and to issue a total of
50,000 warrants with exercise prices ranging from $ 2.50 to $ 3.50.
NOTE 5 - 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 6 - DEBT FINANCINGS
Short-Term Borrowings
December 31,
---------------------
1998 1999
-------- -------
Promissory Note (a)
(net of discount of $ 42,555) $ 57,445 $ --
Other loans (b) 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 was amortized on a
straight-line basis over the term of the note.
F-13
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - DEBT FINANCINGS (contd.)
Short-Term Borrowings (contd.)
(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,
------------------------
1998 1999
---------- ----------
Bank loan (a) $ 26,563 $ 15,983
10% Promissory Notes (b)
(net of discount of $130,475) 1,332,025 --
8% Promissory Notes (c)
(net of discount of $41,424) 108,576 --
---------- ----------
1,467,164 15,983
Less: current portion 873,153 7,764
---------- ----------
$ 594,011 $ 8,219
========== ==========
(a) The loan is denominated in New Israeli Shekels (NIS), bears interest
at the Israeli prime rate (at December 31, 1999 - 12.2%) plus 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. The exercise price of the
warrant is $ 1.50 per share. For financial reporting purposes, the
Company recorded a discount of $ 357,450, to reflect the value of
the Warrants. The discount was being amortized on a straight-line
basis over the terms of the respective notes. The notes and accrued
interest were due at the earlier of one year or 30 days following
any public or private equity or debt financing exceeding $
1,000,000.
In December 1999, the Company offered any remaining note holders an
option to convert their outstanding principal and accrued interest
to shares of common stock. The conversion rate was based on 85% of
the average closing bid price of the common shares for the 30
trading days preceding the date of conversion. In accordance with
applicable accounting rules, the Company recorded a charge to
interest expense in the amount of $ 572,505 to reflect this
beneficial conversion feature. A total of $ 1,329,202 of note
principal and accrued interest was converted to common stock.
F-14
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - DEBT FINANCINGS (contd.)
Long-Term Debt (contd.)
(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 note discount of $ 41,513, to
reflect the value of the Stock and Warrants. The discount was being
amortized on a straight-line basis over the term of the notes. In
November 1999, the entire principal balance plus accrued interest on
these notes was repaid.
The aggregate maturities of long-term debt for the next two years ending
December 31, are as follows: 2000 - $ 7,764; and 2001 - $ 8,219.
10% Convertible Debentures
In May 1999 the Company agreed to issue $ 2,000,000 of its 10% Convertible
Debentures to private investors. The Debentures were convertible into
shares of the Company's Common Stock at the rate of $ 0.77 per share based
on the closing trading prices of the Common Stock during certain specified
periods. In addition, upon conversion, warrants were issued to purchase
additional shares of Common Stock equal to one-half of the shares of
Common Stock issued. The warrants were exercisable at a price per share
equal to 120% of the conversion rate and expire in April 2002.
In October and November 1999, the investors converted all of the
outstanding debentures and were issued 2,681,934 shares of common stock
and 1,340,967 warrants exercisable at $ 0.92 per share. In November 1999,
the investors exercised of all the outstanding conversion warrants.
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. Using the Black-Scholes model
for estimating the fair value of the warrants, the Company recorded $
3,845,400 as deferred financing costs. This amount was charged to
operations in the period the debentures were converted.
F-15
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES
At December 31, 1999, the Company had available $ 6,475,000 of net
operating loss carryforwards for U.S. federal income tax purposes which
expire in the years 2014 through 2019, and $ 6,822,000 of foreign net
operating loss carryforwards with no expiration date. Due to the
uncertainty of their realization, no income tax benefit has been recorded
by the Company for these net operating loss carryforwards as valuation
allowances have been established for any such benefits. The use of the
U.S. federal net operating loss carryforwards is subject to limitations
under section 382 of the Internal Revenue code pertaining to changes in
stock ownership.
Significant components of the Company's deferred tax assets for U.S.
federal and Israel income taxes are as follows:
Year ended
December 31,
---------------------------
1998 1999
----------- -----------
Net operating loss carryforwards $ 3,094,809 $ 4,398,088
Research and development 227,000 130,853
Stock based compensation 40,813 2,313,232
Accrued vacation and severance 32,000 22,905
----------- -----------
Total deferred tax assets 3,394,622 6,865,078
Valuation allowance (3,394,622) (6,865,078)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
NOTE 8 - 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 1999,
the Plan was amended to increase the total number of shares available for
grant to 1,500,000. 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
ISOs issued to employees who are less than 10% stockholders and employees
who are 10% stockholders. The Plan will terminate in 2006.
F-16
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
Stock Options (contd.)
1996 Incentive and Non-Qualified Stock Option Plan (contd.)
In 1997, 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 was being amortized over the vesting period. In 1999, the Company
granted 534,000 $ 0.01 options under the Plan, which were immediately
exercisable to employees. The issuance of the options resulted in a charge
to stock based compensation in the amount of $ 1,502,610. Included in this
amount, were 209,500 options granted to an employee who is also the
brother of the Company's president and chief executive officer.
A total of 24,000 stock options granted 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.
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, 1999, no options had been granted under the Directors' Plan.
F-17
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
Stock Options (contd.)
Non-Executive Directors Stock Option Plan (contd.)
A summary of the status of the Plan as of December 31, 1999 and changes
during the year 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
Granted 736,500 0.01- 5.06
Canceled (144,850) 4.00-13.88
Exercised -- --
------- ----------
Options outstanding, December 31, 1999 749,400 $0.01- 7.00
======== ==========
Shares of common available for future grant 750,600
========
The following table summarizes information about stock options under the
plan outstanding at December 31, 1999:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Average Weighted Average
---------------- ----------------
Remaining
Number Contractual Exercise Number Exercise
Range of price Outstanding Life Price Exercisable Price
-------------- ----------- ---- ----- ----------- -----
$ 0.01 534,000 9.70 $ 0.01 449,000 $ 0.01
$ 0.90 100,000 9.14 0.90 100,000 0.90
$ 2.56 100,000 9.89 2.56 -- --
$ 4.00-$5.81 8,900 8.16 4.96 3,650 4.81
$ 7.00 6,500 7.00 7.00 3,500 7.00
------- ---- ------ ------- --------
$ 0.01-$7.00 749,400 9.61 $ 0.59 556,150 $ 0.25
======= ==== ====== ======= ========
Weighted-average grant date fair value of options granted in 1997, 1998
and 1999, under the Black-Scholes option pricing model, was $ 5.82, $ 1.14
and $ 2.20 per option, respectively.
F-18
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
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
$ 0.01 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 vesting 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 1999, the Company issued non-plan options to purchase 196,000 shares to
various employees . The options have an exercise price of $ 0.01 per share
and vested immediately. The issuance of these options resulted in a charge
to stock based compensation in the amount of $ 163,660.
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:
Year ended December 31,
-----------------------
1997 1998 1999
---- ---- ----
Net loss
As reported $ (4,119,612) $ (5,578,540) $ (13,072,237)
Proforma $ (4,599,940) $ (5,635,574) $ (13,123,185)
Loss per share
As reported $ (1.35) $ (1.54) $ (2.07)
Proforma $ (1.51) $ (1.56) $ (2.08)
The fair value of each option granted in 1997, 1998 and 1999 is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
1997 1998 1999
---- ---- ----
Risk free interest rates 6.23% 5.51% 5.52%
Expected option lives 2.5 years 2.5 years 2.5 years
Expected volatilities 46.5% 46.5% 46.5%
Expected dividend yields None None None
F-19
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
Warrants
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 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.
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 are 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.
F-20
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
Warrants (contd.)
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.
o In May 1999, in connection with the sale of convertible debentures
(see Note 6) the Company issued 1.3 million warrants. These warrants
expire in April 2002 and are exercisable at a nominal price per
share.
o In July 1999, the Company issued 200,000 warrants exercisable at $
2.75 to a consultant pursuant to a three-month consulting agreement.
o In August 1999 a consultant was issued warrants to purchase up to 1
million shares of common stock at a nominal price per share. The
warrants are exercisable only upon the Company entering into an
agreement with a strategic investor through the efforts of the
consultant. The warrants expire in October 2002. In November 1999,
upon the signing of an agreement with a strategic investor, the
warrants became exercisable (see Note 10). Using the Black-Scholes
model for estimating the fair value of the warrants, the Company
recorded a charge to operations of $ 2,741,000 in connection with
the warrants.
o In November 1999, in connection with a legal settlement, the Company
issued a total of 50,000 warrants with exercise prices ranging from
$ 2.50 to $ 3.50. (see Note 4)
o In November 1999, the Company issued 25,000 warrants exercisable at
a nominal price per share to a consultant.
o At December 31, 1999, the Company had outstanding warrants to
purchase a total of 2,814,536 shares of Common Stock with exercise
prices ranging from $ 0.01 to $ 7.80 per share.
F-21
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
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.
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. 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 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 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.
F-22
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY (contd.)
Stock Issuances (contd.)
During the year ended December 31, 1999, the Company completed the
following common stock transactions:
o 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 value of
the services totaling $ 445,725 is being amortized over the one-year
contract terms.
o In January 1999, the Company issued 250,000 shares of Common Stock
as payment of an outstanding liability in the amount of $ 168,750.
o In February and April 1999, the Company received $ 160,000 from the
issuance of an additional 205,682 shares of its Common Stock.
o In July 1999, the Company issued 150,000 shares of Common Stock in
exchange for previously issued options in connection with the
termination of, and settlement of certain claims by an ex-employee.
o In October 1999, the Company issued 200,000 shares of Common Stock
to a consultant pursuant to a consulting agreement.
o In October 1999, the Company issued 2,681,934 shares of Common Stock
as a result of the conversion of all the outstanding 10% convertible
debentures plus accrued interest thereon.
o In December 1999, the Company issued 538,574 shares as a result of
the conversion of long-term debt.
o In 1999, the Company issued 1,714,952 shares of Common Stock from
the exercise of various outstanding warrants.
F-23
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - 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 10 - 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,
1999 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 refund these grants if the sales are not sufficient.
Operating Leases
TTR Ltd. has entered into a lease agreement for office space expiring
through 2001. Future minimum rentals on these leases as of December 31,
1999 are as follows:
Year ended December 31,
-----------------------
2000 $ 32,180
2001 13,408
F-24
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - COMMITMENTS AND CONTINGENCIES (contd.)
Employment Agreement
Effective, June 1, 1999, the Company entered into an employment agreement
with its new 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 upon 90 days prior notice. The
agreement provides for a monthly salary of $ 5,000 plus benefits and the
issuance of options under the 1996 Option Plan to purchase 235,000 shares
of the Company's common stock, at an exercise price of $ 0.01 per share.
Upon the consummation of the equity investment by Macrovision Corporation
("Macrovision"), 150,000 of the options became exercisable, with the
remaining options vesting at the end of the tenth month thereafter.
Consulting Agreement
In June 1999, the Company entered into a consulting agreement which will
terminate in January 2003. The agreement provides for quarterly fees of
$15,000.
Amended Marketing and Sales Representation Agreement
In August 1999, the Company amended an existing agreement to provide for
the issuance of 200,000 shares of common stock upon the commencement of an
approved marketing campaign of the Company's proposed product to prevent
the unauthorized copying of audio CR-ROM discs. In addition, the
representative was granted warrants to purchase up to 1,000,000 shares of
common stock at a nominal price per share. The warrants are exercisable
only upon the Company entering into an agreement with a Strategic Partner
as a direct result of the representatives activity. Such agreement must
provide for an equity investment of at least $ 3,000,000 and the licensing
of the Company's technology. The warrants expire in October 2002.
In October 1999, pursuant to the agreement, the Company issued 200,000
shares of common stock. In November 1999, upon the signing of an agreement
with a Strategic Partner, the warrants became exercisable. Using the
Black-Scholes model for estimating the fair value of the warrants, the
Company recorded a charge to operations of $ 2,741,000 in connection with
the warrants.
F-25
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - COMMITMENTS AND CONTINGENCIES (contd.)
Licensing and Investment Agreement
In November 1999, the Company signed an agreement with Macrovision
Corporation to jointly develop and market music copy protection technology
for optical based media. In connection with the agreement the Company
granted to Macrovision an exclusive world-wide, royalty-bearing license to
use the Company's proprietary technology through December 31, 2009. The
Company will be entitled to a 30% royalty which may be adjusted to 25%,
under certain conditions. Also under certain conditions, the exclusive
license may revert to a non-exclusive license as of the second anniversary
of the Commercial Launch, as defined. If certain conditions relating to
the timing of the Commercial Launch transpire, the Company will be
entitled to minimum annual guaranteed royalty advances, commencing on the
first anniversary of the Commercial Launch and continuing through the
ninth year, aggregating $ 25 million.
Under the Agreement, in January 2000, Macrovision made a $ 4 million
equity investment in the Company for an 11.4% interest and received an
exclusive license to the Company's proprietary DiscGuard(TM) technology.
Also under the agreement, the Company has agreed to reimburse Macrovision
for up to $ 1 million of research and development expenses incurred within
the first year of the joint development.
NOTE 11 - GEOGRAPHIC DATA
U. S. % of Total Israel % of Total
----- ---------- ------ ----------
For the year ended
December 31, 1999:
Revenue $ 5,550 8.07% $ 63,253 91.93%
Operating loss (6,371,600) 80.90% (1,503,849) 19.10%
Identifiable assets 239,995 51.30% 227,872 48.70%
For the year ended
December 31, 1998:
Revenue $ -- -- $ 54,922 100.00%
Operating loss (2,090,049) 40.79% (3,033,901) 59.21%
Identifiable assets 171,678 35.00% 318,867 65.00%
For the year ended
December 31, 1997:
Revenue $ -- -- $ -- --
Operating loss (1,414,007) 37.36% (2,370,628) 62.64%
Identifiable assets 633,285 53.28% 555,342 46.72%
F-26
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - RELATED PARTY TRANSACTION
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 13 - SUBSEQUENT EVENTS
Private Placement
In February 2000, the Company completed a private placement of 1,800,000
shares of its Common Stock and 900,000 Class A Warrants for an aggregate
purchase price of $10,000,000. The Class A Warrants are exercisable for a
period of 60 months at an exercise price per share of $8.84. The Company
may redeem the Class A Warrants for $ 0.10 per warrant 6 months following
issuance if the underlying common stock is registered and the Company's
common shares have traded at or above 200% of the exercise price for a
period of twenty consecutive trading days. Upon exercise of the Class A
Warrants, the Company will issue Class B Warrants for an additional
450,000 shares. The Class B Warrants are exercisable for a period of 36
months from the date of issuance at an exercise price per share of $21.22.
The Class B Warrants may be redeemed by the Company if the underlying
common stock is registered and the common shares have trade at $26 or
above for a period of twenty consecutive trading days. The Company paid a
placement agent a fee of $500,000 and issued 180,000 warrants exercisable
at $5.56 per share, 90,000 Class A Warrants exercisable at $8.84 and upon
exercise an additional 45,000 Class B Warrants exercisable at $21.22. Also
in connection with the private placement, the Company paid $200,000 and
issued 275,000 warrants, exercisable at $2.75, as a finder fee.
Authorized Shares
In January 2000, the Company's stockholders voted to increase the number
of authorized shares of Common Stock to 25,000,000.
F-27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following expenses will be paid by TTR, and not the selling
stockholders, in connection with the distribution of the securities registered
hereby. All of such expenses, except for the SEC registration fee, are
estimated.
SEC Registration Fee ............................................. $16,787
Legal Fees ....................................................... $50,000
Accountants' Fees and Expenses ................................... $15,000
Printing Expenses ................................................ $10,000
Blue Sky Fees and Expenses ....................................... $ 2,000
Transfer Agent Fees and Expenses ................................. $ 1,000
Miscellaneous .................................................... $ 1,000
Total ........................................................ $95,787
=======
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was lawful.
In the case of an action by or in the right of the corporation, Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or complete action in
any of the capacities set forth above against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in and not opposed to the best interests of the
corporation, except that indemnification is not permitted in respect of any
claim, issue or matter as to which such person is adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought determines upon application that,
despite the adjudication of liability, but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such court deems proper. Section 145
further provides: that a Delaware corporation is required to indemnify a
director, officer, employee or agent against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with any action,
suit or proceeding or in defense of any claim,
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issue or matter therein as to which such person has been successful on the
merits or otherwise; that indemnification provided for by Section 145 not be
deemed exclusive of any other rights to which the indemnified party may be
entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer against any such liability asserted against him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against liability under Section 145. A Delaware
corporation may provide indemnification only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct. Such determination is to be made (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even through
less than a quorum or (ii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion or (iii) by the
stockholders.
Section 6 of the Certificate of Incorporation of TTR Technologies, Inc.
("TTR") provides that:
"To the fullest extent that the General Corporation Law of the State
of Delaware, as the same exists or may hereafter be amended, permits
elimination or limitation of the liability of directors, a director
of the corporation shall not be personally liable to the corporation
or any of its shareholders for any breach of duty in his capacity as
a director. Any repeal or modification of the foregoing sentence by
the shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the
time of such repeal or modification."
Section 102(b)(7) of the Delaware Corporation Law provides that the
Certificate of Incorporation of a Delaware corporation may contain a provision
eliminating the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of a
director for (i) any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) the payment of
unlawful dividends or the making of unlawful stock purchases or redemptions or
(iv) any transaction from which the director derived a personal benefit.
Section 7 of the Certificate of Incorporation of TTR contains the
following provisions with respect to the elimination or limitation of liability
of our directors:
"The directors and officers of the corporation shall be entitled to
such rights of indemnification and advancement of expenses,
including attorneys' fees, in the defense of any action or
threatened action in which a director or officer is or may be a
party as the Board of Directors may by resolution prescribe."
Our By-Laws provide that we will indemnify our directors, executive
officers, other officers, employees and agents to the fullest extent permitted
by law.
Item 15. Recent Sales of Unregistered Securities.
The following paragraphs set forth certain information with respect to all
securities sold by TTR within the past three years without registration under
the Securities Act. The information includes the names of the purchasers, the
dates of issuance, the title and number of securities sold the discounts or
commissions, if any, paid to underwriters or placement agents in connection with
such sales, the consideration received by TTR for the issuance of these
securities and the class of persons to whom the
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securities were sold.
1.(a) In connection with TTR's initial public offering, TTR issued to
First Metropolitan Securities, Inc. warrants to purchase up to 80,000 shares of
common stock at an exercise price per share of $11.20. In July 1998, the
warrants were exchanged for 32,000 shares of common stock.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services rendered.
(d) TTR believes that the warrants and the shares for which they were
exchanged were issued in transactions not involving a public offering in
reliance upon an exemption from registration provided by Section 4(2) of the
Securities Act.
2. (a) In March 1997, TTR issued 5,000 shares of common stock to a former
consultant to TTR.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services rendered.
(d) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
3. (a) In March 1997, TTR issued 50,000 shares of common stock to an
employee, of which 25,000 shares vested on July 31, 1997 and the remaining
25,000 shares vested on January 31, 1998.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services rendered.
(d) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
4. (a) In April 1997, TTR issued 15,000 and 4,000 shares of common stock
to two private investors.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services rendered.
(d) TTR believes that the shares were issued in transactions not involving
a public offering in reliance upon an exemption from registration provided by
Section 4(2) of the Securities Act.
5. (a) In May 1997, TTR issued 15,000 shares of common stock to a former
consultant to TTR.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of the settlement of a
lawsuit.
(d) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
6. (a) In December 1997, TTR issued to a private investor 64,000 shares of
common stock and four year warrants to purchase 33,000 shares of common stock at
an exercise price per share of $7.80.
(b) There were no underwriters with respect to the above transaction.
(c) The shares and warrants were issued in consideration of the payment of
$400,000.
(d) TTR believes that the shares and warrants were issued in a transaction
not involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
7. (a) In April 1998, TTR issued to a consultant four year warrants to
purchase 25,000 shares of common stock at an exercise price per share of $5-5/8.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services rendered.
(d) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
8. (a) In July 1998, TTR completed a private placement of 10% promissory
notes for an
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aggregate amount of $1,462,500. In connection therewith TTR issued warrants to
purchase an aggregate of 336,375 shares of common stock at an exercise price
equal to 115% of the price per share of common stock in TTR's then proposed
public offering or as the date of grant if no offering took place by December
31, 1998. The exercise price was subsequently amended to $1.50 per share. In
December 1999, all of the outstanding principal and accrued interest on these
notes were converted into an aggregate of 538,574 shares of TTR's common stock.
(b) TTR paid commissions to the placement agents of approximately $96,000.
(c) TTR believes that the promissory notes, warrants and conversion shares
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act.
9.(a) In June 1998, TTR issued to three consultants a total of 125,000
shares of common stock and warrants for an additional 25,000 shares of common
stock. The warrants are exercisable at a price per share equal to $1.50.
(b) There were no underwriters with respect to the above transaction.
(c) The shares and warrants were issued in consideration of services
rendered.
(d) TTR believes that the shares and warrants were issued in a transaction
not involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
10.(a) In July 1998 TTR issued to certain holders of warrants issued in
April 1996 an aggregate of 400,000 shares in exchange for warrants to purchase
up to 1,000,000 shares at an exercise price of $7.00.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
11.(a) In September 1998, TTR issued to an investor 111,111 shares of
common stock for $100,000.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
12.(a) In October and November 1998, TTR issued to two consultants an
aggregate of 119,000 shares of common stock.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
13.(a) In December 1998, TTR completed a private placement of an aggregate
of 45,000 shares of common stock and warrants to purchase an aggregate of 15,000
shares of common stock at an exercise price of $6.00 per share.
(b) TTR paid commissions to placement agents of approximately $19,500.
(c) TTR believes that the shares and warrants were issued in a transaction
not involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
14. (a) In December 1998, TTR issued to an investor 150,758 shares at a
price per share of $0.60.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
15.(a) In January 1999, TTR issued to a consultant 297,000 shares of
common stock.
(b) There were no underwriters with respect to the above transaction.
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<PAGE>
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
16.(a) In January 1999, TTR issued warrants to purchase up to 10,000
shares at an exercise price per share of $1.75 to a consultant and an aggregate
of 380,000 shares of common stock to three other consultants.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares and warrants were issued in a transaction
not involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
17.(a) In February 1999, TTR issued to certain employees warrants to
purchase an aggregate of 196,000 shares, at an exercise price per share of
$0.01. As of March 10, 2000 an aggregate of 146,000 shares had been issued upon
exercise of these warrants.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants and shares issued upon exercise of
certain of these warrants were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
18.(a) In February and March 1999, TTR issued to certain investors an
aggregate of 130,682 shares at a price per share of $0.86 and issued to a
consultant 200,000 shares of common stock.
(b) There were no underwriters with respect to the above transactions.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
19.(a) In April 1999 TTR issued to a consultant 75,000 shares at a price
of $0.60 per share.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
20.(a) In May, July, September and October 1999, TTR issued $1,000,000,
$400,000, $100,000 and $500,000, respectively, in principal amount of its 10%
Convertible Debentures due April 30, 2001 to certain private investors. In
October 1999, the outstanding principal amount and accrued interest on the
Convertible Debentures were converted into an aggregate of 2,681,934 shares of
TTR common stock. Upon the issuance of the conversion shares, the Company issued
to these investors warrants to purchase an aggregate of 1,340,970 shares of TTR
common stock at an exercise price of $0.92 per share. In November 1999, all of
these warrants were exercised by the investors.
(b) TTR paid commissions to Wall & Broad Equities, Inc. of approximately
$240,000.
(c) TTR believes that the Debentures, warrants, conversion shares and
warrant shares were issued in transactions not involving a public offering in
reliance upon an exemption from registration provided by Section 4(2) of the
Securities Act.
21.(a) In May 1999 TTR issued to a consultant options to purchase up to an
aggregate of 1,300,000 shares at a nominal exercise price per share. As of March
10, 2000, TTR had issued 796,798 shares upon the partial exercise of these
options.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
22.(a) In July 1999 TTR issued to a consultant warrants to purchase up to
an aggregate of 400,000 shares at an exercise price of $2.75 per share. In
settlement of certain disputes between the consultant and TTR, TTR re-issued
warrants for an aggregate of 200,000 at an exercise price of $2.75 per share and
the consultant waived any rights to the warrants for the remaining 200,000
shares.
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<PAGE>
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants and option shares were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act.
23.(a) In October 1999, TTR issued to a consultant 200,000 shares and an
option to purchase an aggregate of 1,000,000 shares at an exercise price per
share of $0.01. The option was exercised in full in January 2000.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
24. (a) In November 1999, TTR issued to a shareholder warrants to purchase
an aggregate of 15,000 shares at an exercise price per share of $2.50 and
warrants to purchase an aggregate of 35,000 shares at an exercise price per
share of $3.50 in settlement of certain disputes between us.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
25. (a) In November 1999, TTR issued to a consultant warrants to purchase
an aggregate of 25,000 shares at an exercise price per share of $0.01.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
26. (a) In January 2000, TTR issued to an investor 1,880,937 shares for
aggregate consideration of $4,000,000.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
27. (a) In January 2000, TTR issued 15,000 shares for services provided to
TTR.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
28. (a) In January 2000, TTR issued to a service provider 1,269 shares in
payment of $10,000 owed to service provider for services performed.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
29. (a) In February 2000, TTR issued, by way of a private placement,
1,800,000 shares and warrants to purchase an additional 900,000 shares (at an
exercise price per share of $8.84) for aggregate consideration of $10,000,000.
Upon exercise of the warrants, the Company is to issue 450,000 shares at an
exercise price per share of $21.22.
(b) TTR paid a commission to a placement agent of $500,000.
(c) TTR believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
30. (a) In February 2000 in connection with the private placement referred
to in paragraph 29, TTR issued as a finders fee warrants to purchase up to an
aggregate of 200,000 shares at an exercise price
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<PAGE>
of $2.75 per share.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
31.(a) In March 2000, in connection with the private placement referred to
in paragraph 29, TTR issued to the placement agent and certain of its affiliates
a warrant to purchase an aggregate of 180,000 shares at an exercise price of
$5.56 per share and an aggregate of 90,000 warrants at an exercise price of
$8.84 per share and upon exercise of the 90,000 warrants, will issue warrants
for 45,000 shares at an exercise price of $21.22 per share.
(b) There were no underwriters with respect to the above transaction.
(c) TTR believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
32. (a) Since January 1, 1997, TTR has issued, pursuant to its 1996 Option
Plan, the following stock options:
(i) In January through February 1997 TTR issued to eight employees
and two consultants options to purchase in the aggregate 34,000 shares of
common stock. The options are exercisable at $7.00 per share until 2006.
(ii) In March 1997, TTR issued to an employee (A) non-qualified
options to purchase up to 40,000 shares of common stock at an exercise
price per share of $10.00 and (B) incentive stock options to purchase up
to 60,000 shares of common stock at an exercise price per share of $5. The
options are exercisable until 2006.
(iii) In May 1997, TTR issued to a total of three consultants and
employees options to purchase 15,000, 5,000 and 3,000 shares of common
stock, respectively, at an exercise price per share equal to $13-7/8,
$13-15/16 and $14-1/2, respectively. All of these issuances were
subsequently canceled and such consultants and employees were issued on
December 31, 1997 options for an identical number of shares of common
stock at an exercise price per share of $5- 13/16. The options are
exercisable until 2006.
(iv) In July and October 1997, TTR issued to a consultant and an
employee options to purchase 2,000 and 2,500 shares of common stock,
respectively, at an exercise price per share equal to $11 and $11-1/4,
respectively. Such issuances were subsequently canceled and the employees
were issued on December 31, 1997 options for an identical number of shares
of common stock at an exercise price per share of $5-13/16. The options
are exercisable until 2006.
(v) In November 1997 TTR issued to an employee options to purchase
1,600 shares of common stock, at an exercise price per share of $10-1/4.
Such issuance was subsequently canceled and the employee was issued on
December 31, 1997 options for an identical number of shares of common
stock at an exercise price per share of $5-13/16. The options are
exercisable until 2006.
(vi) In January 1998, TTR issued to a consultant options to purchase
4,000 shares of common stock, at an exercise price per share of $5-7/8.
The options are exercisable until 2006.
(vii) In April 1998, TTR issued to employees options to purchase an
aggregate of 7,000 shares of common stock at an exercise price per share
of $5-3/8.
(viii) In June 1998, TTR issued to an employee options to purchase
4,000 shares of common stock at an exercise price per share of $4-5/8.
(ix) In July 1998, TTR issued to an employee options to purchase
250,000 shares of common stock at an exercise price per share of $2-15/16.
In October 1998, these options were exchanged for options to purchase
250,000 shares at an exercise price of $15/16. In July 1999, TTR issued
150,000 shares in exchange for such options in connection with the
termination of, and settlement of certain claims by, such employee.
(x) In June 1999, TTR issued to an employee options to purchase
235,000 shares of common stock, vesting in 36 equal monthly installments,
for a nominal exercise price.
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(xi) In November, 1999, TTR issued to employees (a) fully vested
options to purchase an aggregate of 298,500 shares with an exercise price
of $0.01 per share, (b) options vesting over 2 years to purchase an
aggregate of 100,000 shares at an exercise price per share of $2.56.
(xii) In January 2000, TTR issued to an employee options to purchase
an aggregate of 347,000 shares with an exercise price per share of $4.00,
with 173,000 of these options fully vested upon issuance and 174,000
vesting over a 12 month period. Additionally, in January 2000, options to
purchase an aggregate of 70,000 shares were issued to an employee, of
which 40,000 were fully vested upon issuance at an exercise price per
share of $4.00, 20,000 were fully vested at an exercise price per share of
$0.01 and 20,000 of which are to vest upon the commercial launch of the
music protection technology being jointly developed by us and Macrovision.
(b) There were no underwriters with respect to the above transactions.
(c) The options were issued in consideration of services rendered.
(d) TTR believes that the securities were issued in transactions not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
3.1 Certificate of Incorporation of TTR dated July 14, 1994 and Certificate of
Amendment to the Certificate of Incorporation of TTR dated August 17,
1994(4)
3.2 Certificate of Amendment to the Certificate of Incorporation of TTR, dated
January 30, 1999*
3.3 Certificate of Amendment to the Certificate of Incorporation of TTR, dated
December 21, 1999*
3.4 By-Laws of TTR, as amended(4)
4.1 Specimen Common Stock Certificate(1)
4.2.1 Form of 10% Convertible Debenture due April 30, 2001(2)
4.2.2 Form of 10% Promissory Note dated variously as of April through August
1998 between TTR and each of certain investors, in an aggregate principal
amount of $1,462,500(4)
4.2.3 Form of Promissory Note dated as of December, 1998 between TTR and each of
certain investors, in an aggregate principal amount of $150,000(4) Certain
instruments which define the rights of holders of long-term debt of the
TTR 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 TTR and its subsidiary on a consolidated basis, as of December
31, 1999.
4.3 Form of Common Stock Purchase Warrant(2)
4.4.1 Warrant Agreement dated as of May 25, 1999 between TTR and Wall & Broad
Equities, Inc.(2)
4.4.2 Warrant Agreement dated as of December 23, 1997 between TTR and Biscount
Overseas Ltd.(3)
4.4.3 Warrant Agreement dated as of February 26, 1998 between TTR and Biscount
Overseas Ltd.(3)
4.4.4 Warrant dated January 15, 1998 between TTR and Mu & Kang Consultants(4)
4.4.5 Warrant Agreement dated as of June 11, 1998 between TTR and Plans, Inc.(2)
4.4.6 Warrant Agreement dated as of July 31, 1999 between TTR and K & D Equities
Inc.(2)
4.4.7 Form of Warrant dated as of December 1998 between TTR and certain private
investors.(4)
4.4.8 Form of Warrant variously dated April through August 1998 between TTR and
certain private investors.(4)
4.4.9 Warrant dated June 11, 1998 between TTR and Plans, Inc.(4)
4.4.10 Warrant dated November 29, 1999 between TTR and Biscount Overseas Ltd.*
4.4.11 Warrant dated November 29, 1999 between TTR and Biscount Overseas Ltd.*
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<PAGE>
4.4.12 Form of Class A Warrant between TTR and certain private investors*
4.4.13 Warrant dated February 15, 2000 between TTR and Mantle International
Investment, Ltd.*
4.4.14 Form of Agent Warrant between TTR and certain entities.*
5.1 Opinion of Wolf, Block, Schorr and Solis-Cohen LLP*
9.1 Voting Trust Agreement(1)
9.2 Instrument terminating Voting Trust Agreement(1)
10.1 Financial Consulting Agreement with Josephthal & Co., Inc.(4)
10.2 1996 Incentive and Non-Qualified Stock Option Plan, as amended(4)
10.3 Non-Executive Directors Stock Option Plan(4)
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)
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(4)
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(3)
10.15 Agreement dated January 19, 1998 between TTR and Henry Israel(3)
10.16 Development and OEM Licensing Agreement dated October 31, 1997 between TTR
and Doug Carson & Associates Inc.(3)
10.17 Development and OEM Licensing Agreement dated October 31, 1997 between
TTR, Doug Carson & Associates Inc. and Nimbus CD International, Inc.(3)
10.18 Management Agreement dated October 1, 1997 between TTR and Ultimus Ltd.(3)
10.19 Stock Purchase Agreement dated December 20, 1997 between TTR and Biscount
Overseas Ltd.(3)
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 Securities Purchase Agreement between TTR and certain
securityholders dated as of May 13, 1999(2)
10.23 Form of Registration Rights Agreement dated as of May 13, 1999 between TTR
and certain investors(2)
10.24 Form of Subscription Agreement dated as of December 1998 between TTR and
certain investors(4)
10.25 Form of Subscription Agreement dated variously as of April through August
1998 between TTR and certain investors(4)
10.26 Agreement dated as of July 27, 1999 between TTR and Arik Shavit(2)
10.27 Agreement dated as of July 27, 1999 between TTR and Steven C. Barsh(2)
10.28 Consulting Agreement between TTR and Jarvis Developments Ltd. dated
November 20, 1998 and amendment thereto dated January 28, 1999(2)
10.29 Consulting Agreement between TTR and Biscount Overseas Ltd. dated October
1, 1998(4)
II-9
<PAGE>
10.30 Consulting Agreement between TTR and Mordecai Lerer dated January 28,
1999(4)
10.31 Settlement Agreement between TTR and Ephod Israel Group dated January 28,
1999(4)
10.32 Consulting Agreement between TTR and CYGNI S.A. dated January 28, 1999(4)
10.33 Marketing Agreement between TTR and Machtec Ltd.(4)
10.34 Stock Purchase Agreement between TTR and Dalimore Consulting Ltd. dated
December 10, 1998(4)
10.35 Stock Purchase Agreement between TTR and Abraham Stephansky dated February
1, 1999(4)
10.36 Stock Purchase Agreement between TTR and Parnell Ltd. dated April 1,
1999(4)
10.37 Consulting Agreement between TTR and Limelkin Ltd. dated June 1, 1998(4)
10.38 Consulting Agreement between TTR and Trax Investments Ltd. dated June 11,
1998(4)
10.39 Consulting Agreement between TTR and Plans Inc. dated June 11, 1998(4)
10.40 Lease between TTR and Peppertree Properties, Inc. dated January 23,
1999(2)
10.41 Employment Agreement dated June 1, 1999 between TTR and Emmanuel
Kronitz(2)
10.42 Agreement dated November 29, 1999 between TTR, Biscount Overseas Ltd.,
Shimshon Halperin and Tuva Financial Ltd.*
10.43 Alliance Agreement between TTR and Macrovision Corporation effective as of
November 24, 1999*(5)
10.44 Amendment No. 1, dated as of August 3, 1999, to Marketing Agreement
between TTR and Machtec Ltd.*
10.45 Stock Purchase Agreement, effective as of January 10, 2000 between TTR and
Macrovision Corporation*(5)
10.46 Agreement between TTR and H.C. Wainwright & Co. Inc. dated February 8,
2000*
10.47 Form of Subscription Agreement dated February 18, 2000 between TTR and
certain private investors and supplement thereto.*
10.48 Form of Registration Rights Agreement between TTR and certain private
investors and supplement thereto*
10.49 Agreement dated February 17, 2000 between TTR, TTR Technologies, Ltd., K&D
Equities, Inc., Isaac Winehouse and Wall and Broad Equities, Inc. *
10.50 Agreement dated February 15, 2000 between TTR and Mantle International
Investment, Ltd.*
10.51 Amendment to Employment Agreement between TTR and Baruch Sollish, dated
July 22, 1998
16.1 Letter on change in certifying accountant(2)
21.1 Subsidiaries of TTR: TTR Technologies, Ltd., an Israeli corporation,
wholly-owned by TTR.
23.1 Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included in Exhibit
5.1).*
23.2 Consent of Brightman Almagor & Co., a member of Deloitte Touche Tohmatsu,
certified public accountants.*
24.1 Powers of Attorney (included on page II-13).*
27.1 Financial Data Schedule.*
- ----------
* Filed herewith.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2, No. 333-11829, and incorporated herein by reference.
(2) Filed as an Exhibit to TTR's Registration Statement on Form SB-2, No.
333-85085 and incorporated herein by reference.
II-10
<PAGE>
(3) 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.
(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB filed
for the year ended December 31, 1998 and incorporated herein by reference.
(5) The Registrant has requested confidential treatment for portions of this
exhibit.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provision described under Item 14 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. If a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the
II-11
<PAGE>
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned in the City of New York, State of New York, on March
15, 2000.
TTR TECHNOLOGIES, INC.
By: /s/ Marc D. Tokayer
------------------------------------
Marc D. Tokayer, Chairman of the
Board and President (Principal
Executive and Financial Officer and
Officer Duly Authorized to Sign on
Behalf of Registrant)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Marc D. Tokayer, or David
Aboudi, or either of them, as his true and lawful attorneys-in-fact and agents,
with full powers of substitution and resubstitution, for him and in his name,
place and stead, to sign in any and all capacities any and all amendments
(including post-effective amendments) to this Registration Statement on Form S-1
and to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Titles Date
--------- ------ ----
/s/ Marc D. Tokayer Chairman of the Board and March 15, 2000
- ----------------------- President (Principal Executive
Marc D. Tokayer and Financial Officer)
/s/ Baruch Sollish Vice President--Research and March 15, 2000
- ----------------------- Development, Chief
Baruch Sollish Technology Officer and
Director
II-13
<PAGE>
E X H I B I T I N D E X
Number Description
- ------ -----------
3.1 Certificate of Incorporation of TTR dated July 14, 1994 and
Certificate of Amendment to the Certificate of Incorporation of TTR
dated August 17, 1994(4)
3.2 Certificate of Amendment to the Certificate of Incorporation of TTR,
dated January 30, 1999*
3.3 Certificate of Amendment to the Certificate of Incorporation of TTR,
dated December 21, 1999*
3.4 By-Laws of TTR, as amended(4)
4.1 Specimen Common Stock Certificate(1)
4.2.1 Form of 10% Convertible Debenture due April 30, 2001(2)
4.2.2 Form of 10% Promissory Note dated variously as of April through
August 1998 between TTR and each of certain investors, in an
aggregate principal amount of $1,462,500(4)
4.2.3 Form of Promissory Note dated as of December, 1998 between TTR and
each of certain investors, in an aggregate principal amount of
$150,000(4) Certain instruments which define the rights of holders
of long-term debt of the TTR 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 TTR and its subsidiary on a
consolidated basis, as of December 31, 1999.
4.3 Form of Common Stock Purchase Warrant(2)
4.4.1 Warrant Agreement dated as of May 25, 1999 between TTR and Wall &
Broad Equities, Inc.(2)
4.4.2 Warrant Agreement dated as of December 23,1997 between TTR and
Biscount Overseas Ltd.(3)
4.4.3 Warrant Agreement dated as of February 26, 1998 between TTR and
Biscount Overseas Ltd.(3)
4.4.4 Warrant dated January 15, 1998 between TTR and Mu & Kang
Consultants(4)
4.4.5 Warrant Agreement dated as of June 11, 1998 between TTR and Plans,
Inc.(2)
4.4.6 Warrant Agreement dated as of July 31, 1999 between TTR and K & D
Equities Inc.(2)
4.4.7 Form of Warrant dated as of December 1998 between TTR and certain
private investors.(4)
4.4.8 Form of Warrant variously dated April through August 1998 between
TTR and certain private investors.(4)
4.4.9 Warrant dated June 11, 1998 between TTR and Plans, Inc.(4)
4.4.10 Warrant dated November 29, 1999 between TTR and Biscount Overseas
Ltd.*
4.4.11 Warrant dated November 29, 1999 between TTR and Biscount Overseas
Ltd.*
<PAGE>
4.4.12 Form of Class A Warrant between TTR and certain private investors*
4.4.13 Warrant dated February 15, 2000 between TTR and Mantle International
Investment, Ltd.*
4.4.14 Form of Agent Warrant between TTR and certain entities*
5.1 Opinion of Wolf, Block, Schorr and Solis-Cohen LLP*
9.1 Voting Trust Agreement(1)
9.2 Instrument terminating Voting Trust Agreement(1)
10.1 Financial Consulting Agreement with Josephthal & Co., Inc.(4)
10.2 1996 Incentive and Non-Qualified Stock Option Plan, as amended(4)
10.3 Non-Executive Directors Stock Option Plan(4)
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)
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(4)
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(3)
10.15 Agreement dated January 19, 1998 between TTR and Henry Israel(3)
10.16 Development and OEM Licensing Agreement dated October 31, 1997
between TTR and Doug Carson & Associates Inc.(3)
10.17 Development and OEM Licensing Agreement dated October 31, 1997
between TTR, Doug Carson & Associates Inc. and Nimbus CD
International, Inc.(3)
10.18 Management Agreement dated October 1, 1997 between TTR and Ultimus
Ltd.(3)
10.19 Stock Purchase Agreement dated December 20, 1997 between TTR and
Biscount Overseas Ltd.(3)
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 Securities Purchase Agreement between TTR and certain
securityholders dated as of May 13, 1999(2)
10.23 Form of Registration Rights Agreement dated as of May 13, 1999
between TTR and certain investors(2)
10.24 Form of Subscription Agreement dated as of December 1998 between TTR
and certain investors(4)
<PAGE>
10.25 Form of Subscription Agreement dated variously as of April through
August 1998 between TTR and certain investors(4)
10.26 Agreement dated as of July 27, 1999 between TTR and Arik Shavit(2)
10.27 Agreement dated as of July 27, 1999 between TTR and Steven C.
Barsh(2)
10.28 Consulting Agreement between TTR and Jarvis Developments Ltd. dated
November 20, 1998 and amendment thereto dated January 28, 1999(2)
10.29 Consulting Agreement between TTR and Biscount Overseas Ltd. dated
October 1, 1998(4)
10.30 Consulting Agreement between TTR and Mordecai Lerer dated January
28, 1999(4)
10.31 Settlement Agreement between TTR and Ephod Israel Group dated
January 28, 1999(4)
10.32 Consulting Agreement between TTR and CYGNI S.A. dated January 28,
1999(4)
10.33 Marketing Agreement between TTR and Machtec Ltd.(4)
10.34 Stock Purchase Agreement between TTR and Dalimore Consulting Ltd.
dated December 10, 1998(4)
10.35 Stock Purchase Agreement between TTR and Abraham Stephansky dated
February 1, 1999(4)
10.36 Stock Purchase Agreement between TTR and Parnell Ltd. dated April 1,
1999(4)
10.37 Consulting Agreement between TTR and Limelkin Ltd. dated June 1,
1998(4)
10.38 Consulting Agreement between TTR and Trax Investments Ltd. dated
June 11, 1998(4)
10.39 Consulting Agreement between TTR and Plans Inc. dated June 11,
1998(4)
10.40 Lease between TTR and Peppertree Properties, Inc. dated January 23,
1999(2)
10.41 Employment Agreement dated June 1, 1999 between TTR and Emmanuel
Kronitz(2)
10.42 Agreement dated November 29, 1999 between TTR, Biscount Overseas
Ltd., Shimshon Halperin and Tuva Financial Ltd.*
10.43 Alliance Agreement between TTR and Macrovision Corporation effective
as of November 24, 1999*(5)
10.44 Amendment No. 1, dated as of August 3, 1999, to Marketing Agreement
between TTR and Machtec Ltd.*
10.45 Stock Purchase Agreement, effective as of January 10, 2000 between
TTR and Macrovision Corporation*(5)
10.46 Agreement between TTR and H.C. Wainwright & Co. Inc. dated February
8, 2000*
10.47 Form of Subscription Agreement dated February 18, 2000 between TTR
and certain private investors and supplement thereto.*
10.48 Form of Registration Rights Agreement between TTR and certain
private investors and supplement thereto*
10.49 Agreement dated February 17, 2000 between TTR, TTR Technologies,
Ltd., K&D Equities, Inc., Isaac Winehouse and Wall and Broad
Equities, Inc. *
10.50 Agreement dated February 15, 2000 between TTR and Mantle
International Investment, Ltd.*
10.51 Amendment to Employment Agreement between TTR and Baruch Sollish,
dated July 22, 1998.*
16.1 Letter on change in certifying accountant(2)
21.1 Subsidiaries of TTR:
TTR Technologies, Ltd., an Israeli corporation, wholly-owned by TTR.
23.1 Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included in
Exhibit 5.1).*
23.2 Consent of Brightman Almagor & Co., a member of Deloitte Touche
Tohmatsu, certified public accountants.*
<PAGE>
24.1 Powers of Attorney (included on page II-13).*
27.1 Financial Data Schedule.*
- ----------
* Filed herewith.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2, No. 333-11829, and incorporated herein by reference.
(2) Filed as an Exhibit to TTR's Registration Statement on Form SB-2, No.
333-85085 and incorporated herein by reference.
(3) 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.
(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB filed
for the year ended December 31, 1998 and incorporated herein by reference.
(5) The Registrant has requested confidential treatment for portions of this
exhibit.
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TTR INC.(Pursuant to section 242)
The undersigned, being the president of TTR Technologies, Inc., does hereby
certify the following:
1. The name of the Corporation is TTR Technologies, 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 to read as
follows:
4. The aggregate number of shares of stock which the corporation
shall have the authority to issue is 25,000,000, 20,000,000 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, each with a par value of $0.01.
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 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,
<PAGE>
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 D. Tokayer
--------------------------
Marc D. Tokayer, President
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TTR TECNOLOGIES, INC.(Pursuant to section 242)
The undersigned, being the president of TTR Technologies, Inc., does hereby
certify the following:
1. The name of the Corporation is TTR Technologies, Inc.
2. The Certificate of Incorporation was filed by the Secretary of State of
Delaware on July 14, 1994.
3. The first paragraph of Paragraph 4 of the Certificate of Incorporation is
hereby amended to read as follows:
"The aggregate number of shares of stock which the corporation shall have
the authority to issue is 30,000,000, 25,000,000 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 Preferred Stock, with a par value of
$0.001."
IN WITNESS WHEREOF, this certificate of Amendment has been signed this 21 st day
of December 1999.
/s/ Marc D. Tokayer
-------------------------
Marc D. Tokayer,
President
Exhibit 4.4.10
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 TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
in favor of
BISCOUNT OVERSEAS LTD
Date: November 29, 1999
No. H- 01 15,000 Common Shares
FOR VALUE RECEIVED, TTR TECHNOLOGIES, INC., a Delaware company (the "Company"),
hereby grants to BISCOUNT OVERSEAS LTD. or its registered assignees (the
"Holder"), the right to purchase, subject to the terms and conditions hereof,
FIFTEEN THOUSAND (15,000) 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 to $2.50, 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.
<PAGE>
1. Warrant Period; Exercise of Warrant
1.1 This Warrant may be exercised in whole 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 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 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.
1.4 Unless there is an effective registration statement under the
Securities Act of 1933, as amended, (the "Securities Act") covering the resale
of the Warrant Shares, at the option of the Holder, in lieu of exercising this
Warrant in the manner provided in Subsection 1.1 above, the Holder may elect,
pursuant to the terms of this Subsection 1.1, to receive Shares equal to the
value of this Warrant (taking into account only that portion of this Warrant
that is then exercisable) by surrender of this Warrant at the principal office
of the Company together with notice of such election in which event the Company
shall issue to the Holder a number of Shares using the following formula:
X = Y(A-B)
------
A
where X = The number of Shares to be issued to the Holder.
Y = The number of Shares purchasable under this Warrant (at the date of
such calculation).
A = The fair market value of one Share (at the date of such calculation).
B = The Per Share Warrant Purchase Price.
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
2
<PAGE>
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, (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. Registration Rights
The Holder acknowledges that there exists an effective Company
registration statement filed under the Securities Act on or about October 4,
1999 [Registration No. 333-85085] (the "Filed Registration Statement"), which
Filed Registration Statement inludes certain securities (other than the Warrant
Shares) held by the Holder. The Holder further acknowledges that the Filed
Registration Statement was filed pursuant to the terms of a Registration Rights
Agreement, dated as May 13, 1999, between the Company and the Initial Investors
named therein (the "Initial Investors"). The Company will explore the option of
amending the Filed Registration Statement to include the Warrant Shares, subject
to the Holder executing a lock-up agreement in substantailly the same form as
previously signed by Biscount.
In the event that the Company does not for whatever reason amend the Filed
Registation Statement to include the Warrant Shares, then if the Company shall
file a registration statement for any shares of its Common Stock, it shall
include in the registration statement relating thereto the Warrant Shares,
except that where such registration statement was filed on behalf of a
shareholder or a rights holder, such inclusion shall be with the consent of such
shareholder or rightsholder. In the event that such registration offering
involves an underwriting, the rights of the Holder to have the Warrant Shares
included in such registration statement shall be conditional upon the
underwriter's determination as to the marketing factors requiring limitation of
such right, and the underwriter may preclude any or all securities of the Holder
which could have otherwise been included in such offering.
5. Adjustment
3
<PAGE>
5.1 In case prior to the expiration of this Warrant by exercise or by its
terms the Company shall issue any shares of its Common Stock as a stock dividend
or subdivide the number of outstanding shares of Common Stock into a greater
number of shares by a stock split or a similar transaction, then, in either of
such cases, the Exercise Price per share of the Warrant Shares purchasable
pursuant to this Warrant in effect at the time of such action shall be
proportionately reduced and the number of Warrant Shares purchasable at that
time shall be proportionately increased; and, conversely, in the event the
Company shall contract the number of outstanding shares of Common Stock by
combining such shares into a smaller number of shares by a reverse split or
similar transaction, then, in such case, the Exercise Price per share of the
Warrant Shares purchasable pursuant to this Warrant shall be proportionately
increased and the number of Warrant Shares purchaseable at that time shall be
propotionately reduced. Any dividend paid or distributed upon the Common Stock
in stock of any other class of securities convertible into shares of Common
Stock shall be treated as a dividend paid in Common Stock to the extent that
shares of Common Stock are issuable upon conversion thereof.
5.2 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.
5.3 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
<PAGE>
5.4 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.
6. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated by
the Holder except in a transation exempt from registration under the Securities
Act and any applicable state securities laws, 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 may require the Holder to provide the Company with an
opinion of counsel in substance reasonably satisfactory to it or to its counsel
as to such exemption. 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."
7. 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.
8. 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.
5
<PAGE>
9. Headings
The headings of this Warrant have been inserted as a matter of convenience and
shall not affect the construction hereof.
10. 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.
11. 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 TECHNOLOGIES, INC.
By: /s/ Marc D. Tokayer
---------------------------
Marc D. Tokayer
President
6
<PAGE>
EXHIBIT A
WARRANT EXERCISE FORM
________________, _______
TO: TTR Technologies, Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Technologies, Inc. at
$7.80 per Common Share. 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: _______________________
7
Exhibit 4.4.11
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 TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
in favor of
BISCOUNT OVERSEAS LTD
Date:November 29, 1999
No. H-002 35,000 Common Shares
FOR VALUE RECEIVED, TTR TECHNOLOGIES, INC., a Delaware company (the "Company"),
hereby grants to BISCOUNT OVERSEAS LTD. or its registered assignees (the
"Holder"), the right to purchase, subject to the terms and conditions hereof,
THIRTY FIVE THOUSAND (35,000) 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 to $3.50, 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.
<PAGE>
1. Warrant Period; Exercise of Warrant
1.1 This Warrant may be exercised in whole 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 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 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.
1.4 Unless there is an effective registration statement under the
Securities Act of 1933, as amended, (the "Securities Act") covering the resale
of the Warrant Shares, at the option of the Holder, in lieu of exercising this
Warrant in the manner provided in Subsection 1.1 above, the Holder may elect,
pursuant to the terms of this Subsection 1.1, to receive Shares equal to the
value of this Warrant (taking into account only that portion of this Warrant
that is then exercisable) by surrender of this Warrant at the principal office
of the Company together with notice of such election in which event the Company
shall issue to the Holder a number of Shares using the following formula:
X = Y(A-B)
------
A
where X = The number of Shares to be issued to the Holder.
Y = The number of Shares purchasable under this Warrant (at the date of
such calculation).
A = The fair market value of one Share (at the date of such calculation).
B = The Per Share Warrant Purchase Price.
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
2
<PAGE>
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, (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. Registration Rights
The Holder acknowledges that there exists an effective Company
registration statement filed under the Securities Act on or about October 4,
1999 [Registration No. 333-85085] (the "Filed Registration Statement"), which
Filed Registration Statement inludes certain securities (other than the Warrant
Shares) held by the Holder. The Holder further acknowledges that the Filed
Registration Statement was filed pursuant to the terms of a Registration Rights
Agreement, dated as May 13, 1999, between the Company and the Initial Investors
named therein (the "Initial Investors"). The Company will explore the option of
amending the Filed Registration Statement to include the Warrant Shares, subject
to the Holder executing a lock-up agreement in substantailly the same form as
previously signed by Biscount.
In the event that the Company does not for whatever reason amend the Filed
Registation Statement to include the Warrant Shares, then if the Company shall
file a registration statement for any shares of its Common Stock, it shall
include in the registration statement relating thereto the Warrant Shares,
except that where such registration statement was filed on behalf of a
shareholder or a rights holder, such inclusion shall be with the consent of such
shareholder or rightsholder. In the event that such registration offering
involves an underwriting, the rights of the Holder to have the Warrant Shares
included in such registration statement shall be conditional upon the
underwriter's determination as to the marketing factors requiring limitation of
such right, and the underwriter may preclude any or all securities of the Holder
which could have otherwise been included in such offering.
5. Adjustment
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<PAGE>
5.1 In case prior to the expiration of this Warrant by exercise or by its
terms the Company shall issue any shares of its Common Stock as a stock dividend
or subdivide the number of outstanding shares of Common Stock into a greater
number of shares by a stock split or a similar transaction, then, in either of
such cases, the Exercise Price per share of the Warrant Shares purchasable
pursuant to this Warrant in effect at the time of such action shall be
proportionately reduced and the number of Warrant Shares purchasable at that
time shall be proportionately increased; and, conversely, in the event the
Company shall contract the number of outstanding shares of Common Stock by
combining such shares into a smaller number of shares by a reverse split or
similar transaction, then, in such case, the Exercise Price per share of the
Warrant Shares purchasable pursuant to this Warrant shall be proportionately
increased and the number of Warrant Shares purchaseable at that time shall be
propotionately reduced. Any dividend paid or distributed upon the Common Stock
in stock of any other class of securities convertible into shares of Common
Stock shall be treated as a dividend paid in Common Stock to the extent that
shares of Common Stock are issuable upon conversion thereof.
5.2 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.
5.3 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
<PAGE>
5.4 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.
6. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated by
the Holder except in a transation exempt from registration under the Securities
Act and any applicable state securities laws, 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 may require the Holder to provide the Company with an
opinion of counsel in substance reasonably satisfactory to it or to its counsel
as to such exemption. 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."
7. 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.
8. 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.
5
<PAGE>
9. Headings
The headings of this Warrant have been inserted as a matter of convenience and
shall not affect the construction hereof.
10. 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.
11. 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 TECHNOLOGIES, INC.
By: /s/ Marc D. Tokayer
-------------------------
Marc D. Tokayer
President
6
<PAGE>
EXHIBIT A
WARRANT EXERCISE FORM
_________________, ____
TO: TTR Technologies, Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Technologies, Inc. at
$7.80 per Common Share. 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: _________________________
7
Exhibit 4.4.12
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR TTR TECHNOLOGIES, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
CLASS A WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
TTR Technologies, Inc.
Subject to Section 1 hereof, expire on February --, 2005
No.: W-1
Number of Shares: Date of Issuance: February 25, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, TTR Technologies, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that------, or its
registered permitted assigns is entitled to subscribe for and purchase, during
the period specified in this Warrant, up to ------ shares (subject to adjustment
as hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share of
Eight dollars and eighty four cents ($8.84), subject, however, to the provisions
and upon the terms and conditions hereinafter set forth. Capitalized terms used
in this Warrant and not otherwise defined herein shall have the respective
meanings specified in Section 8 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., New York Time, on February 25, 2005 (the "Initial
Term"), provided, that, if at the date of the expiration of the Initial Term,
(A) the Warrant Stock shall not be listed on the OTC Bulletin Board, the Nasdaq
SmallCap Market, the Nasdaq National Market, The New York Stock Exchange, Inc.
or The American Stock Exchange, Inc. or (B) the Issuer shall not have sufficient
shares of Warrant Stock issuable upon a full exercise of this Warrant, then the
Initial Term shall be extended until the first such date on which none of the
foregoing events shall exist (the Initial Term, as such may be extended, being
hereinafter called the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office
of the Issuer, and by the payment to the Issuer of an amount of
consideration therefor equal to the Warrant Price in effect on the
1
<PAGE>
date of such exercise multiplied by the number of shares of Warrant
Stock with respect to which this Warrant is then being exercised,
payable at the Holder's election in cash by certified or official
bank check or wire transfer.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to
the terms and conditions hereof, (i) certificates for the shares of
Warrant Stock so purchased shall be dated the date of such exercise
and delivered to the Holder hereof within a reasonable time, not
exceeding five Trading Days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the Holder of the
shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant
representing the number of shares of Warrant Stock, if any, with
respect to which this Warrant shall not then have been exercised
(less any amount thereof which shall have been canceled in payment
or partial payment of the Warrant Price as hereinabove provided)
shall also be issued to the Holder hereof at the Issuer's expense
within such time.
(d) Transferability of Warrant. Subject to the provisions of subsection
(e) of this Section 2, this Warrant may be transferred by the Holder
without the consent of the Issuer. If transferred pursuant to this
paragraph, and subject to the provisions of subsection (e) of this
Section 2, this Warrant may be transferred on the books of the
Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment
in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of
the Issuer for Warrants for the purchase of the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the
right to purchase such number of shares of Warrant Stock as the
Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant
hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell, transfer or otherwise dispose of this Warrant or any shares of
Warrant Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and
all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR TTR TECHNOLOGIES, INC. SHALL HAVE
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
2
<PAGE>
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been
effectively registered under the Securities Act, (B) upon the Issuer's receipt
of an opinion of counsel, in form and substance reasonably satisfactory to the
Issuer, addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act or (C) upon the
Issuer's receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be entitled to
receive from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in the case of
shares of Warrant Stock, new stock certificates) of like tenor not bearing the
applicable legends required by paragraph (ii) above relating to the Securities
Act and state securities laws.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a number of shares of Common Stock equal to at least
100% of the aggregate number of shares of Warrant Stock issuable upon the
exercise of the Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holder of this
Warrant, (iii) take all such action as may be reasonably necessary in order that
the Issuer
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may validly and legally issue fully paid and nonassessable shares of Common
Stock, free and clear of any liens, claims, encumbrances and restrictions (other
than as provided herein) upon the exercise of this Warrant, and (iv) use its
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Registration Rights Under The Securities Act
The Holder shall have the registration rights granted to the Holder
in the Registration Rights Agreement of even date hereof between the Holder and
the Company.
5. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger; provided, however,
that a merger for the sole purpose of effecting a change in domicile of
the Issuer from one state to another shall not be deemed a Triggering
Event, or (b) permit any other Person to consolidate with or merge into
the Issuer and the Issuer shall be the continuing or surviving Person but,
in connection with such consolidation or merger, any Capital Stock of the
Issuer shall be changed into or exchanged for Securities of any other
Person or cash or any other property, or (c) transfer all or substantially
all of its properties or assets to any other Person, or (d) effect a
capital reorganization or reclassification of its Capital Stock, then, and
in the case of each such Triggering Event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled upon the exercise
hereof at any time after the consummation of such Triggering Event, to the
extent this Warrant is not exercised prior to such Triggering Event, or is
redeemed in connection with such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the consummation
of such Triggering Event in lieu of the Common Stock issuable upon such
exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which the Holder would have been entitled upon the
consummation of such Triggering Event if the Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments and increases (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in Section 4 hereof
(b) Subdivision or Combination of Shares. If the Issuer, at any time while
this Warrant is outstanding, shall subdivide or combine any shares of Common
Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the
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increase in the total number of shares of Common Stock outstanding as a result
of such subdivision, or (ii) in the case of a combination of shares, the Warrant
Price shall be proportionately increased (as at the effective date of such
combination or, if the Issuer shall take a record of holders of its Common Stock
for the purpose of so combining, as at the applicable record date, whichever is
earlier) to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
(c) Issuance of Additional Shares of Common Stock. If at any time the
Company shall issue any Additional Shares of Common Stock at a price per share
which is lower than $5.56, then the number of shares of Common Stock to be
received by the holder of this Warrant upon the exercise hereof shall be
adjusted to that number determined by multiplying [(a) the number of shares of
Common Stock purchasable hereunder immediately prior thereto by (b) a fraction
(i) the numerator of which shall be the sum of (A) the number of shares of
Common Stock Deemed Outstanding immediately prior to the issuance of such shares
of Common Stock plus (B) the number of shares of Common Stock issued in the
subject transaction and (ii) the denominator of which shall be an amount equal
to the sum of (x) the number of shares of Common Stock Deemed Outstanding
immediately prior to the issuance of such shares of Common Stock plus (y) the
quotient of (1) the Offering Price multiplied by the number of shares of Common
Stock so issued by the Company, divided by (2) $5.56. The foregoing provisions
shall not apply to Additional Shares (A) if price per share (or in the case of
an option or warrant, the exercise price thereof) is not less than $5.00 and the
gross proceeds received or receivable by the Company as consideration for the
issue of such Additional Shares, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designated to protect against dilution)
payable to the Company upon the exercise of such Additional Shares, equals or
exceeds $1,500,000 (B) (ii) any capital stock or other securities offered or
issued in connection with any acquisition of another corporation or entity by
the Company by merger or purchase of all, or substantially all, of the assets of
such corporation or entity, share exchange, reorganization or the like (C) any
capital stock or other securities issued in connection with any stock split,
stock dividend, recapitalization or the like by the Company.;
(d) Certain Dividends and Distributions. If the Issuer, at any time while
this Warrant is outstanding, shall:
(i) Common Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the holders the Issuer's Capital
Stock for the purpose of receiving such dividend or other distribution (or
if no such record is taken, as at the date of such payment or other
distribution), to that price determined by multiplying the Warrant Price
in effect immediately prior to such record date (or if no such record is
taken, then immediately prior to such payment or other distribution), by a
fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution, and (2) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such dividend or
distribution (plus in the event that the Issuer paid cash for fractional
shares, the number of additional shares which would have been outstanding
had the Issuer issued fractional shares in connection with said
dividends); or
(ii) Other Dividends. Pay a dividend on, or make any distribution of
its assets upon or with respect to (including, but not limited to, a
distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than
as described in clause (i) of this subsection (c)), or in the event that
the Issuer shall offer options or rights to subscribe for shares of Common
Stock, or issue any Common Stock Equivalents, to all of its holders of
Common Stock, then on the record date for such payment, distribution or
offer or, in the absence of a record date, on the date of such
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payment, distribution or offer, the Holder shall receive what the Holder
would have received had it exercised this Warrant in full immediately
prior to the record date of such payment, distribution or offer or, in the
absence of a record date, immediately prior to the date of such payment,
distribution or offer.
(e) Other Provisions Applicable to Adjustments Under this Section 5. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof then
directly or indirectly owned or held by or for the account of the Issuer or any
of its Subsidiaries, and (B) be deemed to include all shares of Common Stock
then issuable upon conversion, exercise or exchange of any then outstanding
Common Stock Equivalents or any other evidences of indebtedness, shares of
Capital Stock (including, without limitation, the Preferred Stock) or other
Securities which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(f) Other Action Affecting Common Stock. In case after the Original Issue
Date the Issuer shall take any action affecting its Common Stock, other than an
action described in any of the foregoing subsections (a) through (d) of this
Section 5, inclusive, then the Warrant Price shall be adjusted in such manner
and at such time as the Board may in good faith determine to be equitable in the
circumstances.
(g) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to the provisions (b) and (c)(i) of this Section 5, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(h) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(i) Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
section 5, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation, or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant.
6. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 5 hereof (for purposes of this
Section 6, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a
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certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to the Holder of this Warrant promptly after each adjustment. Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to one of the national accounting firms currently known as
the "big five" mutually agreed upon by the Issuer and the Holder or, in the
event the Issuer and the Holder are unable to agree, a "big five" national
accounting firm (other than the Issuer's independent auditors) selected by the
Issuer's independent auditors. The firm selected in the manner as provided in
the preceding sentence shall be instructed to deliver a written opinion as to
such matters to the Issuer and the Holder within thirty days after submission to
it of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer.
7. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with and exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
8. Redemption of Warrants. The Company may redeem the Class A Warrants for
$.10 per warrant 6 months following issuance if the underlying common stock is
registered and the Company's common shares have traded at or above 200% of the
warrant exercise price (the "trigger price") for a period of twenty consecutive
trading days.
9. Issuance of Class B Warrants. Upon exercise of the Class A Warrants,
the investors will be issued Class B warrants for such number of shares as shall
equal one half the number of shares for which this Class A warrants is exercised
with a term of 36 months and an exercise price of 120% of the Class A Warrant
trigger price. The Class B warrants may be redeemed by the Company if the
underlying common stock is registered and the common shares have traded at $26
or above for a period of twenty consecutive trading days.
10. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" shall mean day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other
government action to close.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether
general or limited) in any Person which is a partnership, (iii) all
membership interests or limited liability company interests in any limited
liability company, and (iv) all equity or ownership interests in any
Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date.
"Common Stock" means the Common Stock, $0.001 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
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"Common Stock Equivalent" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any shares of Common
Stock or any Convertible Security.
"Convertible Securities" means evidences of indebtedness, shares of
Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for shares of Common Stock. The term
"Convertible Security" means one of the Convertible Securities.
"Five Day Average Share Price" means the average of the closing bid
prices of shares of the Common Stock (as reported by Bloomberg Financial
Markets) in the over-the-market on the electronic bulletin board for such
security (the "OTC Bulletin Board") (or such other United States stock
exchange or public market (an "Alternative Exchange") on which the Common
Stock trades if, at the time of exercise, the Common Stock is not trading
on the OTC Bulletin Board), for the five (5) consecutive trading days
immediately preceding the date of determination.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holder" means the registered Person or Persons who shall from time
to time own this Warrant.
"Issuer" means TTR Technologies, Inc., a Delaware corporation, and
its successors.
"Original Issue Date" means February , 2000.
"Other Common" means any other Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this Warrant
(other than Common Stock) and which shall have the right to participate in
the distribution of earnings and assets of the Issuer without limitation
as to amount.
"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the Five
Day Average Share Price on such date, (b) if the Common Stock is not
listed then on the OTC Bulletin Board or any Alternative Exchange, then
the average of the "Pink Sheet" quotes for the five consecutive days
immediately preceding such date, as determined in good faith by the
Holder, or (c) if the Common Stock is not then publicly traded, the fair
market value of a share of Common Stock as determined by the Company in
good faith. In determining the fair market value of any shares of Common
Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or
other right to purchase or acquire any Security. "Security" means one of
the Securities.
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"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded on
the over the counter market as reported by the OTC Bulletin Board, or (b)
if the Common Stock is not listed on the OTC Bulletin Board, a day on
which the Common Stock is traded on any other registered national stock
exchange, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other government action to
close.
"Voting Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of the
Board of Directors (or other governing body) of such corporation, other
than Capital Stock having such power only by reason of the happening of a
contingency.
"Warrant Price" means $8.54, as such price may be adjusted from time
to time as shall result from the adjustments specified in Section 5
hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all adjustments to such number
made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of this
Warrant.
11. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of
Common Stock; or
(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares
of Capital Stock of any class or of any Common Stock
Equivalents or Convertible Securities or other rights; or
(C) there shall be any reclassification of the Capital Stock of
the Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or
substantially all of the Issuer's property, assets or business
(except a merger or other reorganization in which the Issuer
shall be the surviving corporation and
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its shares of Capital Stock shall continue to be outstanding
and unchanged and except a consolidation, merger, sale,
transfer or other disposition involving a wholly-owned
Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by him to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
12. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument executed by the Issuer and the Holder.
13. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
14. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York Time, on a
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York Time, on any date and
earlier than 11:59 p.m., New York Time, on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to the Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
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TTR Technologies, Inc.
67 Wall St., Suite 2411
New York, NY 10023
Attn: Mark D. Tokayer Chairman and CEO
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to the address or
addresses specified on the first page hereto.
15. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
16. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
17. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer and the Holder and shall be enforceable by the Holder.
18. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
19. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and
year first above written.
TTR TECHNOLOGIES, INC.
By: /s/ Marc D. Tokayer
----------------------------------
Name:
Title:
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EXERCISE FORM
TTR TECHNOLOGIES, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ____________________________
Address ______________________________
______________________________
ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
__________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _________________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated: _________________ Signature ____________________________
Address ______________________________
______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
__________ the right to purchase ___________ shares of Warrant Stock evidenced
by the within Warrant together with all rights therein, and does irrevocably
constitute and appoint _________________, attorney, to transfer that part of the
said Warrant on the books of the within named corporation.
Dated: _________________ Signature ____________________________
Address ______________________________
______________________________
<PAGE>
FOR USE BY THE ISSUER ONLY:
This Warrant No. W___________ canceled (or transferred or exchanged) this
_____ day of ___________, _____, shares of Common Stock issued therefor in the
name of _______________, Warrant No. W-HCW _____ issued for ____ shares of
Common Stock in the name of _______________.
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
MANTLE INTERNATIONAL INVESTMENT LTD.
DATE: February 15, 2000
WARRANT NO. __ 200,000 Shares of Common
Stock of TTR Technologies, Inc.
FOR VALUE RECEIVED, TTR TECHNOLOGIES INC., a Delaware company (the
"Company"), hereby grants to MANTLE INTERNATIONAL INVESTMENT LTD. (the
"Holder"), the right to purchase, subject to the terms and conditions hereof,
200,000 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 $2.75, 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 or in part at any time commencing
9:00 a.m., New York City time, on the date set forth above through January 31,
2001 (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, subject to the closing
of the Investment. As used herein, the term "Investment" shall mean the closing
of a private investment in the Company with gross proceeds equal to or exceeding
$7,500,000.
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
<PAGE>
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. If this warrant should be exercised in part
only, the Company shall, upon surrender of the Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder hereof to purchase
the balance of the Shares purchasable hereunder.
1.3 Any stamp tax attributable to the issuance of the Shares shall be borne
solely by Holder.
2. Representations and Warranties
2.1 The Holder (i) represents, warrants, covenants and agrees that the Warrant
and the underlying Warrant Shares are being acquired by the Holder for the
Holder's own account, for investment purposes only, and not with a view to or
for sale in connection with any distribution thereof or with any present
intention of selling or distributing all or any part of the Warrant or the
underlying Warrant Shares thereof; (ii) understands (x) that if it should
thereafter decide to dispose of such Warrant or Warrant Shares (which it does
not contemplate at such time) it may do so only in compliance with the
Securities Act, (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. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to
any rights of a stockholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
<PAGE>
6. Stock Dividends, Reclassifications, Reorganization, Anti-Dilution Provisions,
Etc.
6.1 In case prior to the expiration of this Warrant by exercise or by its terms
the Company shall issue any shares of its Common Stock as a stock dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases, the Exercise Price per share of the
Warrant Shares purchasable pursuant to this Warrant in effect at the time of
such action shall be proportionately reduced and the number of Warrant Shares
purchasable at that time shall be proportionately increased; and, conversely, in
the event the Company shall contract the number of outstanding shares of Common
Stock by combining such shares into a smaller number of shares, then, in such
case, the Exercise Price per share of the Warrant Shares purchasable pursuant to
this Warrant shall be proportionately decreased. Any dividend paid or
distributed upon the Common Stock in stock of any other class of securities
convertible into shares of Common Stock shall be treated as a dividend paid in
Common Stock to the extent that shares of Common Stock are issuable upon
conversion thereof.
6.2 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.
6.3 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.
<PAGE>
6.4 Upon the occurrence of each event requiring an adjustment of the Exercise
Price and the number of Warrant Shares purchasable at such adjusted Exercise
Price by reason of such event in accordance with the provision of this Section
6, the Company shall compute the adjusted Exercise Price and the adjusted number
of Warrant Shares purchasable at such adjusted Exercise Price by reason of such
event in accordance with the provisions of this Section 6 and shall prepare a
certificate setting forth such adjusted Exercise Price and the adjusted number
of Warrant Shares and showing in reasonable detail the facts upon which such
determination is made. The Company shall mail to the holder of this Warrant a
copy of such Certificate, and thereafter said certificate shall be conclusive
and shall be binding upon such holder unless contested by such holder in a
written notice furnished to the Company within 15 days of the receipt thereof
setting forth in reasonable detail the basis of such contention.
6.5 In case:
(a) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or any other distribution in
respect of the Common Stock (including cash), pursuant to without limitation,
any spin-off, split-off or distribution of the Company's assets; or
(b) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to subscribe for or purchase any shares of stock of
any class or to receive any other rights; or
(c) of any classification, reclassification or other reorganization of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, or conveyance of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up of
the Company;
then, and in any such case, the Company shall mail to the Holder, at least
twenty (20) days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend or distribution
of rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in said dividend on
distribution of rights, or shall be entitled to exchange their shares of Common
stock for securities or other property deliverable upon such classification,
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation, or winding up, as the case may be. The failure to give
such notice shall not affect the validity of any such proceeding or transaction
and shall not affect the right of the holder of this Warrant to participate in
said dividend, distribution of rights, or any such exchange and acquire the kind
and amount of cash, securities or other property as the Holder would have been
entitled to acquire if it was the record holder of the Warrant Shares which
could be obtained upon the exercise of the Warrants immediately before such
proceeding or transaction; provided that the Holder
<PAGE>
exercises the Warrants within 30 days after discovery that such action or
proceeding has taken place.
6.6 In case the Company at any time while this Warrant shall remain unexpired
and unexercised, shall dissolve, liquidate, or wind up its affairs, the holder
of this Warrant may thereafter receive upon exercise hereof in lieu of each
share of Common Stock of the Company which it would have been entitled to
receive, the same kind and amount of any securities or assets as may be
issuable, distributable or payable upon any such dissolution, liquidation or
winding up with respect to each share of Common Stock of the Company.
7. Limited Transfer
7.1 The Company may treat the registered holder of record as the holder for all
purposes.
7.2 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, ASAMENDED, 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."
8. Registration Rights
The Holder understands that the Company is in the process of filing with
the Securities and Exchange Commission a registration statement under the
Securities Act relating to certain Company securities held by certain Company
shareholders or the holders of certain rights in Company securities, (the
"Registration Statement"). That Registration Statement is being filed pursuant
to the terms of a investment agreement between the Company and certain parties.
The Company agrees to include the Warrant Shares in the Registration Statement
subject to the Holder executing any lock up which all other selling shareholders
shall be required to execute.
9. Representations and Warranties of the Company.
The Company represents and warrants to the holder as follows:
9.1 The Company is duly organized and, as of the date of the original issuance
hereof, validly existing and in good standing under the laws of the State of
Delaware.
<PAGE>
9.2 The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuing Warrant
Shares upon the exercise of this Warrant, such shares as may be issuable upon
the exercise hereof.
9.3 The Warrant Shares, when issued and paid for in accordance with the terms of
this Warrant, will be fully paid and not assessable.
9.4 This Warrant has been duly authorized and approved by all required corporate
action by the Company and does not violate the certificate of incorporation or
the bylaws of the Company.
10. 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.
11. 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 D. Tokayer
-----------------------------------
Marc D. Tokayer
<PAGE>
ELECTION TO PURCHASE
TTR Technologies, 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,
Exhibit 4.4.14
AGENT WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR TTR TECHNOLOGIES, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
AGENT WARRANT TO PURCHASE
SHARES OF COMMON STOCK AND CLASS A AGENT WARRANTS
OF
TTR Technologies, Inc.
Subject to Section 1 hereof, expire on March1 , 2005
No.: W-HCW-1
Number of Shares: Date of Issuance: February 29, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, TTR Technologies, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that _________________
or its registered permitted assigns is entitled to subscribe for and purchase,
during the period specified in this Warrant, up to _________ shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share of Five dollars and fifty six cents ($5.56) and up to _____ Class A
Agent Warrants to purchase Common Stock at ($8.84) per share at an exercise
price of ($.01) per Warrant, subject, however, to the provisions and upon the
terms and conditions hereinafter set forth. Capitalized terms used in this
Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 8 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., New York Time, on March 1, 2005 (the "Initial
Term"), provided, that, if at the date of the expiration of the Initial Term,
(A) the Warrant Stock shall not be listed on the OTC Bulletin Board, the Nasdaq
SmallCap Market, the Nasdaq National Market, The New York Stock Exchange, Inc.
or The American Stock Exchange, Inc. or (B) the Issuer shall not have sufficient
shares of Warrant Stock issuable upon a full exercise of this Warrant, then the
Initial Term shall be extended until the first such date on which none of the
foregoing events shall exist (the Initial Term, as such may be extended, being
hereinafter called the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term.
Method of Exercise. (i) The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the
1
<PAGE>
principal office of the Issuer, and by the payment to the Issuer of an amount of
consideration therefor equal to the Warrant Price in effect on the date of such
exercise multiplied by the number of shares of Warrant Stock with respect to
which this Warrant is then being exercised, payable at the Holder's election in
cash by certified or official bank check or wire transfer, (ii) at any time on
or after the Original Issue Date by surrender to the Issuer for cancellation of
a portion of this Warrant representing that number of unissued shares of Warrant
Stock which is equal to the quotient obtained by dividing (A) the product
obtained by multiplying the Warrant Price by the number of shares of Warrant
Stock being purchased upon such exercise by (B) the difference obtained by
subtracting the Warrant Price from the Per Share Market Value as of the date of
such exercise ("Cashless Exercise by surrender of Warrant) or (iii) by a
combination of the foregoing methods of payment selected by the Holder of this
Warrant. In any case where the consideration payable upon such exercise is being
paid in whole or in part pursuant to the provisions of clause (ii) of this
subsection (b), such exercise shall be accompanied by written notice from the
Holder of this Warrant specifying the manner of payment thereof and containing a
calculation showing the number of shares of Warrant Stock with respect to which
rights are being surrendered thereunder and the net number of shares to be
issued after giving effect to such surrender. For purposes of the cashless
exercise provision, per share market value shall be calculated either (i) on the
date the Warrant exercise is delivered to the Company ("Notice Date") or (ii) as
the average closing Market Price for each of the five trading days preceding the
Notice Date, whichever of (i) or (ii) is greater. Notwithstanding anything in
this Warrant to the contrary, any remaining unexercised portion of this Warrant
shall be deemed to have been exercised immediately prior to the Expiration Date,
pursuant to a cashless exercise and the Company shall issue that number of
shares of common stock as provided for based on the method described under the
Cashless Exercise provision above.
(b) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(c) Transferability of Warrant. Subject to the provisions of subsection
(e) of this Section 2, this Warrant may be transferred by the Holder without the
consent of the Issuer. If transferred pursuant to this paragraph, and subject to
the provisions of subsection (e) of this Section 2, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at
the principal office of the Issuer for Warrants for the purchase of the same
aggregate number of shares of Warrant Stock, each new Warrant to represent the
right to purchase such number of shares of Warrant Stock as the Holder hereof
shall designate at the time of such exchange. All Warrants issued on transfers
or exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant hereto.
(d) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon exercise
hereof are being acquired
2
<PAGE>
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell, transfer or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and
all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR TTR TECHNOLOGIES, INC. SHALL HAVE
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been
effectively registered under the Securities Act, (B) upon the Issuer's receipt
of an opinion of counsel, in form and substance reasonably satisfactory to the
Issuer, addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act or (C) upon the
Issuer's receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be entitled to
receive from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in the case of
shares of Warrant Stock, new stock certificates) of like tenor not bearing the
applicable legends required by paragraph (ii) above relating to the Securities
Act and state securities laws.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a number of shares of Common Stock equal to at least
100% of the aggregate number of shares of Warrant Stock issuable upon the
exercise of the Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such
3
<PAGE>
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holder of this
Warrant, (iii) take all such action as may be reasonably necessary in order that
the Issuer may validly and legally issue fully paid and nonassessable shares of
Common Stock, free and clear of any liens, claims, encumbrances and restrictions
(other than as provided herein) upon the exercise of this Warrant, and (iv) use
its best efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Registration Rights Under The Securities Act
The Company is currently preparing a registration statement under
the Securities Act of 1933, as amended, covering the resale of by certain
shareholders of shares of Common Stock of the Company, which registration
statement the Company intends to shortly file (the "Registration
Statement"). The Warrant Shares shall be included in such registration
statement. In the event that the Registration Statement shall not be
effective, then upon the request of the Holder, the Company shall file a
registration statement respecting the resale of the Warrant Shares.
5. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate with or
merge into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger; provided, however,
that a merger for the sole purpose of effecting a change in domicile of
the Issuer from one state to another shall not be deemed a Triggering
Event, or (b) permit any other Person to consolidate with or merge into
the Issuer and the Issuer shall be the continuing or surviving Person but,
in connection with such consolidation or merger, any Capital Stock of the
Issuer shall be changed into or exchanged for Securities of any other
4
<PAGE>
Person or cash or any other property, or (c) transfer all or substantially
all of its properties or assets to any other Person, or (d) effect a
capital reorganization or reclassification of its Capital Stock, then, and
in the case of each such Triggering Event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled upon the exercise
hereof at any time after the consummation of such Triggering Event, to the
extent this Warrant is not exercised prior to such Triggering Event, or is
redeemed in connection with such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the consummation
of such Triggering Event in lieu of the Common Stock issuable upon such
exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which the Holder would have been entitled upon the
consummation of such Triggering Event if the Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments and increases (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in Section 4 hereof
(b) Subdivision or Combination of Shares. If the Issuer, at any time while
this Warrant is outstanding, shall subdivide or combine any shares of Common
Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Issuance of Additional Shares of Common Stock. If at any time the
Company shall issue any Additional Shares of Common Stock at a price per share
which is lower than $5.56, then the number of shares of Common Stock to be
received by the holder of this Warrant upon the exercise hereof shall be
adjusted to that number determined by multiplying [(a) the number of shares of
Common Stock purchasable hereunder immediately prior thereto by (b) a fraction
(i) the numerator of which shall be the sum of (A) the number of shares of
Common Stock Deemed Outstanding immediately prior to the issuance of such shares
of Common Stock plus (B) the number of shares of Common Stock issued in the
subject transaction and (ii) the denominator of which shall be an amount equal
to the sum of (x) the number of shares of Common Stock Deemed Outstanding
immediately prior to the issuance of such shares of Common Stock plus (y) the
quotient of (1) the Offering Price multiplied by the number of shares of Common
Stock so issued by the Company, divided by (2) $5.56. The foregoing provisions
shall not apply to Additional Shares (A) if price per share (or in the case of
an option or warrant, the exercise price thereof) is not less than $5.00 and the
gross proceeds received or receivable by the Company as consideration for the
issue of such Additional Shares, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designated to protect against dilution)
payable to the Company upon the exercise of such Additional Shares, equals or
exceeds $1,500,000 (B) (ii) any capital stock or other securities offered or
issued in connection with any acquisition of another corporation or entity by
the Company by merger or purchase of all, or substantially all, of the assets of
such corporation or entity, share exchange, reorganization or the like (C) any
capital stock or other securities issued in connection with any stock split,
stock dividend, recapitalization or the like by the Company.
(d) Certain Dividends and Distributions. If the Issuer, at any time while
this Warrant is outstanding, shall:
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(i) Common Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the holders the Issuer's Capital
Stock for the purpose of receiving such dividend or other distribution (or
if no such record is taken, as at the date of such payment or other
distribution), to that price determined by multiplying the Warrant Price
in effect immediately prior to such record date (or if no such record is
taken, then immediately prior to such payment or other distribution), by a
fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution, and (2) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such dividend or
distribution (plus in the event that the Issuer paid cash for fractional
shares, the number of additional shares which would have been outstanding
had the Issuer issued fractional shares in connection with said
dividends); or
(ii) Other Dividends. Pay a dividend on, or make any distribution of
its assets upon or with respect to (including, but not limited to, a
distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than
as described in clause (i) of this subsection (c)), or in the event that
the Issuer shall offer options or rights to subscribe for shares of Common
Stock, or issue any Common Stock Equivalents, to all of its holders of
Common Stock, then on the record date for such payment, distribution or
offer or, in the absence of a record date, on the date of such payment,
distribution or offer, the Holder shall receive what the Holder would have
received had it exercised this Warrant in full immediately prior to the
record date of such payment, distribution or offer or, in the absence of a
record date, immediately prior to the date of such payment, distribution
or offer.
(e) Other Provisions Applicable to Adjustments Under this Section 5. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof then
directly or indirectly owned or held by or for the account of the Issuer or any
of its Subsidiaries, and (B) be deemed to include all shares of Common Stock
then issuable upon conversion, exercise or exchange of any then outstanding
Common Stock Equivalents or any other evidences of indebtedness, shares of
Capital Stock (including, without limitation, the Preferred Stock) or other
Securities which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(f) Other Action Affecting Common Stock. In case after the Original Issue
Date the Issuer shall take any action affecting its Common Stock, other than an
action described in any of the foregoing subsections (a) through (d) of this
Section 5, then the Warrant Price shall be adjusted in such manner and at such
time as the Board may in good faith determine to be equitable in the
circumstances.
(g) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to the provisions (b) and (c)(i) of this Section 5, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which
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such shares may then be validly issued under applicable law. Such exercise shall
not constitute a waiver of any claim arising against the Issuer by reason of its
default under Section 3 of this Warrant.
(h) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(i) Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
section 5, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation, or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant.
6. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 5 hereof (for purposes of this
Section 6, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" mutually agreed upon by the
Issuer and the Holder or, in the event the Issuer and the Holder are unable to
agree, a "big five" national accounting firm (other than the Issuer's
independent auditors) selected by the Issuer's independent auditors. The firm
selected in the manner as provided in the preceding sentence shall be instructed
to deliver a written opinion as to such matters to the Issuer and the Holder
within thirty days after submission to it of such dispute. Such opinion shall be
final and binding on the parties hereto. The fees and expenses of such
accounting firm shall be paid by the Issuer.
7. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with and exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
8. Issuance of Class A Agent Warrants. The Class A Agent Warrants shall be
non-redeemable and shall contain the cashless exercise provision found in
Section 2(a) of this Warrant Agreement.
9. Issuance of Class B Agent Warrants. Upon exercise of the Class A Agent
Warrants, the Agent will be issued Class B Agent Warrants for such number of
shares as shall equal one-half the number of shares for which the Class Agent
Warrants are exercised with a term of 36 months and an exercise price equal to
the Class B investor warrant exercise price.
10. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
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"Business Day" shall mean day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other
government action to close.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether
general or limited) in any Person which is a partnership, (iii) all
membership interests or limited liability company interests in any limited
liability company, and (iv) all equity or ownership interests in any
Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date.
"Common Stock" means the Common Stock, $0.001 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"Common Stock Equivalent" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any shares of Common
Stock or any Convertible Security.
"Convertible Securities" means evidences of indebtedness, shares of
Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for shares of Common Stock. The term
"Convertible Security" means one of the Convertible Securities.
"Class A Agent Warrant Exercise Price" means $8.84 per share, as
such price may be adjusted from time to time as shall result from the
adjustments specified in Section 5 hereof.
"Five Day Average Share Price" means the average of the closing bid
prices of shares of the Common Stock (as reported by Bloomberg Financial
Markets) in the over-the-market on the electronic bulletin board for such
security (the "OTC Bulletin Board") (or such other United States stock
exchange or public market (an "Alternative Exchange") on which the Common
Stock trades if, at the time of exercise, the Common Stock is not trading
on the OTC Bulletin Board), for the five (5) consecutive trading days
immediately preceding the date of determination.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holder" means the registered Person or Persons who shall from time
to time own this Warrant.
"Issuer" means TTR Technologies, Inc., a Delaware corporation, and
its successors.
"Original Issue Date" means February 29 , 2000.
"Other Common" means any other Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this Warrant
(other than Common Stock) and which shall have the right to participate in
the distribution of earnings and assets of the Issuer without limitation
as to amount.
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"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the Five
Day Average Share Price on such date, (b) if the Common Stock is not
listed then on the OTC Bulletin Board or any Alternative Exchange, then
the average of the "Pink Sheet" quotes for the five consecutive days
immediately preceding such date, as determined in good faith by the
Holder, or (c) if the Common Stock is not then publicly traded, the fair
market value of a share of Common Stock as determined by the Company in
good faith. In determining the fair market value of any shares of Common
Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or
other right to purchase or acquire any Security. "Security" means one of
the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded on
the over the counter market as reported by the OTC Bulletin Board, or (b)
if the Common Stock is not listed on the OTC Bulletin Board, a day on
which the Common Stock is traded on any other registered national stock
exchange, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other government action to
close.
"Voting Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of the
Board of Directors (or other governing body) of such corporation, other
than Capital Stock having such power only by reason of the happening of a
contingency.
"Warrant Price" means $5.56, as such price may be adjusted from time
to time as shall result from the adjustments specified in Section 5
hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after
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giving effect to all adjustments to such number made or required to be
made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of this Warrant.
11. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of
Common Stock; or
(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares
of Capital Stock of any class or of any Common Stock
Equivalents or Convertible Securities or other rights; or
(C) there shall be any reclassification of the Capital Stock of
the Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or
substantially all of the Issuer's property, assets or business
(except a merger or other reorganization in which the Issuer
shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by him to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
12. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument executed by the Issuer and the Holder.
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13. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
14. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the
date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified for notice
prior to 5:00 p.m., New York Time, on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York Time, on
any date and earlier than 11:59 p.m., New York Time, on such date,
(iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual
receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to the
Holder of this Warrant or of Warrant Stock issued pursuant hereto,
addressed to the Holder at its last known address or facsimile
number appearing on the books of the Issuer maintained for such
purposes, or with respect to the Issuer, addressed to:
TTR Technologies, Inc.
67 Wall St., Suite 2411
New York, NY 10023
Attn: Mark D. Tokayer Chairman and CEO
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to the address or
addresses specified on the first page hereto.
15. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
16. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
17. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer and the Holder and shall be enforceable by the Holder.
18. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the
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preceding sentence, the unenforceability of such provision shall not affect the
other provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
19. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and
year first above written.
TTR TECHNOLOGIES, INC.
By: ____________________________
Name:
Title:
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EXERCISE FORM
TTR TECHNOLOGIES, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________________
_____________________________
ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
__________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _________________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________________
_____________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
__________ the right to purchase ___________ shares of Warrant Stock evidenced
by the within Warrant together with all rights therein, and does irrevocably
constitute and appoint _________________, attorney, to transfer that part of the
said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________________
_____________________________
<PAGE>
FOR USE BY THE ISSUER ONLY:
This Warrant No. W___________ canceled (or transferred or exchanged) this
_____ day of ___________, _____, shares of Common Stock issued therefor in the
name of _______________, Warrant No. W-HCW _____ issued for ____ shares of
Common Stock in the name of _______________.
Exhibit 5.1
March 15, 2000
TTR Technologies, Inc.
2 HaNagar Street
Kfar Saba, Israel
Re: Registration Statement on Form S-1
Gentlemen:
As counsel to TTR Technologies, Inc. (the "Company"), we have assisted in
the preparation of a Registration Statement on Form S-1 (together with all
exhibits thereto and documents incorporated by reference therein, the
"Registration Statement") in the form proposed to be filed with the Securities
and Exchange Commission (the "Commission"). The Registration Statement relates
to the sale from time to time, pursuant to Rule 415 of the General Rules and
Regulations promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), of up to 10,423,504 shares of Common Stock, par value $.001
per share ("Common Shares"), of the Company.
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K promulgated under the Securities Act.
In connection with the opinions expressed herein, we have examined the
originals or copies, certified or otherwise identified to our satisfaction, of
such records, instruments, documents and matters of law as we have deemed
necessary or appropriate for the purpose of rendering this opinion.
In our examination, we have assumed without independent verification (i)
the legal capacity of all natural persons, (ii) the genuineness of all
signatures, (iii) the authenticity of all documents submitted to us as
originals, (iv) the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such documents, and (v) the power and authority of all persons
other than the Company signing such documents to execute, deliver and perform
such documents, and the valid authorization, execution and delivery of such
documents by such other persons. As to any facts material to the opinions
expressed herein which were not independently established or verified, we have
relied upon oral or written statements and representations of officers or other
representatives of the Company.
<PAGE>
March 15, 2000
Page 2
Sales of an aggregate of 3,881,299 Common Shares covered by the
Registration Statement were covered in the Company's Registration Statement on
Form SB-2 (Registration No. 333-85085)(the "October 1999 Registration
Statement"). Pursuant to Rule 429 of the General Rules and Regulations
promulgated under the Securities Act, the Registration Statement constitutes
Post-Effective Amendment No. 1 to the October 1999 Registration Statement. An
opinion regarding such Common Shares was filed as an exhibit to the October 1999
Registration Statement. No opinion regarding such Common Shares is given herein.
The remaining 6,587,206 Common Shares covered in the Registration
Statement (the "Remaining Common Shares") consist of:
(a) an aggregate of 4,722,206 currently outstanding Common Shares held
by certain selling stockholders, and
(b) an aggregate of 1,865,000 Common Shares issuable upon exercise of
warrants to purchase such Common Shares held by certain selling
stockholders.
We also have assumed that (i) the Registration Statement, and any
amendments thereto (including post-effective amendments), including the form of
prospectus included therein (as supplemented, the "Prospectus"), will have
become effective under the Securities Act, and the Remaining Common Shares will
be issued and sold in compliance with applicable federal and state securities
laws and solely in the manner stated in the Registration Statement and the
Prospectus.
We are admitted to practice in the State of New York and we do not express
any opinion as to the laws of any other jurisdiction other than the federal laws
of the United States of America and the General Corporation Law of the State of
Delaware to the extent necessary to render this opinion. The Remaining Common
Shares may be issued and sold from time to time on a delayed or continuous
basis, and this opinion is limited to the laws, including applicable rules and
regulations, in effect on the date hereof, and to the facts in existence on the
date hereof. We assume no obligation to update such opinion.
Based upon and subject to the foregoing, and our examination of law and
such other matters as we have deemed relevant under the circumstances, it is our
opinion that the Remaining Common Shares, when duly issued and sold in the
manner and for the consideration contemplated by the Registration Statement and
the Prospectus, will be legally issued, fully paid and non-assessable.
We hereby consent to the reference to our firm in the Registration
Statement under the Prospectus caption "Legal Matters" and to the filing of this
opinion with the Commission as an
<PAGE>
March 15, 2000
Page 3
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules or regulations of the
Commission.
Very truly yours,
/s/ Wolf, Block, Schorr and Solis-Cohen LLP
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
Exhibit 10.42
AGREEMENT
AGREEMENT made this 29th day of November, 1999, between Biscount Overseas
Ltd., a private company with offices at Freilager Strasse 47, Zurich,
Switzerland ("Biscount"), Shimshon Halperin, with an address at 20
Wallenberg Circle, Monsey, New York, 10952 ("Halperin") and Tuva Financial
Ltd., a private company with offices at Mannenstrasse 2, Zurich,
Switzerland ("Tuva"), on the one hand, and TTR Technologies, Inc., a
Delaware company with offices at 1841 Broadway, New York, New York ("TTR
Inc.") and TTR Technologies Ltd., an Israeli company with offices at 2
HaNagar Street, Kfar Saba, Israel ("TTR Ltd." together with "TTR Inc." the
"Companies") on the other hand.
W I T N E S S E T H
WHEREAS, Biscount, Halperin, Tuva and the Companies desire to settle
certain differences of opinion amongst them on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the terms and conditions hereafter set
forth, the adequacy and sufficiency of which are hereby acknowledged, the
parties agree hereafter as follows:
1. Agreement by TTR Inc. Subject to the terms and conditions set forth herein
and in consideration of the releases contained herein, without acknowledging any
admittance of liability TTR Inc. undertakes to (i) remit to Biscount the
following amounts upon the occurrence of the events specified below and solely
from the sources identified below and (ii) issue the following securities, all
as therein specified:
(i) $75,000 on the Closing Date (as hereinafter defined);
(ii) $75,000 within ten (10) business days following TTR Inc.'s receipt of
the proceeds of any investment by the strategic investor with whom it is
currently in negotiations and solely from such proceeds; provided, that, if such
investment is not consummated, then such amount shall be remitted solely from
the net proceeds by TTR Inc. of any equity investment where the net proceeds to
TTR Inc. thereof shall aggregate at least $2 million; provided, that, the
payment thereof will not be restricted by the terms of such investment;
(iii) $50,000 upon (and subject to) the reduction of the aggregate amount
of principal and accrued interest owing by TTR Inc. to the investors holding TTR
Inc. debentures issued between April and December 1998 in connection with TTR
Inc.'s private placement financing (hereinafter, the "Bridge Loan Financing") to
an aggregate amount not exceeding $500,000, such amount to be remitted in the
calendar quarter following the calendar quarter on which such reduced amount of
Bridge Loan Financing has been recorded on the Company's quarterly or year-end
financial statement;
provided, that, in the event that the Company is unable to make (or for any
reason has not yet made) the payment specified in items (ii) and (iii) above as
contemplated therein, then such amounts shall become due and payable solely from
TTR Inc.'s operating revenues at the rate of twenty percent (20%) of such
revenues actually received by the Company (such amount payable being the
"Remittable Revenue
<PAGE>
Amount") and the Remittable Revenue Amount shall be remitted to Biscount within
15 business days following its receipt and recording by the Company; and
(iv) On the Closing Date, issue to Biscount warrants to purchase up to
15,000 shares of TTR Inc.'s Common Stock par value $0.001 ("Common Stock") at an
exercise price per share of $2.50 and warrants to purchase up to 35,000 shares
of Common Stock at an exercise price per share of $3.50, such warrants to be
substantially on the form attached hereto as Exhibit A. The amounts payable to
Biscount under Items (i) through (iii) above and the securities issued under
item (iv) above shall hereinafter be referred to collectively as the "Settlement
Amount".
2. Release.
(a) In consideration of the Company's agreement to remit to Biscount the
Settlement Amount, each of Biscount, Tuva and Halperin (and each of their
respective officers, directors, employees, shareholders, attorneys, agents,
heirs, successors, executors, personal representatives and assigns) does hereby
absolutely and unconditionally waive, release and forever discharge each of the
Companies, their respective affiliates, officers, directors, shareholders,
employees, agents, attorneys, insurers, successors and assigns, from any claims,
demands, obligations, liabilities, rights, causes of action and damages, whether
liquidated or unliquidated, absolute or contingent, known or unknown, arising
prior to or concurrent with the date hereof including specifically, but without
limiting the generality of the foregoing, claims relating to or arising as a
result of any investment in the Companies. The foregoing release shall not be
construed as a waiver by Biscount, Tuva or Halperin of the due and full
performance by the Companies of its obligations specifically undertaken pursuant
to this Agreement.
(b) In consideration of the releases in Section 2 (a) above, each of Companies
(and each of their respective officers, directors, employees, shareholders,
attorneys, agents, heirs, successors, executors, personal representatives and
assigns) does hereby absolutely and unconditionally waive, release and forever
discharge each of Biscount, Tuva and Halperin, their respective affiliates,
officers, directors, shareholders, employees, agents, attorneys, insurers,
successors and assigns, from any claims, demands, obligations, liabilities,
rights, causes of action and damages, whether liquidated or unliquidated,
absolute or contingent, known or unknown, arising prior to or concurrent with
the date hereof.
3. Closing. The closing of the transactions contemplated hereby shall take place
on on such date on or prior to Tuesday November 30, 1999 as shall be mutually
agreed to by the parties at a time and place mutually agreeable to the parties
(such date being the "Closing Date").
4. Confidentiality. Each of Biscount, Tuva, Halperin and the Companies hereby
undertakes (i) to keep confidential and (ii) not to disclose to any party - any
and all matters relating to this Agreement, unless required by applicable law or
relevant regulations.
5. Reliance and Complete Agreement. The parties acknowledge and agree that in
the execution of this Agreement, neither has relied upon any representation by
any party or attorney, except as expressly stated herein. Moreover, this
Agreement shall represent the complete and entire agreement between the parties,
to the exclusion of any and all other prior or concurrent terms, written or
oral. No supplement, modification or waiver or termination of this Agreement or
any provision hereof shall be binding unless executed in writing by the parties
to be bound thereby.
2
<PAGE>
6. Headings. Section and subsection headings are not to be considered part of
this Agreement and are included solely for convenience and are not intended to
be full or accurate descriptions of the content thereof.
7. Successors and Assigns. Except as otherwise provided in this Agreement, all
the terms and provisions of this Agreement shall be upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns.
8. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9. Entire Agreement. This Agreement may be executed in counterparts. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes any prior or contemporaneous
understanding or agreement, written or verbal, among the parties with respect to
the subject matter hereof.
10. Governing Law; Forum
10.1 This Agreement, its validity, construction and effect shall be
governed by and construed under the laws of the State of New York. All disputes,
controversies, differences or questions arising out of or relating to this
Agreement, or to the validity, interpretation, breach, violation or term
thereof, will be finally and solely determined and settled by an arbitrator in
Israel, mutually agreed upon or appointed by the Parties.
10.2 Such arbitrator shall not be bound by the rules of evidence or civil
procedure but shall give written reasons for any decision. The signing of this
Agreement constitutes a an agreement to arbitrate under Article 75 of the New
York Civil Practice Law and Rules.
10.3 The arbitrator shall be authorized to render interim decisions and
partial verdicts and shall have the right to issue verdicts whether of law or
compromise.
10.4 In the absence of agreement between the Parties either shall have the
right to apply to American Arbitration Association, New York Office to appoint
an arbitrator to act in accordance with the provisions set out in this section
10.
11. Representation. Each Party acknowledges that they have had the opportunity
to consult with legal counsel respecting this Agreement. Each person executing
this Agreement on behalf of a corporation hereby represents and warrants that he
has been authorized to do so by all necessary corporate action.
12. Non-Disparagement. None of Halperin (and his respective heirs, personal
representatives, successors), Biscount, Tuva or the Companies (and their
respective officers, directors, employees, agents, attorneys, insurers,
successors and assigns) shall disparage the other parties hereto or their
businesses.
IN WITNESS WHEREOF, each of the parties has set forth its/ his signature
as of the date first written above.
3
<PAGE>
Biscount Overseas Ltd. TTR Technologies, Inc.
By: /s/ Josef Ovadiah By: /s/ Marc D. Tokayer
------------------------- --------------------------
Title: President Title: President
Tuva Financial Ltd.
By: /s/ Mina Ledereich
-------------------------
Title: Director
/s/ Shimshon Halperin
- -----------------------------
Shimshon Halperin
TTR Technologies Ltd.
By: /s/ Marc D. Tokayer
----------------------
Title: President
4
<PAGE>
EXHIBIT A
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 TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
in favor of
BISCOUNT OVERSEAS LTD
Date:_____________
No. _______ Common Shares
FOR VALUE RECEIVED, TTR TECHNOLOGIES, INC., a Delaware company (the
"Company"), hereby grants to BISCOUNT OVERSEAS LTD. or its registered
assignees (the "Holder"), the right to purchase, subject to the terms and
conditions hereof, __________ (______) fully paid and non-assessable
shares of Common Stock of the Company, par value $0.001 ("Shares"). The
purchase price for each Share purchased pursuant to this Warrant shall be
equal to $____, 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
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1.1 This Warrant may be exercised in whole 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 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 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.
1.4 Unless there is an effective registration statement under the
Securities Act of 1933, as amended, (the "Securities Act") covering the
resale of the Warrant Shares, at the option of the Holder, in lieu of
exercising this Warrant in the manner provided in Subsection 1.1 above,
the Holder may elect, pursuant to the terms of this Subsection 1.1, to
receive Shares equal to the value of this Warrant (taking into account
only that portion of this Warrant that is then exercisable) by surrender
of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to the
Holder a number of Shares using the following formula:
X = Y(A-B)
------
A
where X = The number of Shares to be issued to the Holder.
Y = The number of Shares purchasable under this Warrant (at the date of
such calculation).
A = The fair market value of one Share (at the date of such calculation).
B = The Per Share Warrant Purchase Price.
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
6
<PAGE>
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, (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. Registration Rights
The Holder acknowledges that there exists an effective Company
registration statement filed under the Securities Act on or about October
4, 1999 [Registration No. 333-85085] (the "Filed Registration Statement"),
which Filed Registration Statement inludes certain securities (other than
the Warrant Shares) held by the Holder. The Holder further acknowledges
that the Filed Registration Statement was filed pursuant to the terms of a
Registration Rights Agreement, dated as May 13, 1999, between the Company
and the Initial Investors named therein (the "Initial Investors"). The
Company will explore the option of amending the Filed Registration
Statement to include the Warrant Shares, subject to the Holder executing a
lock-up agreement in substantailly the same form as previously signed by
Biscount.
In the event that the Company does not for whatever reason amend the Filed
Registation Statement to include the Warrant Shares, then if the Company
shall file a registration statement for any shares of its Common Stock, it
shall include in the registration statement relating thereto the Warrant
Shares, except that where such registration statement was filed on behalf
of a shareholder or a rights holder, such inclusion shall be with the
consent of such shareholder or rightsholder. In the event that such
registration offering involves an underwriting, the rights of the Holder
to have the Warrant Shares included in such registration statement shall
be conditional upon the underwriter's determination as to the marketing
factors requiring limitation of such right, and the underwriter may
preclude any or all securities of the Holder which could have otherwise
been included in such offering.
7
<PAGE>
5. Adjustment
5.1 In case prior to the expiration of this Warrant by exercise or by its
terms the Company shall issue any shares of its Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock
into a greater number of shares by a stock split or a similar transaction,
then, in either of such cases, the Exercise Price per share of the Warrant
Shares purchasable pursuant to this Warrant in effect at the time of such
action shall be proportionately reduced and the number of Warrant Shares
purchasable at that time shall be proportionately increased; and,
conversely, in the event the Company shall contract the number of
outstanding shares of Common Stock by combining such shares into a smaller
number of shares by a reverse split or similar transaction, then, in such
case, the Exercise Price per share of the Warrant Shares purchasable
pursuant to this Warrant shall be proportionately increased and the number
of Warrant Shares purchaseable at that time shall be propotionately
reduced. Any dividend paid or distributed upon the Common Stock in stock
of any other class of securities convertible into shares of Common Stock
shall be treated as a dividend paid in Common Stock to the extent that
shares of Common Stock are issuable upon conversion thereof.
5.2 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.
5.3 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
8
<PAGE>
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.
5.4 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.
6. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated by
the Holder except in a transation exempt from registration under the Securities
Act and any applicable state securities laws, 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 may require the Holder to provide the Company with an
opinion of counsel in substance reasonably satisfactory to it or to its counsel
as to such exemption. 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."
7. 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
9
<PAGE>
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.
8. 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.
9. Headings
The headings of this Warrant have been inserted as a matter of convenience and
shall not affect the construction hereof.
10. 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.
11. 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 TECHNOLOGIES, INC.
By: _________________________
EXHIBIT A
WARRANT EXERCISE FORM
10
<PAGE>
________________, ____
TO: TTR Technologies, Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Technologies, Inc. at
$7.80 per Common Share. 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: ____________________________
11
Exhibit 10.43
[** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT]
ALLIANCE AGREEMENT
This Alliance Agreement (the "Agreement"), effective as of November 24,
1999 (the "Effective Date"), is entered into by and between MACROVISION
CORPORATION, a Delaware Corporation with its principal place of business at 1341
Orleans Drive, Sunnyvale, California 94089, USA, together with its subsidiary
C-Dilla, Ltd., with offices at Woodley House, Crockhamwell Road, Woodley,
Reading, Berkshire, RGP 3JP, United Kingdom (collectively "Macrovision"); and
TTR TECHNOLOGIES, INC., a Delaware corporation with its administrative offices
at 1841 Broadway, New York, NY 10023, USA, together with its subsidiary TTR
Technologies, Ltd., with offices at 2 Hanagar Street, Kfar-Saba, 4425, Israel
(collectively "TTR").
RECITALS
A. Macrovision develops and markets content copy protection and rights
management technologies and products which are designed to prevent the illicit
duplication, reception or use of video and audio programs and computer software.
B. TTR has represented to Macrovision that TTR owns certain intellectual
property and technology, and has the expertise and experience required to
develop music copy protection technology.
C. TTR and Macrovision have entered into that certain Letter Agreement as of
November 24, 1999, pursuant to which they have agreed to enter into a long-form
agreement incorporating, inter-alia, the terms therein.
D. Consistent with the foregoing, Macrovision and TTR desire to enter into an
agreement under which the Parties will jointly develop such music copy
protection technology, and Macrovision will have, subject to the continuing
satisfaction of certain conditions hereinafter set forth, the exclusive right to
commercialize and market such technology for a period of time.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth below, the Parties agree as follows:
1. Definitions
1
CONFIDENTIAL
<PAGE>
Exhibit 10.43
1.1 "Affiliate" means any entity controlling, controlled by, or under
common control with, a Party hereto.
1.2 "Field of Use" means technologies and products designed to prevent the
illicit duplication of audio programs (including the audio portion of music
videos, movies and other video or audio content) distributed on optical media
(including but not limited to CDs and DVDs), and technologies for Internet
digital rights management for audio applications.
1.3 "Intellectual Property Rights" means intellectual property or
proprietary rights, including but not limited to copyright rights, patent rights
(including patent applications and disclosures), rights of priority, and trade
secret rights, recognized in any jurisdiction in the world.
1.4 "Investment Date" means that date on which TTR receives the gross
proceeds of an equity investment in TTR made by Macrovision pursuant to the
Letter Agreement.
1.5 "Joint Development Project" means the development efforts by the
Parties to develop the Music Protection Technology pursuant to this Agreement.
1.6 "Joint Technology" means any and all software, hardware, technology,
know-how, algorithms, procedures, techniques, solutions, and work-arounds
developed or created jointly or individually in the course of and pursuant to
the Joint Development Project and prior to the Commercial Launch (as defined in
Section 5.1 (b) herein), whether or not based on Macrovision Technology or TTR
Technology. Joint Technology does not include the Macrovision Technology or TTR
Technology.
1.7 "Letter Agreement" means that certain Letter Agreement entered into by
TTR and Macrovision as of November 24, 1999.
1.8 "Macrovision Technology" means any and all software, hardware,
technology, know-how, algorithms, procedures, techniques, solutions, and
work-arounds, (i) owned by or licensed to Macrovision as of the Effective Date
and contributed by Macrovision to the development effort hereunder including,
without limitation, the technology specified on Exhibit B hereto, or (ii) which
can be shown by Macrovision by reasonable tangible evidence to have been
developed independently by Macrovision subsequent to the Commercial Launch
without the use or exploitation of the TTR Technology.
2
CONFIDENTIAL
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Exhibit 10.43
1.9 "Music Protection Technology" means the technology and/or any
derivative product or component thereof developed pursuant to the Joint
Development Project within the Field of Use, which may be comprised of Joint
Technology, Macrovision Technology and TTR Technology.
1.10 "Net Revenues" means the gross revenues received by or on behalf of
Macrovision or any of its Affiliates from customers, distributors, or any
sublicensees of the Joint Technology and/or the Music Protection Technology,
reduced by discounts, returns and rebates, but not by cost of goods sold.
1.11 "Specification" means the agreed-upon functional specifications and
performance requirements for the Joint Development Project as set forth in
Exhibit A.
1.12 "TTR Technology" means any and all software, hardware, technology,
know-how, algorithms, procedures, techniques, solutions, and work-arounds (i)
owned by or licensed to TTR as of the Effective Date and contributed by TTR to
the development effort hereunder, including, without limitation, the technology
specified on Exhibit C hereto, or (ii) which can be shown by TTR by reasonable
tangible evidence to have been developed independently by TTR subsequent to the
Commercial Launch without the use or exploitation of the Macrovision Technology.
2. Development Effort
2.1 Joint Development Project. Each Party will exert commercially
reasonable efforts to jointly develop the Music Protection Technology in
accordance with the Specification. The Parties will work together to develop a
complete product specification as well as a completed product suitable for
Commercial Launch, including completely functional LBR encoder modules for the
[**] mastering systems. The Parties intend that [**] LBR encoder modules shall
be developed no later than [**], one being for the [**] TTR shall also perform
all ongoing technology development, enhancement, and 2nd level technical support
activities.
2.2 Expenses. Unless otherwise specified, each Party agrees to fully fund
and pay for the costs and expenses of the performance of its responsibilities
specified herein, including without limitation: (i) any and all salaries,
employee benefits and other overhead costs for its own employees and facilities
involved in the performance of this Agreement; (ii) any and all lodging, meal or
travel expenses of its own employees; (iii) any and all costs and expenses for
consultants whose use is not mutually agreed to in writing by both Parties; and
(iv) any and all taxes, charges or fees arising out of its sole obligations or
acts hereunder.
3
CONFIDENTIAL
<PAGE>
Exhibit 10.43
2.3 Development Personnel. Each Party will dedicate sufficient personnel
with appropriate technical skills to the development effort to ensure that the
Music Protection Technology is developed in accordance with the Specification.
Without limiting the foregoing, TTR will assign the personnel resources set
forth in Exhibit D. All engineers and other staff which may be assigned by TTR
or Macrovision to develop the Music Protection Technology shall at all times be
employees or consultants of TTR or Macrovision, respectively. Each Party may, at
its option, employ the services of contractors or consultants to assist in the
development of the Music Protection Technology. Such Party will be held fully
responsible for and guarantee the work and activities of each of its
subcontractors, including but not limited to each subcontractor's compliance
with this Agreement.
2.4 Modification to Development Efforts. In the course of their
development efforts, the Parties may agree that the Specification may need to be
revised or modified. Any material modification to the Specification must be
pre-approved in writing by the Parties.
2.5 Technical Contacts. Each Party shall designate one primary and one
alternate technical contact (collectively, the "Technical Contacts") as the
primary individuals responsible for facilitating communication between the
Parties and for coordinating the development of the Music Protection Technology.
Each of TTR and Macrovision's initial Technical Contacts are set forth in
Exhibit D. The Technical Contacts will confer on a regular basis to assess the
status of the Joint Development Project with respect to the Milestones. The
Parties may change their own Technical Contacts at any time upon written notice
to the other Party.
3. Ownership
3.1 Macrovision Technology. The Macrovision Technology and all
Intellectual Property Rights therein are, and/or will remain, the sole and
exclusive property of Macrovision and its suppliers, if any.
3.2 TTR Technology. The TTR Technology, and all Intellectual Property
Rights therein are, and will remain, the sole and exclusive property of TTR and
its suppliers, if any.
3.3 Joint Technology. Macrovision and TTR shall be co-owners of the Joint
Technology and all Intellectual Property Rights therein, and each Party will
have an undivided, one-half interest in and to the Joint Technology and all
Intellectual Property Rights therein. Notwithstanding anything to the contrary
contained in the foregoing, neither TTR nor Macrovision shall use or otherwise
exploit the Joint Technology except as expressly provided hereunder. Except as
set forth explicitly herein (including without limitation Section 5.1 and 5.2
hereof), neither Party will be entitled to any accounting of
4
CONFIDENTIAL
<PAGE>
Exhibit 10.43
profits, royalties, or other form of compensation with respect to any sale,
distribution, license or other exploitation by the other Party of the Joint
Technology. Notwithstanding the foregoing, during the term of this Agreement,
TTR will not transfer, license, distribute or disclose to any third party the
Joint Technology in the Field of Use, in whole or in part, or any products
incorporating such Joint Technology, in any manner. TTR and Macrovision shall
each retain the right to use or otherwise exploit the Joint Technology outside
of the Field of Use, however, TTR's right to use or otherwise exploit the Joint
Technology outside the Field of Use shall be subject to the terms of this
Agreement (including without limitation Section 4.5).
3.4 Patent Rights. Macrovision and TTR will file and prosecute, and shall
bear the expense of filing and prosecuting, at the minimum, in [**] any patents
on the Macrovision Technology or the TTR Technology, respectively, which the
Parties agree, are commercially important to protecting the intellectual
property rights of the Music Protection Technology. Except as prohibited by law,
the Parties shall jointly file, with respect to Joint Technology, such patent
and copyright applications and amendments thereof as the Parties agree are
useful to protect their joint interests in the Music Protection Technology, and
shall thereafter use commercially reasonable and diligent efforts to prosecute
and maintain in force such applications and any resultant patents and
copyrights. The costs and expenses (including attorneys' fees) incurred in the
filing, prosecution and maintenance of such patents and copyrights shall be
shared equally by the Parties. Macrovision will undertake the administrative
efforts required to give effect to this Section. As an additional right, either
Party, at its own expense, may file patent and copyright applications covering
the Music Protection Technology in those countries where the Parties do not
mutually agree to file such applications. All patent and copyright applications
for Joint Technology developed under this Agreement shall be filed in the name
of both Parties.
4. License Grants
4.1 Macrovision Technology. Macrovision hereby grants to TTR a
non-exclusive, non-transferable, royalty-free, worldwide license to use, copy,
modify, improve and create derivative works based on the Macrovision Technology
solely for the purposes of performing its obligations in connection with the
development of the Music Protection Technology. The license granted under this
Section shall not be construed so as to grant TTR any commercial rights to the
Macrovision Technology other than as expressly set out in this Agreement.
4.2 TTR Technology. Subject to the terms and conditions set forth herein,
TTR hereby grants to Macrovision an exclusive, royalty bearing, worldwide
license, within the Field of Use (a) to use, copy, modify and improve the Joint
Technology and the TTR Technology and create derivative works based thereon
solely in connection with the
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Exhibit 10.43
development of the Music Protection Technology, and (b) to make, have made,
sublicense and distribute the TTR Technology and any derivative works thereof
embodied in the Music Protection Technology. No right is being granted to
sublicense or distribute the TTR Technology (or components thereof) as
stand-alone products outside the Field of Use, except as otherwise expressly
provided in Section 4.4 of this Agreement. The Parties acknowledge that a copy
of the TTR Technology, as set out in Exhibit C hereof, has been delivered to
Macrovision. TTR will apprise Macrovision of any material improvements or
developments relating to the Music Protection Technology of which TTR becomes
aware within thirty (30) days of such improvement or development. TTR will not
deliver to Macrovision without Macrovision's prior written consent any
technology pertaining to MusicGuard which requires the payment of royalties to a
third party; alternatively, if TTR does deliver to Macrovision any such
royalty-bearing technology, payment of such royalties will be the responsibility
of TTR. Further, TTR will not deliver to Macrovision without Macrovision's prior
written consent any technology pertaining to DiscGuard which requires the
payment of royalties to a third party. The Parties expressly acknowledge that
DiscGuard includes a component known as Gearworks which is licensed by a third
party.
4.3 Trademark Licenses. TTR hereby grants Macrovision the exclusive right
to use the TTR trademark "MUSIC GUARD" ("TTR Mark") in marketing and
distributing the Music Protection Technology. Macrovision shall have the the
right, in its sole discretion, to market the Music Protection Technology or the
CD Technology (as defined in Section 4.4) under its trade names and trademarks
or under the TTR Mark.
4.4 TTR's Other Technology. Effective upon the Investment Date, TTR grants
Macrovision an exclusive, worldwide license (with the right to sublicense) to
(a) use, copy, modify, and create derivative works based on TTR's CD-ROM
software copy protection technology as further described in Exhibit F ("CD
Technology"), including but not limited to its CD and DVD signatures, encoder
modules and other technology; (b) incorporate the CD Technology (or components
thereof) into or bundle the CD Technology with Macrovision products; and (c)
market, sublicense and distribute the CD Technology alone or with or
incorporated in Macrovision bundled products. TTR shall, within [**] days
following the Investment Date, deliver to Macrovision all materials, notes,
plans, diagrams, schematics, source code, object code and technical
specifications related to the CD Technology, including but not limited to the
digital signature portions thereof. The license granted in this Section shall be
[**]. Except for the licenses named in the marketing agreements listed in
Exhibit G, TTR shall, within [**] of the closing of the Investment Date, notify
all existing CD Technology customers and prospective customers that, after [**]
of such notice, TTR will no longer license or support the CD Technology, and
that TTR encourages such customers to license Macrovision's Safe Disc Technology
(defined in Section 5.3) from Macrovision. TTR further agrees to work
cooperatively with Macrovision to encourage Sonopress and Nimbus to cease
offering or marketing the CD Technology within such [**] period and in any event
agrees to remit to Macrovision 100% of any
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Exhibit 10.43
revenues related to the CD Technology which TTR receives from Sonopress or
Nimbus subsequent to the Investment Date.
4.5 Other TTR Technologies. TTR grants to Macrovision an exclusive right
of first refusal, during the term of this Agreement, with respect to the
acquisition of all rights in or worldwide exclusive marketing and distribution
rights to: (i) the Music Protection Technology outside of the Field of Use
and/or (ii) any future packaged media copy protection or internet digital rights
management technologies developed by TTR which are applicable to music, music
video, video, software or data publishing products or markets. In addition, TTR
shall notify Macrovision of any bona-fide third party offers to purchase or
license any such technology, including the terms of such offer. If Macrovision
notifies TTR of its interest in such purchase or license under the terms of such
offer within ten (10) United States business days of Macrovision's receipt of
such notification, the Parties will negotiate in good faith a definitive
agreement for the purchase or license.
5. Royalties
5.1 Amounts.
(a) Royalty Rate. Except as provided below in this Section 5,
Macrovision or its Affiliates agree to pay to TTR thirty percent (30%) of the
Net Revenues received by Macrovision or its Affiliates from licenses of the
Music Protection Technology as a stand alone product to customers, distributors,
OEM partners or other third parties.
(b) Delayed Commercial Launch. In the event that the Commercial
Launch (as defined below) [**], then, beginning [**] and for the remaining term
of this Agreement, the royalty rate percentage payable by Macrovision to TTR as
described above shall be reduced to twenty five percent (25%) of Net Revenues.
"Commercial Launch" shall mean the date by which the first of the following two
events have occurred: (i) [**] major music labels [**] have each manufactured at
least [**] music CDs which have been copy protected using the Music Protection
Technology, or (ii) [**] major music labels [**] has manufactured at least [**]
music CDs which have been copy protected using the Music Protection Technology
and an aggregate total of [**] such copy-protected music CDs (including such
copy-protected music CDs manufactured by such major music label) have been
manufactured.
(c) Bundling. If Macrovision licenses the Music Protection
Technology as a portion of another product or service it offers to its
customers, distributors, OEM partners, or sublicensees, TTR will negotiate with
Macrovision in good faith the allocation of revenue to the Music Protection
Technology. Macrovision agrees that it shall not license the Music Protection
Technology as a portion of another product or service until the
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Exhibit 10.43
allocation of revenue to the Music Protection Technology has been mutually
agreed by Macrovision and TTR.
(d) Payment Terms. Macrovision agrees to pay to TTR the royalties
described in Section 5.1 on the last day of each calendar month during the term
of this Agreement with respect to cash receipts actually received in the
immediately preceding month. Each remittance to TTR hereunder shall be
accompanied by a written report, signed by an authorized officer of Macrovision,
setting forth in reasonable detail the basis for the determination of such
royalty then due to TTR, including the amount of gross revenues received by
Macrovision in respect of such preceding month.
5.2 Minimum Royalty
(a) Generally. In order to maintain exclusivity with respect to the
rights granted to Macrovision by TTR hereunder, Macrovision shall pay to TTR,
beginning twelve months following the Commercial Launch, a series of minimum
annual guaranteed royalty advances (each a "Guaranteed Royalty"), recoupable
dollar-for-dollar against royalties actually earned by TTR as its share of Net
Revenues generated from the Music Protection Technology subsequent to the
payment by Macrovision of each Guaranteed Royalty during the full term of this
Agreement. Macrovision shall pay such Guaranteed Royalties to TTR according to
the following schedule:
PAYMENT DUE DATE
(Expressed as the number of
calendar months following
Commercial Launch) PAYMENT AMOUNT
[**]
The first such Guaranteed Royalty payment in the amount of US [**] as provided
above shall not be reduced by royalties paid pursuant to Section 5.1 hereunder
during the first twelve months following Commercial Launch. Subsequent
Guaranteed Royalty payments shall not be reduced by royalties paid prior to the
payment of each such Guaranteed Royalty payment.
Notwithstanding the above, all Guaranteed Royalty payments shall be fully
creditable against all royalties payable by Macrovision to TTR as described in
Section 5.1 hereof during the term of this Agreement, which are incurred
subsequent to the payment of each such Guaranteed Royalty payment.
Except in the event of an early termination of this Agreement as described in
Section 8.2 or 8.3 hereof, all Guaranteed Royalty payments which have not
otherwise been paid to TTR
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Exhibit 10.43
as of December 31, 2009 shall be paid to TTR by Macrovision on or before
December 31, 2009.
In the event of an early termination of this Agreement as described in Section
8.2 or 8.3 hereof, all Guaranteed Royalty payments which are due but unpaid as
of the date of such early termination shall be payable by Macrovision to TTR and
all previously paid Guaranteed Royalty payments shall vest entirely in TTR.
(b) Waived Minimum Royalty. Notwithstanding the above, if the
Commercial Launch is achieved prior to [**], or if the Commercial Launch is not
achieved by [**], then all Guaranteed Royalty payments described in Section
5.2(a) shall be waived. In the event that the Guaranteed Royalty described in
Section 5.2(a) is waived as described in this Section and Macrovision shall not
have paid to TTR a minimum of US [**] in aggregate royalties as provided in
Section 5.1 by the second anniversary of the Commercial Launch, then, at
Macrovision's option: (i) Macrovision may pay TTR any shortfall in the minimum
royalty set forth in this paragraph within thirty days, or (ii)] Macrovision's
exclusive license hereunder shall revert to nonexclusive status.
5.3 Royalties for SafeDisc Technology. Macrovision shall pay to TTR, for
the [**] period beginning [**], and ending [**], a royalty equal to [**] of the
SafeDisc Net Revenues Macrovision receives from licenses of the SafeDisc
technology described in Exhibit E ("Safe Disc Technology") to customers,
distributors, or other third parties located in the People's Republic of China
("PRC"). [**] Notwithstanding the above, TTR and Macrovision will work
cooperatively to transition [**] to a SafeDisc license as soon as possible. For
purposes of this Section "SafeDisc Net Revenues" shall mean the gross revenues
received by or on behalf of Macrovision or any of its Affiliates from customers,
distributors, OEM partners or other sublicensees utilizing the SafeDisc
Technology in the PRC, reduced by discounts, returns and rebates but not by cost
of goods sold.
Macrovision will pay to TTR the royalties described in this Section 5.3 on
the last day of each calendar month during the term of this Agreement with
respect to cash receipts actually received in the immediately preceding month.
Each remittance to TTR hereunder shall be accompanied by a written report,
signed by an authorized officer of Macrovision, setting forth in reasonable
detail the basis for the determination of such royalty then due to TTR,
including the amount of gross revenues received by Macrovision in respect of
such immediate preceding month and reflecting a schedule of the customers and
amounts from whom such gross revenues were collected.
5.4 Reports. Macrovision agrees to provide reports to TTR on a quarterly
basis (for quarters ending March 31, June 30, September 30, and December 31 each
year during the term of this Agreement), setting forth the total number of music
CDs then manufactured to which Macrovision is aware that the Music Protection
Technology has
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Exhibit 10.43
been applied, each such report shall be delivered to TTR within 45 days
following the end of each such quarter after the Commercial Launch has occurred.
5.5 Audit. Each of TTR and Macrovision will have the right, no more than
once yearly, during the term of this Agreement and for one (1) year thereafter
to have an independent "Big 5" certified public accounting firm (i.e., Deloitte
and Touche, Arthur Andersen, Price Waterhouse Coopers, KPMG Peat Marwick, or
Ernst & Young) review or audit the other Party's relevant records for the
purpose of certifying compliance with this Agreement. All audits will be at the
auditing Party's expense and conducted during regular business hours, and begun
upon at least one (1) month's prior written notice. If any audit reveals a net
underpayment of more than one percent (1%), the audited Party shall immediately
pay such underpayment; if any audit reveals a net underpayment of more than five
percent (5%), the audited Party shall pay the costs of the audit and auditing
Party may conduct a follow up audit at any time upon thirty (30) days prior
written notice, not more often than quarterly, and the audited Party shall pay
interest on such underpayment at the prime rate then most recently published by
the largest bank in New York (in terms of Assets) plus one (1) point. Finally,
if three (3) audits in any three (3) year period reveal that an audited Party
under reported, for whatever reason, payments by more than fifteen percent
(15%), the auditing Party may terminate this Agreement upon ninety (90) days
prior written notice to the audited Party.
6. Sales and Marketing
6.1 Sales and Marketing. Macrovision shall, in its sole discretion,
determine the staffing and other resources to be allocated by Macrovision to
commercialize the Music Protection Technology; provided that Macrovision will
allocate commercially reasonable staffing and other resources to commercialize
the Music Protection Technology consistent with Macrovision's good faith
determination of the commercial potential of the Music Protection Technology.
Macrovision shall, in its sole discretion, determine the naming, branding, and
pricing for the Music Protection Technology, except that Macrovision agrees (i)
to mention in the text of all press releases related to the Music Protection
Technology that the Music Protection Technology has been developed jointly by
Macrovision and TTR, (ii) to mention in the advertising and related marketing
collateral materials that the Music Protection Technology has been developed
jointly by Macrovision and TTR, and (iii) not to license the Music Protection
Technology free of charge to customers, distributors, OEM partners, or other
sublicensees other than for promotional purposes. TTR agrees that Macrovision
shall, in its sole discretion, determine the degree of prominence afforded to
the mention of TTR described in subsection (i) and (ii) of this Section 6.1.
6.2 Cooperative Marketing and Development Payments. Subject to the terms
of this Agreement, TTR recognizes the unique one-time costs which will be
incurred by Macrovision to co-develop and launch the Music Protection Technology
into the commercial
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Exhibit 10.43
market and agrees to reimburse Macrovision for its staffing and other costs
related to development and testing, product management, sales, product
naming/branding, marketing, and promotional expenses incurred by Macrovision
with respect to the Music Protection Technology during the twelve month period
ending on [**], up to an aggregate maximum reimbursement of [**].
Reimbursements shall be paid by TTR to Macrovision on the last day of each month
with respect to reimbursable expenses (including direct overheads related to
such expenses) incurred by Macrovision in the prior month, based upon invoices
submitted by Macrovision to TTR for each such prior month, until the earlier of
the date on which TTR has paid to Macrovision [**] in aggregate reimbursements,
or [**]. The first such reimbursement shall be paid by TTR to
Macrovision on or before [**] with respect to reimbursable expenses incurred by
Macrovision during the months of [**] and [**]. Notwithstanding the above, no
such reimbursement shall be payable by TTR to Macrovision prior to the execution
of the Stock Purchase Agreement of even date herewith.
7. Confidentiality
7.1 Confidential Information. "Confidential Information" refers to: (i)
the Specification and any related documentation or technical or design
information related to the Music Protection Technology; (ii) the Macrovision
Technology, the TTR Technology, and any other business or technical information
of either of the Parties, including but not limited to any information relating
to such Party's product plans, designs, costs, product prices and names,
finances, marketing plans, business opportunities, personnel, research,
development or know-how designated by a Party as "confidential" or "proprietary"
or which, under the circumstances taken as a whole, would reasonably be deemed
to be confidential; and (iv) the terms and conditions of this Agreement.
7.2 Exclusions of Confidential Information. Notwithstanding the foregoing,
"Confidential Information" will not include information that: (i) is or becomes
generally known or available by publication, commercial use or otherwise through
no fault or breach of confidentiality undertakings of the receiving Party; (ii)
is known to the receiving Party at the time of disclosure without violation of
any confidentiality restriction, as demonstrated by prior tangible evidence, and
without any restriction on the receiving Party's further use or disclosure; or
(iii) is independently developed by the receiving Party, as demonstrated by
reasonable prior tangible evidence furnished by the receiving Party.
7.3 Use and Disclosure Restrictions. During the term of this Agreement and
for five (5) years after any termination or expiration of this Agreement, the
Parties shall refrain from using the other Party's Confidential Information
except as contemplated herein, and from disclosing such Confidential Information
to any third party except as is reasonably required in connection with the
exercise of its rights and obligations under this Agreement (and only subject to
binding use and disclosure restrictions at least as protective as those
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Exhibit 10.43
set forth herein executed in writing by such parties). However, a Party may
disclose Confidential Information of the other Party: (i) pursuant to the order
or requirement of a court, administrative agency, or other governmental body,
provided that the disclosing Party give reasonable notice to the other Party to
contest such order or requirement; and (ii) on a confidential basis to legal or
financial advisors or (iii) as otherwise required in connection with its
reporting requirements under Securities Exchange Act of 1934, as amended.
7.4 Employment of Other Party's Employees. Each Party and its Affiliates
agree that during the continuance of this Agreement and for a period of 18
months after its termination, in whole or in part, it will not hire or otherwise
contract the services of, whether directly or indirectly, an employee of the
other Party. Macrovision expressly agrees not to solicit the employment of nor
hire [**] for a period of one year following the earlier of the termination of
this Agreement or his employment with TTR.
8. Term and Termination
8.1 Term. This Agreement shall commence on the Effective Date and, unless
earlier terminated in accordance with this Section 8, will continue in effect
until December 31, 2009.
8.2 Termination at the Option of Either Party. Either of TTR or
Macrovision shall be entitled, upon furnishing five days' written notice to the
other, to terminate this Agreement (and the rights granted hereunder) if the
Investment Date does not occur, for any reason whatsoever, on or before January
31, 2000.
8.3 Termination for Cause. Either Party will have the right to terminate
this Agreement if: (i) the other Party materially breaches this Agreement and
fails to cure such breach within thirty (30) days after written notice thereof
from the other Party setting forth in reasonable detail the facts or
circumstances constituting the alleged breach; (ii) the other Party becomes the
subject of a voluntary petition in bankruptcy or any voluntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors; (iii) the other Party becomes the subject of an
involuntary petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within sixty (60)
days of filing, or (iv) in accordance with the provisions of Section 5.5.
8.4 Effect of Termination.
(a) Confidential Information. Upon any expiration or termination of
this Agreement, each Party shall promptly return to the other Party, and will
not take or use
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Exhibit 10.43
(except as permitted herein), all items of any nature that belong to such Party
and all records containing or relating to such Party's Confidential Information.
(b) Survival. The following provisions will survive termination of
this Agreement for any reason: Section 1 (Definitions), Section 3 (Ownership),
Section 7 (Confidentiality), Section 8.3 (Effect of Termination), Section 10
(Warranty Disclaimer), Section 11 (Indemnification), Section 12 (Limitation of
Liability), and Section 13 (General Provisions).
9. Representations and Warranties
9.1. By Macrovision. Macrovision represents and warrants that: (i)
Macrovision has not previously granted and/or will not grant any rights in the
Macrovision Technology to any third party which are inconsistent with the rights
granted herein; (ii) Macrovision has full power and authority to enter into this
Agreement, to carry out its obligations hereunder, and to grant the rights
herein granted; and (iii) C-Dilla is a wholly-owned subsidiary of Macrovision.
9.2. By TTR. TTR represents and warrants that: (i) the TTR Technology does
not infringe the intellectual property rights of any third party; (ii) TTR has
not previously granted and will not grant any rights in the TTR Technology to
any third party which are inconsistent with the rights granted or assigned
herein; and (iii) TTR has full power and authority to enter into this Agreement,
to carry out its obligations hereunder, and to grant the rights herein granted.
10. Warranty Disclaimer
EXCEPT AS PROVIDED IN SECTION 9 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT.
11. Indemnification
Subject to Section 12.1, TTR will at its expense defend, indemnify, and
hold Macrovision harmless against all costs, expenses, liabilities, and damages
(including but not limited to reasonable attorneys; fees) paid out in settlement
of or resulting from a judgment awarded to a third party against Macrovision
resulting from any claim that the TTR Technology as supplied by TTR infringes or
misappropriates the Intellectual Property Rights of any third party or breaches
the representations and warranties contained in Section 9.2 above, provided that
Macrovision: (i) gives prompt written notice of any such claim; (ii) allows TTR
to direct the defense and settlement of the claim; and (iii) provides TTR with
the authority, information, and assistance reasonably necessary for the defense
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Exhibit 10.43
and settlement of the claim. Macrovision reserves the right to participate in
any such defense at its expense and in its sole discretion.
12. Limitation of Liability
12.1 Notwithstanding anything to the contrary contained in the foregoing,
TTR's total liability to Macrovision under this Agreement will be limited as
follows:
(a) for breach of the confidentiality provisions herein and/or
improper disclosure of Confidential Information, there will be no limitation on
TTR's liability;
(ii) for intentional breach of the representation set forth in
Section 9.2 hereof, there will be no limitation on TTR's liability;
(iii) for unintentional breach of the representation set forth in
Section 9.2 hereof, TTR's maximum liability to Macrovision will be capped at
four times the amount of fees paid by Macrovision to TTR;
(iv) for fraudulent misrepresentation, there will be no limitation
on TTR's liability; and
(v) for all other matters, TTR's maximum liability to Macrovision
will be capped at one million dollars (US $1,000,000.00).
12.2 Notwithstanding anything to the contrary contained in the foregoing,
in no event shall Macrovision's total liability to TTR under this Agreement
exceed $1,000,000, regardless of whether any remedy set forth herein fails of
its essential purpose.
12.3 In no event will either Party be liable for any form of special,
incidental, indirect, consequential, or punitive damages of any kind, whether or
not foreseeable (including, without limitation damages for loss of business
profits, business interruption, loss of business information, and the like),
whether based on breach of contract, tort (including negligence), product
liability, or otherwise, even if such Party has been advised of the possibility
of such damages.
13. General Provisions
13.1 Amendment. This Agreement may only be amended by a writing signed by
both Parties.
13.2 Arbitration. Any dispute, controversy or claim arising out of or
relating to the validity, construction, enforceability or performance of this
Agreement, including disputes relating to alleged breach or to termination of
this Agreement, shall be settled by final, binding arbitration in the manner
described in this Section. The arbitration shall be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration
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Exhibit 10.43
Association then in effect ("Rules"). Notwithstanding the Rules, the following
provisions shall apply to the arbitration hereunder:
(a) Arbitrators. The arbitration shall be conducted in San
Francisco, California by a panel of three (3) arbitrators (the "Panel"). Each
Party shall have the right to appoint one (1) member of the Panel, with the
third member to be mutually agreed by the Parties and, failing such agreement by
the Parties, by the two (2) Panel members appointed by the Parties or appointed
in accordance with the Rules. The arbitrators shall be persons in the industry
with experience in the matters in dispute.
(b) Proceedings. The Panel shall, in rendering its decision, apply
the law of the State of California, without regard to its conflict of laws
provisions, except that the interpretation of and enforcement of this Section
shall be governed by the U.S. Federal Arbitration Act. The fees of the Panel
shall be paid by the losing Party, which Party shall be designated by the Panel.
If the Panel is unable to designate a losing Party, it shall so state and the
fees shall be shared equally between the Parties.
(c) Injunctive Relief. Each Party agrees that any violation or
threat of violation by it or its employees of its obligations under this
Agreement will result in irreparable harm to the other for which damages would
not be an adequate remedy and, therefore, in addition to its rights and remedies
otherwise available at law, including without limitation the recovery of damages
for breach of such sections of this Agreement, the injured Party will be
entitled to seek immediate equitable relief, including both interim and
permanent injunctions, without the necessity of posting a bond or any other
undertaking, and to such other and further equitable relief as the court may
deem proper under the circumstances.
13.3 Assignment. TTR shall not assign its rights or delegate its
obligations hereunder without the express written consent of Macrovision , which
consent shall not be unreasonably withheld. Any assignment or delegation by TTR
in violation of this Section will be void. Subject to the foregoing, this
Agreement will benefit and bind the successors and permitted assigns of the
Parties. Notwithstanding the foregoing, (i) either of Macrovision or TTR may
assign this Agreement without the other's consent if such assignment arises out
of a corporate reorganization, or merger, acquisition of sale in which all or
substantially all of Macrovision's or TTR's stock or assets, as the case may be,
are transferred to the assignee, and (ii) Macrovision may assign this Agreement
without TTR's consent to any third party of Macrovision's choosing so long as
Macrovision can demonstrate to TTR using commercially reasonable criteria that
the assignee is at least as capable financially and operationally of fulfilling
Macrovision's obligations hereunder.
13.4 Compliance with Laws. The Parties shall comply with all laws and
regulations applicable to its activities under this Agreement in all material
respects. Without limiting the foregoing, the Parties shall: (i) comply with all
United States Department of Commerce
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Exhibit 10.43
and other United States export controls with respect to the subject matter
hereof; and (ii) not produce or distribute any software, products, or technical
data in any country where such production or distribution would be unlawful.
13.5 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement of even date herewith, including all exhibits hereto, constitutes the
entire agreement between the Parties with respect to the subject matter hereof,
and supersedes and replaces all prior or contemporaneous communications,
negotiations, and agreements, written or oral (including the Letter Agreement)],
regarding such subject matter.
13.6 Governing Law. This Agreement will be governed by and construed in
accordance with the substantive laws of the United States and the State of
California, without regard to or application of provisions relating to choice of
law.
13.7 No Agency. The Parties to this Agreement are independent contractors,
and nothing in this Agreement will be construed as creating or implying an
agency, partnership, joint venture, or any other form of legal association
(other than as expressly set forth herein) between the Parties.
13.8 No Third Party Beneficiaries. No provisions of this Agreement,
express or implied, are intended or will be construed to confer any rights,
remedies or other benefits on any third party under or by reason of this
Agreement.
13.9 Notices. All notices required or permitted under this Agreement will
be in writing, will reference this Agreement and will be deemed given: (i) when
personally delivered, (ii) when sent by confirmed facsimile; (iii) five (5)
working days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iv) one (1) working day after deposit
with a commercial overnight carrier, with written verification of receipt. All
communications will be sent to the addresses set forth on the signature page
hereof, or to such other address as may be designated by a Party by giving
written notice to the other Party pursuant to this Section.
13.10 Publicity. TTR and Macrovision will jointly issue a press release
announcing the existence of this Agreement and of the principal terms
thereunder. The timing and content of such press release will be mutually agreed
on by the Parties. Except as set forth above, neither TTR nor Macrovision shall
make any public announcement or press release regarding this Agreement or any
activities performed under this Agreement without the prior written consent of
the other. Notwithstanding the above, Macrovision may make public announcements
related to the development, adoption, or deployment of the Music Protection
Technology which is deems necessary or appropriate in its sole discretion.
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Exhibit 10.43
13.11 SEC Filings. TTR's disclosure of the existence of this Agreement and
the terms thereunder (as redacted by Macrovision) in accordance with its
obligation under the Securities Exchange Act of 1934, as amended, shall not be
deemed to be a violation of Section 13.10, so long as TTR has provided to
Macrovision beforehand a copy of the provisions which it proposes to release to
the Securities and Exchange Commission, has given good faith consideration to
any request by Macrovision to redact specific provisions from such disclosure
and has allowed Macrovision to have review rights in the SEC approval process.
13.12 Severability. If for any reason a court of competent jurisdiction
finds any provision or portion of this Agreement to be unenforceable, that
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the Parties, and the remainder of this Agreement will
continue in full force and effect.
13.13 Waiver. To be enforceable, a waiver must be in writing and signed by
the waiving Party.
13.14 Force Majeure. Neither Party will be liable under this Agreement for
non-performance caused by events or conditions beyond the Party's control, if
the Party makes reasonable efforts to perform.
13.15 Counterparts; Facsimile Execution. This Agreement may be executed in
counterparts and by the exchange of facsimile signed copies.
IN WITNESS WHEREOF, the duly authorized representatives of the Parties
have executed this Agreement as of the Effective Date.
Macrovision Corporation TTR Technologies, Inc.
By: /s/ Ian Halifax By: /s/ Marc D. Tokayer
------------------------------- -----------------------------------
Printed Name: Ian Halifax Printed Name: Ian Halifax
Title: Chief Financial Officer Title: Chief Financial Officer
----------------------------- ----------------------------------
Exhibit A: Specification
Exhibit B: Macrovision Technology
17
CONFIDENTIAL
<PAGE>
Exhibit 10.43
Exhibit C: TTR Technology
Exhibit D: Personnel
Exhibit E: SafeDisc Technology
Exhibit F: CD Technology
Exhibit G: Marketing Agreements
18
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT A
SPECIFICATION
The Technology shall include, but not be limited to, a process
specification, LBR encoder modules, manufacturing test modules, and quality
control modules. The Parties intend that the Technology meet the following
functional requirements:
(a) The quality of the protected disk, when played on [**] of the
worldwide installed base of CD players (red book and yellow book, including but
not limited to portable players with anti-shock capability), shall match the
quality of the original unprotected disk [**].
(b) The protected disk, when played on [**] of the installed base of CD
players (red book and yellow book, including but not limited to portable players
with anti-shock capability), shall match the original unprotected disk [**] and
otherwise perform in the same manner as the original unprotected disk.
(c) Copies of protected disks sourced from [**] the worldwide installed
base of CD-Readers as described in subsection (d) below shall be degraded, such
that the commercial entertainment value of the music has been eliminated, when
played on the worldwide installed base of CD players (red book and yellow book,
including but not limited to portable players with anti-shock capability) and
mini-disc players.
(d) The tracks recorded on a protected disc shall not be transferable
(directly or indirectly, except if the commercial value of the music is
eliminated during the transfer through the CD Reader - PC Data Interface) from
[**] of the worldwide installed base of CD-Readers onto the hard-drive of a PC
using file formats such as .wav or .bin, including but not limited to by using
software programs such as Goldenhawk CDR Win, Adaptec Easy CD Creator, and Nero.
19
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT B
MACROVISION TECHNOLOGY
[**]
20
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT C
TTR TECHNOLOGY
[**]
21
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT D
PERSONNEL
1. TTR PERSONNEL:
TTR will assign a sufficient number of technical personnel for a [**]
period beginning on the Effective Date of this Agreement, to develop, enhance,
and maintain the Music Protection technology. During the period beginning on the
Effective Date and ending [**], TTR agrees to cause [**] to be assigned on a
full time basis to develop, enhance, and maintain the Technology and to perform
such activities on a three quarter time [**] basis at [**]. TTR shall pay all
travel and lodging expenses related to [**] work in the UK during this period.
Macrovision agrees to designate at least [**] technical liaison to interact with
[**] and the other TTR personnel who are involved with the Music Protection
Technology. At Macrovision's option, up to [**] project status meetings may be
held at Macrovision's Sunnyvale, California office, and in each such case TTR
agrees to cause [**] to attend, and macrovision agrees to reimburse TTR for the
reasonable travel (coach class airfare) and lodging costs of [**] related to
each such meeting. Telephone conference calls will also be held weekly at
mutually agreed upon times.
TTR also will, upon request from macrovision, cause [**] to be present at
TTR's expense (except as described below) at Macrovision's Sunnyvale, CA USA
location, or at any other location in the USA, England (except for [**] will be
working on [**] basis as described above) or [**] as requested by Macrovision
for up to [**] beginning on the Effective Date and ending [**]. Macrovision
agrees to reimburse TTR for the reasonable travel (coach class airfare) and
lodging costs of [**] or other TTR personnel if they are requested by
Macrovision to travel to the USA.
2. Technical Contacts:
TTR: [**] (Alternate: [**])
Macrovision: [**] (Alternate: [**])
22
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT E
SAFEDISC TECHNOLOGY
Description:
[**]
23
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT F
CD TECHNOLOGY
The following description defines the CD Technology. The CD Technology consists
of the digital signature portion and the protection portion. The digital
signature portion is [**], and is more specifically described as
follows:
[**]
24
CONFIDENTIAL
<PAGE>
Exhibit 10.43
EXHIBIT G
MARKETING AGREEMENTS
TTR granted exclusive production and marketing rights for DiscGuard to China
Intercontinental Communications Center for the People's Republic of China,
Taiwan, and Maco under and agreement dated October 15, 1988.
Sonopress Gmbh holds a non-exclusive license to manufacture and market DiscGuard
and related products in the world, except for the Peoples Republic in China
(PRC), under an agreement dated February 15, 1999.
Nimbus CD International Inc. holds a non-exclusive worldwide license to
manufacture and market DiscGuard and related products, under an agreement dated
November 24, 1997.
Warlock Records holds a non-exclusive worldwide license to use MusicGuard
protection for their music CDs, under an agreement dated September 2, 1999.
25
CONFIDENTIAL
Exhibit 10.44
Amendment No. 1
To
Marketing, Sales and Representation Agreement
This Amendment No. 1 to the Marketing, Sales and Representation Agreement
dated as of February 1, 1999 (as originally executed, the "Agreement") between
Machtec Ltd. and TTR Technologies, Inc. (hereinafter, "TTR") is entered into as
of the 3rd day of August 1999 by .
W I T N E S S E T H
WHEREAS, pursuant to the Agreement, Machtec provides consulting in
connection with the promotion and sales of TTR's software anti-piracy product
known as "DiscGuard";
WHEREAS, TTR has developed anti-piracy solution intended to deter the
unauthorized replication of music and similar content distributed on optical
media known as "MusicGuard";
WHEREAS, Machtec desires to introduce MusicGuard to the recording industry
and other distributors and publishers of music titles and similar content
distributed on optical media that are based in North America;
WHEREAS, Machtec represents that it has the expertise and experience and
connection to advance the promotion, marketing and sales of MusicGuard to the
music industry;
WHEREAS, TTR and Machtec desire to amend the Agreement (as hereinafter
amended, the "Amended Agreement") as hereinafter provided to set forth the terms
under which Machtec will consulting service to the Company in connection with
the promotion, marketing and sales of MusicGuard.
Therefore, in consideration of the mutual promises contained herein, the
Parties agree as follows:
1. All capitalized terms used herein shall have the meaning set forth in the
Agreement and all terms of the Agreement not specifically amended as hereinafter
set forth shall remain in full force and effect. Upon the effectiveness of this
Amendment No. 1 to the Agreement, all referenced to the "Agreement" shall
include and be deemed to refer to the Amended Agreement.
2. Section 2(i) of the Agreement is deleted in full and the following shall be
substituted therefor:
<PAGE>
"MACHTEC will provide to TTR a dedicated and focused effort to develop
business for the DiscGuard and MusicGuard product lines. Specifically,
MACHTEC will introduce TTR to and represent TTR to potential customers in
the Territories.
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. 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.
Machtec is entitled to appoint third parties, upon approval of TTR, to
assist Machtec is the performance of its duties herein"
Section 2(iii) is deleted in full and the following shall be substituted
therefor:
"Compensation
TTR will pay to MACHTEC the following:
(a) in consideration of MACHTEC committing itself to be available
for not less than four days of work per month for a period of 24
months in rendering the services under this Agreement, TTR hereby
agrees to issue to MACHTEC, 200,000 shares of its common stock.
("Fees").
(b) TTR will issue to Machtec, subject to (and in compliance with US
federal securities laws), forthwith upon the achievement of of the
milestones below such number of common shares of capital stock of
TTR set forth opposite such milestone:
2
<PAGE>
Milestone Company Shares
--------- --------------
(i) Commencement of a marketing & press
campaign pre-approved by TTR heralding
MusicGuard.
200,000
(c ) Additionally, effective as of the date set forth above, TTR
grants to MACHTEC warrants, in the form approved by TTR's Board of
Directors, exercisable through October 31, 2002, to purchase up to
1,000,000 shares of TTR's Common Shares at an exercise price per
share equal to $0.01, provided that such options shall become
exercisable upon the execution by TTR and a Strategic Partner, of an
agreement as a direct result of MACHTEC's activity.
"Strategic Partner" means a third party unaffiliated with the
Company as of the date hereof which party (i) is engaged in a
business which is the business in which TTR is engaged or a similar
or related business, and (ii) undertakes to subsequently purchase
equity securities of TTR (or securities convertible into equity
securities of TTR), with minimum gross proceeds to TTR of $3
million, where such purchase is accompanied or followed by any one
or more of the following: the licensing by TTR of all or any portion
of its technology to such third party, the licensing by such third
party of all or any portion of its technology to TTR, or any other
coordination of all or a portion of their respective business
activities or operations by TTR and such third party.
(c) 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) if TTR shall file a registration statement for any shares of its
Common Stock, it shall include in the registration statement
relating thereto the Shares and the shares issued upon exercise of
the warants (collectively, the "securities"). In the event that such
registration offering involves an underwriting, the rights hereunder
to have the securities included in such registration statement shall
be conditional upon the underwriter's determination as to the
marketing factors requiring limitation of such right, and the
underwriter may preclude any or all securities which could have
otherwise been included in such offering.
3. The following sub-section shall be added to the Agreement:
"2(vii) The term of this Agreement shall be until January 31, 2001, and
neither party shall thereafter have any continuing liability or responsibility
to the other. "
3
<PAGE>
IN WITNESS WHEREOF, the Parties have signed this Amendment Agreement on the date
first mentioned above.
TTR Technologies Inc. Machtec Ltd.
/s/ Derrick Harper
/s/ Marc D. Tokayer /s/ Frank Flannigan
- --------------------------- ------------------------
President Directors
4
Exhibit 10.45
[** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS
DOCUMENT]
THIS STOCK PURCHASE AGREEMENT, effective as of January 10, 2000, is by and
between TTR TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and
MACROVISION CORPORATION, a Delaware corporation (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, the Investor agrees to purchase at the Closing and
the Company agrees to sell and issue to the Investor at the Closing, one
million, eight hundred eighty thousand, nine hundred thirty-seven shares
(1,880,937) of the Company's Common Stock $0.001 par value (the "Shares"). The
purchase price for the Shares (subject to adjustment as provided in section 4.8
hereof) shall be Two Dollars and Thirteen Cents ($2.1266) per Share, or an
aggregate purchase price of Four Million Dollars ($4,000,000) (the "Purchase
Price"), which purchase price assumes that such Shares will be registered under
the Securities Act within 90 days of the Closing and will be freely tradable as
of that time by Investor, without regard to exemptions under the Securities Act.
The per share Purchase Price of each Share shall be determined by dividing the
number of shares of Common Stock outstanding immediately prior to the Closing,
on a fully diluted basis, into $31 million. The number of Shares of Common Stock
to be issued to Investor shall be determined by dividing the per share Purchase
Price, determined in the preceding sentence, into the aggregate $4 million
Purchase Price.
1.2 Closing. The purchase and sale of the Common Stock shall take
place at the offices of Manatt, Phelps & Phillips LLP, 3030 Hansen Way, Suite
100, Palo Alto, California (or such other location as the Investor may designate
and the Company consents thereto), at 10:00 A.M. on January 12, 2000, or such
other time and date as the Investor determines that all of the conditions to the
obligation of Investor, set forth in Section 5 hereof, have been or will be
satisfied (the "Closing"). At the Closing, the Company shall deliver to the
Investor a certificate representing the Shares against receipt by the Company
from the Investor of a wire transfer in the amount of the Purchase Price.
1
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor, except as set
forth on a Schedule of Exceptions attached as Schedule A hereto (the "Schedule
of Exceptions"), specifically identifying the relevant subparagraph hereof,
which exceptions shall be deemed to be a part of the representations and
warranties as if made hereunder (provided that such Schedule of Exceptions may,
at the discretion of the Company, be amended from time to time as necessary
until Closing, so long as such amendments do not reflect any material change in
the disclosure), the following:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a Material Adverse
Effect on its business or properties.
2.2 Capitalization and Voting Rights. Immediately prior to the
Closing, the authorized capital of the Company will consist of:
(i) Capital Stock. 25,000,000 shares of common stock ("Common
Stock"), of which 10,602,866 are issued and outstanding and 5,000,000 shares of
preferred stock, none of which are issued and outstanding. The Company has
reserved an aggregate 1,500,000 shares of Common Stock under its 1996 employee
stock option plan for purposes of (i) future grants of stock options to
employees, consultants and directors (hereinafter, the "ESOP"), and (ii)
issuance to holders of previously granted stock options upon exercise of such
options. Additionally, the company has reserved an additional 25,000 shares of
common stock under its non-executive directors option plan for issuance to its
non-employee directors. There is no other class or series of stock authorized.
(ii) Warrants and Options. The Company has warrants and
options exercisable and outstanding to purchase up to an aggregate of 3,224,911
shares of Common Stock, except for 749,400 ESOPS currently exercisable and
outstanding.
2
<PAGE>
(iii) Other Agreements. Except as set forth in this Agreement
and in the Schedule of Exceptions, there are no outstanding options, warrants,
convertible securities, rights (including conversion, right of first refusal or
any preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any future issuance of securities
by the Company.
(iv) Voting Agreements. Except as set forth in this Agreement,
the Company has no agreement, obligation or commitment with respect to the
election of any individual or individuals to the Board, and to the best of the
Company's knowledge, there is no voting agreement or other arrangement among its
shareholders with respect to the election of any individual or individuals to
the Board.
(v) Common Stock Outstanding. The total number of shares of
the Company's Common Stock outstanding on a fully diluted basis, immediately
prior to the Closing, is 14,577,177 shares.
2.3 Subsidiaries. Except for TTR Technologies, Ltd., the Company's
wholly-owned Israeli subsidiary with offices in Kfar-Saba, Israel, the Company
does not own or control, directly or indirectly, any other corporation,
association, or other business entity.
2.4 Authorization. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance and delivery of the Common Stock being
sold hereunder has been taken or will be taken prior to the Closing, and this
Agreement, upon due execution and delivery, constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
2.5 Valid Issuances of Common Stock. The Shares which are being
purchased by the Investor hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable, and the Investor shall
have good and marketable title to such Shares, free and clear of any liens,
pledges, encumbrances, taxes, charges or restrictions of any kind (other than
those created by or through the Investor).
3
<PAGE>
2.6 Compliance with Law and Charter Documents. The Company is not in
violation of, or default under, any provisions of its Certificate of
Incorporation or Bylaws, both as currently in effect. To its knowledge, the
Company is in compliance in all material respects with all applicable laws,
rules, regulations, judgments, decrees and governmental orders, except for such
non-compliance that would not have a Material Adverse Effect on the properties,
financial condition, operations, prospects or business of the Company. The
Company has received no notice of any violation of such laws, rules,
regulations, judgments, decrees or orders which has not been remedied prior to
the date hereof or which would have a Material Adverse Effect on the Company.
The execution, delivery and performance of the Agreement and the consummation of
the transactions contemplated thereby will not result in any such violation or
default, or be in conflict with or constitute, with or without the passage of
time or the giving of notice or both, either a default under the Company's
Certificate of Incorporation or Bylaws, both as currently in effect, or an event
which results in the creation of any material lien, charge or encumbrance upon
the capital stock or any asset of the Company, or a default under any Material
Agreement or contract by the Company, or a violation of any laws, rules,
regulations, judgments, decrees or orders. All material licenses, permits,
approvals, registrations, qualifications, certificates and other authorizations
necessary for the conduct of the Company's business as presently conducted (the
"Licenses") have been duly obtained and are in full force and effect, and there
are no proceedings pending or threatened which may result in the revocation,
cancellation, suspension or any material adverse modification of any of such
Licenses, except for Licenses that, individually or in the aggregate, the
Company need not hold or possess in order to avoid a Material Adverse Effect on
the Company's assets, properties, financial condition, operating results or
business. The Company believes it can obtain, without undue burden or expense,
any similar authority for the conduct of its business in the future as presently
conducted and proposed to be conducted.
2.7 Compliance with Other Instruments, None Burdensome, Etc. The
execution, delivery and performance of and compliance with this Agreement and
the issuance and sale of the Shares will not result in nor constitute any
breach, default or violation of (i) any agreement, contract, lease, license,
instrument or commitment (oral or written) to which the Company is a party or is
bound and which involves payment by the Company or any of its subsidiaries in
excess of $250,000 or which is otherwise material to the business, properties,
financial condition or results of operation of the Company or its subsidiaries
(a "Material Agreement") or (ii) any law, rule, regulation, statute or order
applicable to the Company, any of its subsidiaries or their respective
properties, nor result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or its
subsidiaries.
2.8 Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with, any
federal, state, local or provincial or other governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement or the consummation of the transactions contemplated herein,
including the offer, sale or issuance of the Shares to the Investor.
4
<PAGE>
2.9 Offering. In reliance on the representations and warranties of
Investor in Section 3, hereof, the offer, sale and issuance of the Shares will
not, to the best knowledge of the Company, result in a violation of the
requirements of Section 5 of the Securities Act or the qualification or
registration requirements of the California or other applicable blue sky laws or
foreign laws as such laws exist on the date hereof.
2.10 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the consummation of the transactions
contemplated hereby or which might result, either individually or in the
aggregate, in any Material Adverse Effects on the assets, financial condition,
operations or business of the Company, financially or otherwise, or any change
in the current equity ownership of the Company. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate.
2.11 Agreements; Action.
(i) Since November 30, 1999, the Company has not (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or any other liabilities in excess of $250,000, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(ii) Except as set forth in the Schedule of Exceptions, the Company
has not engaged since November 24, 1999 in any discussion (i) with any
representative of any corporation or corporations regarding the consolidation or
merger of the Company with or into any such corporation or corporations, (ii)
with any corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which more than fifty (50%) of the voting ownership of the
Company is disposed of, or (iii) regarding any other form of acquisition,
liquidation, dissolution or winding up of the Company.
2.12 Related Party Transactions.
5
<PAGE>
(i) No employee, officer or director of the Company or member
of his or her immediate family is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any of
them.
(ii) To the best of the Company's knowledge, no employee or
officer has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees or officers of the Company and members of their immediate
families may own stock in publicly traded companies that may compete with the
Company. Prior to the Closing, no officer, director or major shareholder or
member of the immediate family of any officer, director or major shareholder of
the Company has a direct or indirect financial interest in any material contract
with the Company.
2.13 Environmental and Safety Laws. To the best of its knowledge,
the Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required to comply
with any such existing statute, law, or regulation.
2.14 Status of Proprietary Assets.
(i) Ownership. The Company owns, is licensed to use or
otherwise has the right to use all patents, trademarks, service marks, trade
names, copyrights and trade secrets that are material or necessary for the
operation of its business as now conducted (the "Proprietary Assets"). The
Company has not received within the past 36 months preceding the date first set
out above any communications alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. The Company has not granted any license
or option or entered into any agreement of any kind with respect to the use of
the Proprietary Assets owned by it, other than licenses to and sales of its
products and services made in the ordinary course of its business.
6
<PAGE>
(ii) Licenses; Other Agreements. The Company is not bound by
or a party to any option, license or agreement with respect to any technology
owned by any third party other than shrink-wrap licenses entered into in the
ordinary course of business except as set forth on the Schedule of Exceptions.
The Company is not obligated to pay any royalties or other payments to another
person or entity with respect to the marketing, sale, distribution, manufacture,
license or use of any Proprietary Asset or any other property or rights, except
as set forth in the Schedule of Exceptions.
(iii) No Breach by Employees. To the best of the Company's
knowledge, no employee of the Company is subject to any judgment, decree or
order of any court or administrative agency, or any other restriction that would
materially interfere with the use of his or her best efforts to carry out his or
her duties for the Company or that would conflict with the Company's business as
currently conducted. The Company has received no written notice from any former
employer that any employee of the Company has prior obligations to a former
employer that would interfere or conflict with such employee's ability to
perform his or her intended services for the Company. To the best of the
Company's knowledge and belief, no employee or advisor of the Company is or is
now expected to be in violation of any term of any employment contract, patent
disclosure agreement, proprietary information and inventions agreement or any
other contract or agreement or any restrictive covenant or any other common law
obligation to a former employer relating to the right of any such employee to be
employed by the Company because of the nature of the business conducted by the
Company or to the use of trade secrets or proprietary information of others, and
the employment of the Company's employees does not subject the Company to any
liability, except where such liability would not have a material adverse effect.
There is neither pending nor, to the Company's knowledge and belief, threatened
any actions, suits, proceedings or claims, or to its knowledge any basis
therefor or threat thereof with respect to any contract, agreement, covenant or
obligation referred to in the preceding sentence.
7
<PAGE>
(iv) No Infringement. Within the 36 months preceding the date
first set out above, no claims with respect to the Proprietary Assets have been
communicated to the Company: (A) to the effect that the manufacture, sale,
license or use of any Proprietary Asset as now used or offered or proposed for
use or sale by the Company infringes any copyright, patent, trade secret or
other intellectual property right of a third party, or (B) challenging the
ownership or validity of any of the Company's rights to or interest in such
Proprietary Assets. The Company has received no notice to the effect that any
patents or registered trademarks, service marks or registered copyright, held by
the Company are invalid or not subsisting except for failures to be valid and
subsisting that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. To the best of the
Company's knowledge, there has been no material unauthorized use, infringement
or misappropriation of any of the Proprietary Assets by any third party,
including any employee or former employee of the Company.
2.15 Material Agreements. The Company has not breached in any
material respect any term or condition of (A) any Material Agreement or (B) any
other agreement, contract, lease, license, instrument or commitment (oral or
written) that, individually or in the aggregate, would have a Material Adverse
Effect on the properties, financial condition, operating results, prospects or
business of the Company. The Company is not a party to any agreement that
restricts in any material respect its ability to market, sell or license any of
its products or services (whether by territorial restriction or otherwise).
2.16 Disclosure. The Company has fully provided the Investor with
all information which the Investor has requested for deciding whether to
purchase the Shares and the Company is not aware of any material information
which it has not provided to the Investor and which the Company believes is
reasonably necessary to enable the Investor to decide whether to enter into the
transaction contemplated by this Agreement. Neither this Agreement nor any other
certificate made or delivered in connection with this Agreement and the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary not to make the statements
herein or therein misleading.
2.17 Registration Rights. The Company has not granted or agreed to
grant to any person or entity any rights (including piggyback registration
rights) to have any securities of the Company registered with the US Securities
and Exchange Commission ("SEC") or any other governmental authority.
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2.18 Tax Status. The Company has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject and has paid all taxes and other
governmental assessments and charges that are shown to be due on such returns,
reports and declarations or otherwise due, except those being contested in good
faith, and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the knowledge of the Company, there
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.
2.19 Employees.
(i) Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
(ii) Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a Material Adverse Effect on the assets, properties, financial condition,
operation or business of the Company, nor is the Company aware of any labor
organization activity involving its employees. The employment of each officer
and employee of the Company is terminable at the will of the Company upon the
giving of notice and the payment of specified amounts. Company has complied in
all material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment.
(iii) Confidential Information and Invention Assignment
Agreements. Each management and technology employee, consultant and officer of
the Company has executed an agreement with the Company regarding confidentiality
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and proprietary information. The Company is not aware that any of its employees
or consultants is in violation thereof, and the Company will use its best
efforts to prevent any such violation.
2.20 Insurance. The Company maintains and keeps in force with good
and responsible insurance companies fire, public liability, property damage and
other insurance, of the kinds and in amounts as are usual and customary in the
type of business conducted by the Company.
2.21 Title to Property and Assets. The Company owns and has valid
title to its property and assets free and clear of all mortgages, liens, loans
and encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets or which would not, in the aggregate, have a Material
Adverse Effect. With respect to the property and assets it leases, the Company
is in compliance with such leases and, to the best of its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances. The Company
does not own any real property.
2.22 Financial Statements. The Company shall deliver to Investor, on
or before January 10, 2000, the Company's annual financial statements (balance
sheet and statement of earnings, statement of shareholders' equity and statement
of cash flows) dated as of December 31, 1998 and interim financial statements
for the eleven months of operations ended November 30, 1999 (the "Financial
Statements"), in each case, such Financial Statements shall be prepared in
accordance with United States generally accepted accounting principles ("GAAP"),
shall include all footnotes in accordance with GAAP, and shall be audited by the
Israeli office or affiliate of a "Big 5" public accounting firm (i.e., Deloitte
and Touche, KPMG Peat Marwick, Price Waterhouse Coopers, Arthur Anderson or
Ernst and Young). The Financial Statements when delivered, will fairly present
the financial condition and operations of the Company as of the dates, and for
the periods, indicated therein, subject to normal year-end adjustments. The
Financial Statements described in subsection 2.21 hereof and the audited balance
sheet as of November 30, 1999, as adjusted by the auditor's subsequent event
disclosure footnote, shall not show liabilities due within 18 months from the
date thereof in an amount in excess of [**] over the amount of cash and cash
equivalents shown on such balance sheet.
2.23 Except as set forth in the Financial Statements, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
2.24 SEC Documents, Financial Statements. Since November 30, 1999,
the Company has timely filed all reports, schedules, forms, statements and other
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documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to the Investor, or the Investor has had access to, true and complete
copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the consolidated financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Except as disclosed in the SEC Documents, since November 30,
1999, there has been no material adverse change in the assets, liabilities,
business, properties, operations, financial condition, or operations of the
Company on a consolidated basis.
2.25 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Shares to the Investor. The issuance of
the Shares to the Investor will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of the Securities
Act.
2.26 Year 2000. The mission critical computer software operated by
the Company and each of its subsidiaries is currently capable of providing, or
is being adapted to provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1, 2000 in
substantially the same manner and with the same functionality as such mission
critical software records, stores, processes and processes and presents such
calendar dates falling on or before December 31, 1999. The costs of the
adaptations referred to in this clause will not have a Material Adverse Effect.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby represents and warrants that:
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3.1 Authorization. The Investor has full power and authority to
enter into this Agreement. This Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
3.2 Purchase Entirely for Own Account. The Investor is acquiring the
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for the resale or distribution of any part thereof. The
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. The Investor further represents that it does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Shares.
3.3 Disclosure of Information. The Investor has received all of the
information which it considers necessary or appropriate for deciding whether to
purchase the Shares. The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
2 of this Agreement or the right of the Investor to rely thereon.
3.4 Investment Experience. The Investor (i) fully understands that
an investment in the Company is highly speculative and that it may lose its
entire investment in the Shares purchased from the Company; (ii) is experienced
in evaluating and investing in development stage companies such as the Company,
(iii) is capable of evaluating the merits and risks of its investment in the
Shares; (iv) is able to bear the economic risk of a loss of the entire amount of
its investment in the Shares; and (v) is prepared to hold the Shares for an
indefinite period of time.
3.5 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission Rule 501 of Regulation
D, as presently in effect.
3.6 Restricted Securities. The Investor acknowledges that, because
the Shares have not been registered under the Securities Act, the Shares must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions..
3.7 Legends. The Investor understands that until (a) the Shares may
be sold by the Investor under Rule 144(k) or (b) such time as the resale of the
Shares have been registered under the Securities Act as contemplated in Section
4.8 hereof, the certificates representing the Shares will bear a restrictive
legend in substantially the
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following form (and a stop-transfer order may be placed against transfer of the
certificates for such Shares):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THOSE
LAWS.
The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, upon registration of the Shares, in accordance with the terms of
Section 4.8 hereof.
4. COVENANTS AND AGREEMENTS
4.1 Ordinary Course of Business and Notice of Adverse Changes. From
and after the date of this Agreement through the Closing, the Company shall
conduct its business in the ordinary course and consistent in all material
respects with past practice, except as may be required or contemplated in this
Agreement. The Company shall advise the Investor promptly of any Material
Adverse Effect, any breach of the Company's representations or warranties, or
any breach of a covenant contained herein of which the Company has knowledge.
4.2 Access to Properties and Records. The Company shall afford to
the Investor and its respective accountants, counsel and representatives,
reasonable access upon notice to the Company and upon agreed upon times during
normal business hours throughout the period prior to the Closing to all of the
Company's properties, books, contracts, commitments and written records and
shall make reasonably available its respective officers and employees to answer
fully and promptly questions put to them (so long as such questions are not
outside of the scope or purpose of this Section; provided that such access shall
not unreasonably interfere with the normal business operations of the Company).
Any such investigations shall be specifically related to this Agreement and to
the transactions contemplated hereby.
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4.3 Exclusive Negotiations. Except in the furtherance of the
transactions contemplated herein, prior to the Closing, the Company shall not
directly, and shall use its reasonable best efforts to cause its respective
directors, officers, employees, representatives or agents (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its affiliates) not to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making or implementation of any proposal or
offer, with respect to any merger, acquisition, consolidation, share exchange,
business combination or other transaction involving, or which would result in
the acquisition of a majority of the outstanding equity securities or
substantially all of the assets of the Company (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, any
person or entity relating to an Acquisition Proposal, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal. The Company
shall immediately cease and cause to be terminated any existing activities or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal, and it shall take the necessary steps to inform any such
parties of the obligations undertaken in this Section. The Company shall notify
the Buyer immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations are sought to be
initiated or continued with, the Company.
4.4 Right of First Refusal. If, during the period from the Closing
through December 31, 2009 (and so long as the Alliance Agreement is in effect),
the Company (or any subsidiary or affiliate) proposes either to sell, transfer
or assign, directly or indirectly, securities in the Company or any subsidiary
or affiliate thereof equal to, or convertible into, a majority of the
outstanding Common Stock of the Company (a "Substantial Equity Interest"), the
Investor shall have a first right of refusal to purchase such Substantial Equity
Interest proposed to be sold, transferred or assigned, for a price equivalent to
the bona fide sale or transfer price offered for such Substantial Equity
Interest and otherwise in accordance with the terms and conditions of such
offer. The right of first refusal granted to the Investor is intended to apply
to any sale, transfer or assignment, directly or indirectly, to any nominee or
straw-men, corporation or other entity, including the sale of stock or an
interest in a partnership, limited-liability corporation, trust or other entity
which holds substantially all of the assets of the Company or any of its
subsidiaries or affiliates, if the intent of any such sale, transfer or
assignment to such person or entity is to avoid the Investor's right of first
refusal contained in this Section.
4.5 Preemptive Right of Investor.
(i) The Company hereby grants to the Investor the preemptive
right to purchase its Pro Rata Share (defined below) of any New Securities
(defined below) that the Company intends to offer for sale and issuance at the
time and on the terms set forth herein (the "Preemptive Right").
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(ii) Definitions:
(1) "New Securities" shall mean (A) any Common Stock of
the Company and (B) those rights, options or warrants to purchase any such
Common Stock (collectively referred to as "Options"), and those securities that
are convertible into or exchangeable for any such Common Stock (collectively
referred to as "Convertible Securities"), if the gross proceeds received or
receivable by the Company as consideration for the issue of such Common Stocks,
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designated to protect against
dilution) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, equals or exceeds [**];
provided however, that "New Securities" does not include (i) any capital stock
or other securities offered or issued to the public pursuant to a registration
statement filed under the Securities Act; (ii) any capital stock or other
securities offered or issued in connection with any acquisition of another
corporation or entity by the Company by merger or purchase of all, or
substantially all, of the assets of such corporation or entity, share exchange,
reorganization or the like; (iii) any stock options granted, subsequent to the
Effective Date, to the Company's existing or future directors, employees or
consultants not in excess of 1,350,000 shares, representing approximately eight
point two percent (8.2%) of the Company's 16,458,114 aggregate issued and
outstanding shares of common stock post-Closing (on a fully-diluted basis) by
the Company; (iv) any capital stock or other securities (or related options or
warrants) offered or issued to directors, officers or employees of, or
consultants to, the Company pursuant to an agreement or an option or purchase
plan program, or any other stock incentive plan or program approved by the Board
of Directors of the Company; or (v) any capital stock or other securities issued
in connection with any stock split, stock dividend, recapitalization or the like
by the Company.
(2) "Ownership Ratio" shall mean the ratio of shares of
Common Stock of the Company held by the Investor on the day immediately
preceding the date of the notice described in subsection (c) below to the total
number of shares of Common Stock of the Company then outstanding.
(3) "Pro Rata Share" for purposes of the Preemptive
Right, shall mean all New Securities which the Company intends to offer for sale
multiplied by the Investor's Ownership Ratio.
(iii) If at any time from the Closing through December 31,
2009, the Company plans or otherwise intends to undertake an issuance of New
Securities, the Company shall, so long as the Alliance Agreement is in effect,
give the Investor written notice describing the type of New Securities, the
price, and the general terms upon which the Company plans or otherwise intends
to issue the same. The Investor
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shall have fifteen (15) days from the date of delivery of any such notice to
agree to purchase all or a portion of its Pro Rata Share of such New Securities
for the price and upon the general terms specified in the notice by giving
written notice to the Company at or before the end of such fifteen (15) days. If
the Investor either fails to so notify the Company or indicates that it will not
purchase its Pro Rata Share, the Company shall thereafter be free to offer, sell
and issue the New Securities, including any such Pro Rata Share not purchased by
the Investor, to any third party so long as such sale is at a price and is upon
general terms no more favorable than described in the Company's notice.
4.6 Certain Employment Matters. Effective as of the date of the
Closing, there are no employment agreements to which the Company is a party
other than those set out in the tabled attached as Schedule 4.6 hereto.
4.7 Board Observer. The Company hereby covenants and agrees with
Investor that, as long as the Alliance Agreement (defined below) remains in
effect, the Investor shall have the right to designate a person (an "Observer")
to be present at all meetings of the Board of Directors of the Company and all
committees thereof. The Company will give such Observer reasonable prior notice
(it being agreed that the same prior notice given to the Board of Directors
shall be deemed reasonable prior notice) in any manner permitted in the
Company's By-laws for notices to directors of the time and place of any proposed
meeting of the Board of Directors, such notice in all cases to include true and
complete copies of all documents furnished to any director in connection with
such meeting. Such Observer will be entitled to be present in person as an
observer at any such meeting or, if a meeting is held by telephone conference,
to participate therein for the purpose of listening thereto.
4.8 Registration of Shares. The Company covenants and agrees that it
shall promptly after the Closing prepare and file, at its cost and expense, a
registration statement on Form S-1 (or such other appropriate form) covering the
Shares (the "Registration Statement") and shall use its best efforts to cause
such registration statement to be declared effective within 90 days following
the Closing. The Company further covenants and agrees to maintain the
Registration Statement Effective for one year following the effective date of
the Registration Statement, provided, that, notwithstanding the foregoing, if at
any time or from time to time after the date of effectiveness of the
Registration Statement, the Company notifies the Investors in writing of the
existence of a Potential Material Event, the Investors shall not offer or sell
any Shares, or engage in any other transaction involving or relating to the
Shares, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend such right to the
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Investor during the period the Registration Statement is required to be in
effect for more than fifty (50) days, provided, however, that no one such
suspension period shall either (i) be for more than twenty (20) days or (ii)
begin less than ten (10) business days after the last day of the preceding
suspension. As used herein, "Potential Material Event" means any of the
following: (i) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
In the event that the Registration Statement is not declared
effective within 90 days following Closing, then the Company shall issue to the
Investor, in respect of each full calendar week (beginning on Monday) following
such 90th day and continuing until such time as the Registration Statement shall
have been declared effective, such number of shares of Common Stock as shall be
equal to one and one quarter percent (1 1/4%) of the number of Shares issued
hereunder (the "Additional Shares"), provided, that, notwithstanding anything to
the contrary contained in the foregoing, the Company shall have no obligation to
issue any Additional Shares in excess of such number of Additional Shares as
shall be equal to, in the aggregate, 10% of the number of Shares issued
hereunder.
Reporting Status; Eligibility to Use Form S-1
The Company's Common Stock is registered under Section 12 of the
Exchange Act. The Company will file with the SEC a Current Report on Form 8-K
disclosing this Agreement and the transactions contemplated hereby within 10
business days after the Closing. Throughout the one year registration period
(referred to in Section 4.8 hereof), the Company shall to file all reports,
schedules, forms, statements and other documents required to be filed by it
timely with the SEC under the reporting requirements of the Exchange Act, and
the Company will not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. The Company
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currently meets, and will take all reasonably necessary action to continue to
meet, the "registrant eligibility" requirements set forth in the general
instructions to Form S-1.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under subsection 1.1 of this Agreement are
subject to the fulfillment, or written waiver by the Investor, on or before the
Closing of each of the following conditions:
5.1 Execution of Agreement. The Company will have executed and
delivered this Agreement to the Investor.
5.2 Shares Certificate. The Company will have delivered to the
Investors duly executed certificates representing the Shares in the amounts
specified in Section 1.1 hereof.
5.3 Representatives, Warranties, Covenants. The representations and
warranties of the Company must be true and correct in all material respects as
of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be true and correct as of such date) and the Company must have
performed and complied in all material respects with the covenants and
conditions required by this Agreement to be performed or complied with by the
Company at or prior to the Closing. The Investor must have received a
certificate or certificates dated as of the Closing and executed by the Chief
Executive Officer or the Chief Financial Officer of the Company certifying as to
the matters contained in this Section 5.3 and as to such other matters as may be
reasonably requested by such Investor, including, but not limited to, the
Company's Certificate of Incorporation, as amended, By-laws, as amended, Board
of Directors' resolutions relating to the transactions contemplated hereby and
the incumbency and signatures of each of the officers of the Company who may
execute on behalf of the Company any document delivered at the Closing.
5.4 Litigation. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction will have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
5.5 Stock Listing. Trading and listing of the Company's Common Stock
on OTC Electronic Bulletin Board must not have been suspended.
5.6 Opinion. The Investor will have received an opinion of the
Company's general counsel, dated as of the Closing, in form, scope and substance
substantially in the form attached hereto as Schedule 5.6.
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5.7 Alliance Agreement. Prior to or simultaneous with the Closing,
the Company and Investor shall have entered into the Alliance Agreement,
substantially in the form of Schedule 5.7 hereto.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
6.1 Execution of Agreement. The Investor will have executed and
delivered this Agreement to the Company.
6.2 Purchase Price. The Investor will have delivered the Purchase
Price for the Shares to the Company in accordance with this Agreement.
6.3 Representations, Warranties, Covenants. The representations and
warranties of the Investor must be true and correct in all material respects as
of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be correct as of such date), and the Investor will have
performed and complied in all material respects with the covenants and
conditions required by this Agreement to be performed or complied with by the
Investor at or prior to the Closing. The Company must have received a
certificate or certificates dated as of the Closing and executed by a duly
authorized officer of the Investor certifying as to the matters contained in
this Section 6.3.
6.4 Legal Impediment. No statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
6.5 Alliance Agreement. Prior to or simultaneous with the Closing,
the Company and Investor shall have entered into the Alliance Agreement,
substantially in the form of Schedule 5.7 hereto.
7. DEFINITIONS.
7.1 "Alliance Agreement" has the meaning set forth in Section 5.7.
7.2 "Closing" means the closing of the purchase and sale of the
Shares under this Agreement.
7.3 "Common Stock" means the common stock, $0.001 par value per
share, of the Company.
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7.4 "Company" means TTR Technologies, Inc.
7.5 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
7.6 "Investor" means Macrovision Corporation
7.7 "Material Adverse Effect" means a material adverse effect on (a)
the business, operations, assets or financial condition of the Company on a
consolidated basis or (b) the ability of the Company to perform its obligations
pursuant to the transactions contemplated by this Agreement or under the
agreements or instruments to be entered into or filed in connection herewith.
7.8 "Material Agreement" has the meaning set forth in Section 2.7.
7.9 "Regulation D" means Regulation D as promulgated under by the
SEC under the Securities Act.
7.10 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.
7.11 "SEC" means the United States Securities and Exchange
Commission.
7.12 "SEC Documents" has the meaning set forth in Section 2.23.
7.13 "Shares" means the 1,880,937 shares of Common Stock to be sold
to Investor pursuant to this Agreement, as such number may be adjusted pursuant
to the provisions of Section 4.8 hereof.
7.14 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar successor statute.
8. MISCELLANEOUS.
8.1 Survival of Warranties. The warranties, representations and
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor of the Company.
8.2 Successor and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Shares). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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8.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applicable to contracts to be
performed entirely within that state.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original by the party executing
the same, but all of which together shall constitute one and the same
instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience and are not to be considered in construing or
interpreting this Agreement.
8.6 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and (i) delivered personally, (ii) mailed by registered or
certified mail (postage prepaid, return receipt requested) or (iii) sent by
telecopier, with the written notice sent by mail as set forth in (ii) above, to
the parties as follows:
(i) if to Company to:
TTR Technologies, Inc., c/o TTR Technologies Ltd.
2 Hanagar Street
PO Box 2295
Kfar-Saba 44425
Israel
Attention: General Counsel
Telecopier No.: 011-972-9-766-2394
with a copy to:
Aboudi & Brounstein
136 Rothschild Blvd.
Tel Aviv 65272
Israel
Telecopier No. 011-972-3-685-1138
(ii) if to Investor to:
Macrovision Corporation
1341 Orleans Drive
Sunnyvale, CA 94089
Attention: Chief Financial Officer
Telecopier No.: (408) 743-8610
with a copy to:
21
<PAGE>
Manatt, Phelps & Phillips, LLP
3030 Hansen Way
Palo Alto, CA 94304
Attention: David Herbst, Esq.
Telecopier No.: (650) 213-0260
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date so delivered, mailed or sent.
8.7 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
8.8 Expenses. Irrespective of whether the Closing is effected, the
Company and the Investor shall each pay their own costs and expenses that each
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
8.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
8.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Entire Agreement. This Agreement, together with the Alliance
Agreement, and all schedules and exhibits attached thereto, constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein. All other prior agreements,
understandings and representations, both oral and written, between the parties
with respect to the subject
22
<PAGE>
matter hereof are superseded and of no effect. This Agreement may be executed in
counterparts and by the exchange of facsimile signed copies.
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement.
TTR TECHNOLOGIES, INC.
BY: /s/ Marc D. Tokayer
------------------------------
Name: Marc D. Tokayer
Title: Chairman and CFO
MACROVISION CORPORATION
BY: /s/ Ian Halifax
------------------------------
Name: Ian Halifax
Title: Chief Financial Officer
23
<PAGE>
Schedule A
Schedule of Exceptions
The following information and disclosures is provided with respect to the
representations and warranties of the Company to the Investor set forth in
Section 2 of the Agreement and corresponding to the relevant subsection of the
Agreement.
Section 2.2(b).
The Company has outstanding the following warrants/options issued to
service providers/consultants:
(i) Wall & Broad (1,300,000). Issued in May, 1999 and exercisable through
April 30, 2002 at an ex. price per share of $0.01
(ii) K & D Equities Inc. (400,000). Issued in July 1999 and exercisable
through Jan. 31, 2001 at an ex. Price per share of $2.75 (2)
(iii) Machtec Ltd. (1,000,000). Issued in Aug. 1999 and exercisable
through Oct. 2002 at an ex. Price per share of $0.01.
(iv) Plans Inc. (25,000) . Issued in June 98 and exercisable through June
2002 at a n exercise price of $1.50 per share.
(v) Josephthal (25,000). Undertook to issue in April 98 and exercisable
through June 2002 at an ex. Price per share of $5 5/8. (3)
(vi) Shavit (10,069)
(vii) Mu & Kang (10,000) Issued in Jan 99 and exercisable through Jan 2002
at an ex. Price per share of $1.75
(viii) (196,000) three year penny warrants issued to Employees of the
Company in Feb. 1999.
(ix) (25,000) three year penny warrants issued to Schneider Ehrlich in
Nov. 99.
The Company has the following warrants/options outstanding to investors.
(i) Warrants held by certain private placement investors issued between
April '98 through Dec. '98 to purchase up to an aggregate of 150,842 shares of
Common Stock
24
<PAGE>
(ii) Biscount (33,000). Issued in Jan 98 in connection with investment in
Company and are exercisable through Dec 2001 at an ex. Price per share of $7.80)
(iii) (15,000). Issued in Nov. 99 and exercisable through Nov. 2002 at an
ex. Price per share of $2.50
(iv) (35,000) Issued in Nov. 99 and exercisable through Nov. 2002 at an
ex. Price per share of $3.50.
The Company also has outstanding 749,400 ESOPs.
Section 2.2 (c)
In May 1999 the Company granted to certain investors the right of first
refusal, under certain conditions, with respect to the issuance by the Company
of shares of common stock or securities convertible into its common stock, which
right is exercisable from October 6, 1999 through approximately July 6, 2000.
Section 2.14(a)
The Company granted exclusive production and marketing rights for
DiscGuard to China Intercontinental Communications Center for the People's
Republic of China, Taiwan, and Maco.
Sonopress Gmbh holds a non-exclusive license to manufacture and market
DiscGuard and related products in the world, except for the Peoples Republic in
China (PRC).
Nimbus CD International Inc. holds a non-exclusive worldwide license to
manufacture and market DiscGuard and related products.
Warlock Records holds a non exclusive worldwide license to use MusicGuard
protection for their music CDs.
Section 2.14(b)
TTR licenses form Elektroson BV a product known as Gear. Wks Toolkit for
which it pays royalties and which is used in the process of producing DiscGuard
protected discs.
Section 2.17
TTR has previously granted to Machtec Ltd. registration rights respecting
up to 200,000 shares of the Company's Common Stock and options to acquire in the
aggregate up to 1,000,000 shares of the Company's Common Stock.
25
<PAGE>
Additionally, certain consultants/employees have been granted registration
rights with respect to a total of approximately 500,000 shares of Common Stock.
Additionally, the Company currently has outstanding an effective
registration statement in favor of certain of its stockholders and rightsholders
[Registration No. 333-85085], which the Company is required to maintain
effective through the earlier of Oct. 2001 or the disposition of the subject
shares.
Section 2.18
The Company has not filed its United States Income tax returns for the
year ended December 31, 1998.
Section 2.20
The Company does not presently have in effect any insurance policies with
respect to fire, public liability, property damage or any other insurance.
26
<PAGE>
Schedule 4.6
Emanuel Kronitz, Dr. Baruch Sollish, Marc D. Tokayer, Gershon Tokayer, Robert
Friedman, Joseph Cusamaro and Rachel Uzan. The agreements with Messrs. Friedman
and Cusamaro are expected to terminate by no later than January 31, 2000.
27
<PAGE>
Schedule 5.6
Opinion of Company's Counsel
January 12, 2000
Macrovision Corporation ("Investor")
1341 Orleans Drive
Sunnyvale, California 94089
Gentlemen:
As General Counsel of TTR Technologies, Inc., a Delaware corporation (the
"Company"), we represented the Company in connection with the issuance of
1,880,937 shares (the "Shares") of the Company's Common Stock, $0.001 par value
per share, pursuant to that certain Stock Purchase Agreement, dated as of
January 10, 2000, including the exhibits thereto (the "Agreement"), between the
Company and the Investor. This opinion is being delivered to you pursuant to
Section 5.6 of the Agreement. Capitalized terms used herein are as defined in
the Agreement unless otherwise specifically provided herein.
In rendering the opinions set forth below I have examined such documents
and have reviewed such questions of law as I have considered necessary or
appropriate for the purpose of this opinion.
In rendering the opinions set forth below, I have, with your consent,
assumed without investigation, that:
1. All documents submitted to me as originals are complete and authentic;
all copies of documents submitted to me conform in all respects to the originals
thereof, including all modifications or amendments thereto; all signatures to
documents are genuine; all originals or copies submitted to me have not been
amended, modified or terminated since the date they were submitted to me by
written or oral agreement of the parties thereto, by the conduct of the parties
thereto or otherwise; facsimile signatures have the same legal effect as
original signatures; and all representations and certificates as to factual
matters dated prior to or on the date hereof upon which I have relied are and
remain accurate, adequate and complete on and as of the date hereof; and each
natural person signing a document is a competent adult person of sound mind not
operating under any legal disability, duress or fraud.
2. The Agreement accurately reflects all of the terms, provisions and
conditions of the transactions contemplated thereby and the intent of the
parties with respect thereto, and that there is no usage of trade or course of
conduct among the parties thereto which would modify the terms of the Agreement
or the respective rights or obligation of the parties thereunder.
28
<PAGE>
3. All of the factual representations made by Company and the Investor in
the Agreement are true and correct. As to questions of fact material to this
opinion, we have relied upon and assumed the accuracy of, without any
independent investigation on our part, certain representations made by the
Company and such other facts as are actually known to us.
4. The Agreement will be enforced and performed in good faith and in a
commercially reasonable manner.
5. The conduct of all parties to the Agreement conforms, and in the future
will conform, with all notice requirements in statutes, law rules, regulations
and ordinances, unless such notice requirements have been validly and legally
waived.
6. The Agreement has been duly authorized, executed and delivered by the
Investor and Investor has the power and authority (corporate or otherwise) to
execute and deliver the Agreement.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, with the corporate power
to own its properties and conduct its business as now conducted. The Company has
the corporate power to execute, deliver and perform the Agreement, including
without limitation, the issuance and sale of the Shares. The Agreement has been
duly authorized by all requisite corporate action, executed and delivered by the
Company. The Agreement constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms, subject to the following limitations,
qualifications and exceptions: (a) the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or similar laws
relating to or affecting the rights of creditors, including, without limitation,
Section 548 of the federal Bankruptcy Code and Section 547 of the federal
Bankruptcy Code and comparable provisions of state law; and (b) the effect of
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law, and the exercise of
judicial discretion in appropriate cases.
2. The Shares, when issued in compliance with the provisions of the
Agreement, will be duly authorized and validly issued and fully paid and
non-assessable.
3. Based on the representations of the Investor in the Agreement, to the
best of our knowledge, the offer and sale of the Shares pursuant to the terms of
the Agreement are exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended.
29
<PAGE>
4. The execution, delivery and performance of the Agreement and the
issuance and sale of the Shares in accordance with the Agreement will not
violate or conflict with, or result in a breach of or default under, the
Certificate of Incorporation, as amended or By-laws, as amended of the Company.
5. To our knowledge there is no action, suit, proceeding or investigation
pending against the Company before any court or governmental agency (I) that
questions the validity of the Agreement or the right of the Company to enter
into the Agreement or (ii) that, if determined adversely, would be likely to
result in a Material Adverse Effect on the financial condition or business of
the Company.
This opinion is limited to the general corporate laws of the State
of Delaware (excluding municipal, county and local ordinances and regulations)
without reference to conflict of law principles, and the federal laws of the
United States of America, and to present judicial interpretations thereof, and
to facts as they presently exist, and we express no opinion with respect to any
other law or the law of any other jurisdiction. In rendering this opinion, we
have no obligation to revise or supplement it should the current laws of the
State of Delaware, or the federal laws of the United States of America be
changed by legislative action, judicial decision or otherwise.
Further, the opinions contained in this letter are given as of the date of
this letter and are rendered exclusively for your benefit solely in connection
with the consummation of the transactions contemplated by the Agreement and may
not be relied upon to state directly or indirectly any general proposition or
for any other purpose. We hereby disclaim any obligation to notify any person or
entity after the date hereof if any change in fact or law should change our
opinions with respect to any matter set forth in this letter.
This opinion may be relied upon by you only in connection with the
transactions contemplated by the Agreement. No other use or distribution of this
opinion may be made, and no other person or party may rely on this opinion,
without our express prior written consent in each instance.
Very truly yours,
30
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Schedule 5.7
Alliance Agreement
31
Exhibit 10.46
February 8, 2000
CONFIDENTIAL
TTR Technologies, Inc.
2 Hanagar St.
Kfar-Saba, 44425, Israel
Attention: Marc D. Tokayer
Chairman & President
Gentlemen:
This letter agreement (this "Agreement") confirms the engagement of H.C.
Wainwright & Co., Inc. ("HCW") by TTR Technologies, Inc. ("TTR") on behalf of
TTR and its affiliates (collectively, the "Company") as financial advisor and
exclusive placement agent to arrange a private placement (the "Private
Placement") of equity securities and/or convertible debt of the Company (the
"Securities"). The Private Placement shall be made pursuant to one or more
exemptions from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable securities laws of states and other
jurisdictions ("Blue Sky Laws"). The Private Placement will have estimated
aggregate gross proceeds of $10,000,000 to $15,000,000 and will close only upon
receipt by the Company of a waiver of certain rights from (i) certain purchasers
of debentures under SPA dated May 1999 and (ii) Macrovision Corporation.
1. Retention. Subject to the terms and conditions of this Agreement, TTR
hereby engages HCW to act on behalf of the Company as financial advisor and
placement agent during the Authorization Period (as defined below) to arrange
the sale of Securities in an amount and on terms and conditions satisfactory to
the Company and HCW hereby accepts such engagement.
The Company understands that, in soliciting purchasers of Securities and
in assuming its other obligations hereunder, HCW is acting solely as agent for
the Company, and not as principal, and that HCW's responsibility is limited to
acting on a reasonable efforts basis in arranging the sale of Securities, with
no understanding, expressed or implied, of a commitment on HCW's part to
underwrite, purchase or place the Securities.
It is understood that HCW is being engaged solely to provide the services
described in this Agreement to the Company and that HCW is not acting as an
agent or fiduciary of, and shall have no duties or liabilities to, the equity
holders of the Company or any third party in connection with its engagement.
During the Authorization Period, TTR shall not, and shall not permit its
affiliates or its or their officers, directors, employees or representatives to,
directly or indirectly, (i) offer any Securities for sale to, or solicit any
offer to purchase any Securities from, or otherwise contact, discuss or
negotiate with respect to any offer or sale of any Securities with, any person,
(ii) authorize anyone other than HCW to act on behalf of the Company to place
any Securities or (iii) have any discussions or negotiations with
<PAGE>
any person other than HCW with respect to engaging such person as a finder,
broker, dealer, agent or financial advisor in connection with any sale of
Securities. TTR shall, and shall cause its affiliates and its and their
officers, directors, employees and representatives to, promptly refer to HCW all
offers, inquiries and proposals relating to any Securities received at any time
during the Authorization Period.
2. Authorization Period. HCW's engagement shall become effective on the
date hereof and, unless extended in writing by TTR and HCW, shall expire on the
earlier of (i) the final closing date of the Private Placement or (ii) 120 days
from the data hereof, (in either case, the "Termination Date"). The period from
the date hereof through the Termination Date is called the "Authorization
Period."
3. Offering Documents. TTR, with the assistance of HCW, shall prepare a
Confidential Offering Memorandum, and such amendments or supplements thereto as
HCW may reasonably deem to be necessary, to effectuate sales of Securities. The
Confidential Offering Memorandum, and any such amendments or supplements, are
collectively called the "Offering Materials." TTR authorizes HCW to transmit the
Offering Materials to potential purchasers of Securities, and shall furnish to
HCW copies of the Offering Materials in such quantities as HCW may from time to
time reasonably request. TTR shall prepare forms of necessary and appropriate
purchase, subscription and other agreements and documents, containing terms and
conditions customary for private placements, to be entered into by the Company
and purchasers of Securities (collectively called "definitive documents"), which
forms shall be provided to prospective purchasers only upon the review and
approval of both the Company and HCW.
4. Compensation. TTR shall pay HCW the compensation set forth below:
a. Fees. TTR shall pay HCW a retainer fee of $25,000 and 10,000
shares of TTR restricted common stock (valued at $5 per share for purpose of
this agreement), which is payable promptly upon execution of this Agreement, and
a placement fee equal to 5.0% of the Aggregate Consideration (as defined below)
received or receivable directly or indirectly by the Company in connection with
the Private Placement, which is payable in cash on the closing date on which
such Aggregate Consideration is paid or becomes payable. The retainer fee shall
be credited against the placement fee.
"Aggregate Consideration" shall include the total value of
Securities sold, including all amounts paid in escrow or payable in the future
(in each case, whether or not subject to any contingency in connection
therewith) and all amounts paid or payable upon exercise, conversion or exchange
of Securities.
If Aggregate Consideration is paid in whole or in part in the form
of securities or other noncash consideration, such consideration shall be valued
at the fair market value thereof on the day prior to the relevant closing date;
provided, however, that to the extent that such consideration consists of
securities with an existing public trading market, such consideration shall be
valued at the average of the last sales price for such securities on the five
trading days prior to the relevant closing date.
b. Warrants. On each closing date on which Aggregate Consideration
is paid or becomes payable, TTR shall or shall cause the issuer of Securities
(if other than TTR) to issue to HCW
<PAGE>
or its assigns warrants (the "Warrants") to purchase 10% of the amount of
Securities issued to purchasers, or, upon mutual agreement of HCW and TTR, the
equity equivalent thereof. The exercise price of the Warrants shall equal the
average price (to any purchaser) at which any common equity of the Company is or
may be sold in the Private Placement or upon the conversion, exercise or
exchange of Securities. The Warrants shall be exercisable immediately after the
date of issuance and shall expire five years after the date of issuance, unless
otherwise extended by the Company. The Warrants shall include customary
anti-dilution protection, including protection against issuances of securities
at prices (or with exercise prices, in the case of warrants, options or rights)
below the lower of the exercise price of the Warrants or the then fair market
value of the underlying common equity, a cashless exercise provision and provide
for automatic exercise upon expiration. At the request of the Company, assuming
there is an effective registration statement for the common shares underlying
the warrants, HCW or its assigns will execute the warrants for cash The Warrants
shall also include one demand registration right exercisable following the first
anniversary of the closing subject to a 60 day notice requirement, and unlimited
piggyback registration rights, in each case customary in transactions of this
type. The Warrants shall be transferable within HCW at HCW's discretion.
c. Tail Period. TTR shall and shall cause its affiliates to, pay to
HCW all compensation described in this Section 4 with respect to all Securities
sold to a purchaser or purchasers at any time prior to the expiration of one
year after the Termination Date (the "Tail Period") if (i) such purchaser or
purchasers were identified to the Company by HCW during the Authorization
Period, (ii) HCW advised the Company with respect to such purchaser or
purchasers during the Authorization Period or (iii) the Company or HCW had
discussions with such purchaser or purchasers during the Authorization Period.
d. Other Terms. If the Company fails through no fault of the Company
to complete a sale of Securities to one or more purchasers whose offer or offers
in respect thereof the Company shall have accepted, TTR(i) shall hold HCW
harmless against any loss, liability, expense, claim or damage arising from such
failure and (ii) shall pay to HCW all compensation to which HCW would be
entitled hereunder in connection therewith if such sale had been consummated.
HCW shall be entitled to its full compensation under this Section 4
regardless of the structure of the Private Placement or sale of Securities.
Accordingly, Section 4 shall apply to any sale of debt or equity securities by,
or any other investment in, any affiliate of TTR and regardless of the terms and
conditions thereof. Likewise, for purposes of this Agreement, the word
"affiliate", when used with respect to TTR or the Company, shall include
subsidiaries, parents, stockholders and sister companies, the word "purchaser"
shall include investors, partners, co-venturers and members. Additionally, any
parties introduced to the Company during the Tail Period, by a party contacted
by HCW during the Authorization period will be deemed to have been contacted
during the Authoriztion period. If such structure does not consist solely of a
sale of common stock of TTR, appropriate adjustments shall be made to the terms
and conditions of the Warrants so that HCW receives the full benefit intended to
be afforded by Section 4(b).
5. Expenses. Regardless of whether the Private Placement or sale of
Securities is consummated, TTR will pay or cause to be paid the Company's
expenses in connection herewith and
<PAGE>
therewith, including: (i) the fees and disbursements of the Company's counsel,
accountants and other representatives and advisers; (ii) the expenses in
connection with the preparation, printing and distribution of the Offering
Materials, definitive agreements and other documents in connection herewith and
therewith; (iii) the expenses in connection with the qualification of Securities
for offering and sale under Blue Sky Laws, including filing fees and fees and
disbursements of counsel for HCW in connection with reviewing applicable Blue
Sky Laws and preparing filings thereunder not to exceed $20,000; (iv) the costs
of preparing certificates representing Securities; (v) the charges of any escrow
agent, transfer agent or registrar; and (vi) all other costs and expenses
incident to the performance of the Company's obligations hereunder and under
definitive agreements (including, without limitation, any taxes payable in
connection with the issuance, sale and delivery of the Securities).
6. Reimbursements. Regardless of whether the Private Placement or sale of
Securities is consummated, the Company shall reimburse HCW, upon request made
from time to time, for all of its reasonable out-of-pocket expenses, not to
exceed $10,000, without the written consent of TTR, incurred in connection with
its engagement and the expenses of any travel that may be necessary.
7. Escrow Account. All proceeds from sales of Securities shall be
deposited in a non-interest bearing escrow account pending the sale of $2
million minimum of Securities. Upon the sale of such minimum amount, there shall
be a first closing of the Private Placement (the "First Closing"). From the date
of the First Closing, all proceeds from further sales of Securities will
continue to be deposited in the escrow account and there shall be a subsequent
closing on the earlier of the sale of the maximum amount of Securities
(cumulative with the amount of Securities sold through the First Closing) or the
Termination Date. HCW will appoint a bank chartered in the State of New York as
the escrow agent. Such appointment will be subject to approval by TTR, which
approval shall not be unreasonably withheld. All fees and expense reimbursements
due to HCW shall be paid out of the proceeds held in the escrow account at each
such closing. The escrow agreement with such bank shall contain provisions
giving effect to this Section 7.
8. Representations, Warranties and Covenants of TTR. TTR represents and
warrants to, and covenants with, HCW as follows:
a. During the Authorization Period, TTR shall not, and shall not
permit its affiliates to, use, disseminate, publish, distribute or refer to any
materials in connection with any offering of Securities, including any Offering
Materials, without HCW's prior consent, except for internal use among the
Company's personnel and representatives.
b. Neither the Company nor any person acting on its behalf has
taken, and TTR shall not and shall not permit its affiliates to take, directly
or indirectly, any action so as to cause any of the transactions contemplated by
this Agreement to fail to be entitled to exemption from registration or
qualification under all applicable securities laws or which constitutes general
advertising or general solicitation (as those terms are used in Regulation D
under the Securities Act) with respect to the Securities.
c. TTR shall, and shall cause its affiliates to, from time to time,
take such action as HCW may reasonably request to qualify Securities for
offering and sale as a private placement under the
<PAGE>
securities laws of such states or other jurisdictions as HCW may reasonably
request and to comply with such laws so as to permit such offers and sales.
d. TTR shall, and shall cause its affiliates to, make available to
HCW, or have professionally prepared at the Company's expense, all financial
statements, projections, appraisals, surveys and other information which in
HCW's reasonable judgment shall be necessary or appropriate for the proper
marketing of Securities. TTR shall, and shall cause its affiliates to, upon
reasonable request, cause the Company's directors, officers, personnel, counsel,
accountants and other representatives to meet with HCW or its representatives to
discuss all information relevant for disclosure in any Offering Materials and to
cooperate in any reasonable investigation requested by HCW or its
representatives (including the production of information at the Company's
offices or copies of such information at the offices of HCW and its counsel) for
the purpose of confirming the accuracy and completeness of statements contained
in the Offering Materials.
e. The Offering Materials as of the date thereof and as of the
closing date of each sale of Securities will be complete and correct in all
material respects and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading. TTR shall advise HCW immediately of the
occurrence of any event or circumstance which results in the Offering Materials
containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading, and shall furnish to HCW copies of amended or supplemented Offering
Materials that correct such statement or omission in such quantities as HCW may
from time to time reasonably request. All financial or other projections
included in the Offering Materials will be prepared in good faith on the basis
of reasonable assumptions. TTR acknowledges that HCW (i) will be using and
relying primarily on the information in the Offering Materials and information
available from generally recognized public sources in performing the services
contemplated hereunder without having independently verified the same, (ii) does
not assume responsibility for the accuracy or completeness of such information
or of the Offering Materials and (iii) will not make any appraisal of any assets
of the Company.
f. TTR has full corporate power and authority to execute and deliver
this Agreement on behalf of itself and its affiliates and to perform its
obligations hereunder, and all consents, authorizations, approvals and orders
required in connection with the execution, delivery and performance hereof have
been obtained. This Agreement is a valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that the
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors generally and general principles
of equity. The execution, delivery and performance of this Agreement will not
conflict with, result in a breach of any of the terms or provisions of or
constitute a violation or a default under any material agreement or instrument
to which the Company is a party or by which the Company is bound.
g. TTR shall take and shall cause its affiliates to take such
actions as may be required to cause compliance with Section 8(h) and 11. HCW
acknowledges that TTR may cause its affiliates to perform any of its obligations
hereunder; provided, however, that TTR's intention to do so
<PAGE>
(or any action by TTR or HCW in respect thereof) shall not relieve TTR from its
obligation to perform such obligations when due.
h. TTR shall cause counsel to the Company to deliver, at each
closing of the Private Placement, an opinion, addressed to HCW and to
purchasers, covering such matters as are typically covered in opinions delivered
in connection with private placements (including, an opinion to the effect that
the Private Placement is exempt from registration under the Securities Act), in
form and substance reasonably acceptable to HCW and its counsel. TTR shall also
cause to be furnished to HCW, at each closing of the Private Placement, (i)
copies of all other legal opinions, "comfort" letters, certificates, agreements
and other documents furnished to purchasers on such closing date and (ii) copies
of all filings made by the Company with the Securities and Exchange Commission
or Blue Sky Law administrators, in each case, in form and substance reasonably
satisfactory to HCW.
9. Representations, Warranties and Covenants of HCW. HCW represents and
warrants to, and covenants with, TTR as follows:
a. None of HCW, its affiliates or any person acting on behalf of HCW
or any of such affiliates has engaged or will engage in any general solicitation
or general advertising (as those terms are used in Regulation D under the
Securities Act) with respect to the Securities.
b. HCW will use its best efforts to conduct the offering and sale of
Securities so that Securities are sold in a transaction or series of
transactions exempt from registration under the Securities Act.
c. HCW will send the Offering Materials only to persons that the HCW
reasonably believes are "accredited investors" (as defined under Rule 501(a) of
the Securities Act).
d. HCW will not make any representation or warranty as to the
Securities or the Company, except those set forth in the Offering Materials.
10. Indemnification. The Company agrees to the indemnification and other
agreements set forth in the attached Indemnification Agreement, the provisions
of which are incorporated herein by reference.
11. Right of First Refusal. HCW shall have a right of first refusal (a)
from the date of the closing until eighteen months after the first closing date
of the Private Placement, to act as (i) the lead managing underwriter in
connection with any public sale of any equity securities (including any public
sale of any securities convertible into or exchangeable or exercisable for
equity securities) of the Company, with the Company having the right to name a
co-manager subject to the approval of HCW, which approval shall not be
unreasonably withheld, (ii) the placement agent in connection with any private
sale of any equity securities (including any private sale of any securities
convertible into or exchangeable or exercisable for equity securities) of the
Company, (iii) the lead placement agent in connection with any private sale of
any debt securities of the Company and (iv) a co-managing underwriter in
connection with any public sale of any debt securities of the Company (and,
unless otherwise agreed by HCW in its sole discretion, HCW shall receive a
minimum of 20% of the gross
<PAGE>
underwriting fees, including its pro-rata share of any non-accountable expense
allowances, associated with any sale of debt securities described in this clause
(iv) and HCW's name shall appear as a co-managing underwriter on the cover of
any prospectus used in connection with any sale of debt securities described in
this clause (iv)) The Company shall compensate HCW for services in connection
with any sale described in clause (a) (i), (a) (ii) or (a) (iii) above an amount
that reflects HCW's normal and customary compensation for such services, as
agreed between TTR and HCW in good faith. The rights herein shall not apply in
event of a business combination as defined below.
12. Merger or Acquisition Transactions. If a business combination
involving the Company (other than with Macrovision), including a merger or
consolidation, a sale, purchase or transfer of assets or formation of a joint
venture, or an exchange or tender offer involving outstanding securities (a
"Business Combination"), is consummated, or the Company enters into an agreement
providing for a Business Combination, (a) during the Authorization Period with
any person or (b) during the Tail Period (i) with any person identified to the
Company by HCW during the Authorization Period, (ii) with any person as to which
HCW advised the Company during the Authorization Period or (iii) with any person
with whom the Company or HCW had discussions during the Authorization Period,
then TTR shall pay HCW an amount equal to 2.5% of the Transaction Value (as
defined below), which is payable in cash on the closing date of such Business
Combination; provided, however, that no such payment shall be due if the Company
enters into such an agreement but no Business Combination of any kind is at any
time consummated.
"Transaction Value" shall include the total proceeds and other
consideration paid or received or to be paid or received in connection with a
Business Combination (including amounts paid in escrow), including: (i) cash;
(ii) notes, securities and other property; (iii) liabilities, including debt,
pension , severance and retirement liabilities and guarantees, assumed or
extinguished; (iv) payments to be made in installments; (v) contingent payments
(whether or not related to future earnings or operations); and (vi) dividends
and distributions to stockholders and other equity holders in anticipation of a
Business Combination and cash and other current assets (net of current
liabilities) retained in connection with a Business Combination. If Transaction
Value is paid in whole or in part in the form of securities or other non-cash
consideration, such consideration shall be valued at the fair market value
thereof on the day prior to the closing date of the Business Combination;
provided that, to the extent such consideration consists of securities with an
existing public trading market, such consideration shall be valued at the
average of the closing sales price for such securities on the five trading days
prior to the closing date of the Transaction.
13. Break-up Fee. If HCW's engagement is terminated by the Company during
the Authorization Period without just Cause (as defined below), TTR shall pay
HCW a break-up fee of $75,000, plus all compensation and expense reimbursements
(up to $25,000) due or which may become due hereunder. The break-up fee shall be
credited against fees or amounts which become payable under Section 4(b), 4(c)
or 12. The retainer fee will not be credited against the break-up fee. For
purposes hereof, "Cause" shall mean gross negligence or willful malfeasance by
HCW in the discharge of its material obligations hereunder, illegal acts or
omissions by HCW in the discharge of its obligations hereunder which adversely
affect the Company or consummation of the Private Placement (other than in a de
minimis way), or repeated failure (after notice) by HCW to discharge its
obligations hereunder.
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14. Survival of Certain Provisions. The expense, indemnification,
reimbursement and contribution obligations of TTR provided herein and in the
attached Indemnification Agreement HCW's rights to compensation (which term
includes all fees, amounts and Warrants due or which may become due under
Sections 4, 12 and 13) provided herein and HCW's rights under Section s 8(h)
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termination other than for cause by Company or consummation of or
failure to initiate or consummate any transaction described herein, (ii) any
investigation made by or on behalf of HCW and (iii) any termination or the
completion or expiration of this Agreement or HCW's engagement hereunder.
Section 11 shall survive any termination, other than for cause by Company,
provided there has been a closing.
15. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be given in writing and shall be sent by certified mail, return
receipt request or recognized overnight courier or personally delivered (a) if
to the Company, to TTR's office at 2 Hanagar St., Kfar-Saba, 44425, Israel,
attention: Marc D. Tokayer, Chairman & President and (b) if to HCW, to its
office at 245 Park Avenue, 44th floor, New York, NY 10167. attention: Scott
Weisman, Managing Director.
16. Future Advertisements. TTR agrees that HCW has the right to place
advertisements describing its services to the Company under this Agreement in
financial and other newspapers and journals at its own expense following the
first closing date of the Private Placement.
17. Confidentiality. No financial advice rendered by HCW pursuant to this
Agreement may be disclosed publicly in any manner without HCW's prior written
approval, except as may be required by law, regulation or court order but
subject to the limitation below. If the Company is required or reasonably
expects to be so required to disclose any advice, TTR shall provide HCW with
prompt notice thereof so that HCW may seek a protective order or other
appropriate remedy and take reasonable efforts to assure that all of such advice
disclosed will be covered by such order or other remedy. Whether or not such a
protective order or other remedy is obtained, TTR will and will cause its
affiliates to disclose only that portion of such advice which the Company is so
required to disclose.
18. Miscellaneous. This Agreement (including the attached Indemnification
Agreement) sets forth the entire agreement between the parties, supersedes and
merges all prior written or oral agreements with respect to the subject matter
hereof, may only be amended in writing and shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such State. The parties shall make reasonable efforts to resolve any
dispute concerning this Agreement, its construction or its alleged breach by
face-to-face negotiations. If such negotiations fail to resolve the dispute, the
dispute shall be finally decided by arbitration in accordance with the rules
then in effect of the American Arbitration Association. Any arbitration will be
conducted in the New York City metropolitan area. TTR (for the Company, for
anyone claiming through or in the name of the Company and on behalf of the
equity holders of the Company) and HCW each hereby irrevocably waives any right
it may have to trial by jury in respect of any claim arising out of this
Agreement or the transactions contemplated hereby.
This Agreement may not be assigned by either party without the prior
written consent of the other party.
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If any provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not effect such provision
in any other respect or any other provision of this Agreement.
Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to HCW the enclosed duplicate copy of this Agreement.
Very truly yours,
H.C. Wainwright & Co., Inc.
By: /s/ Scott Weisman
---------------------------
Name: Scott Weisman
Title: Managing Director
Accepted and agreed to as of
the date first written above
TTR Technologies, Inc.
By: /s/ Marc D. Tokayer
Name: Marc D. Tokayer
Title: Chairman & President
Exhibit 10.47
SUBSCRIPTION AGREEMENT
February 18, 2000
TTR Technologies, Inc. TTR Technologies, Ltd.
67 Wall St., Suite 2411 2 Hanagar Street
New York, NY 10023 Kfar Sava
44425, Israel
Ladies and Gentlemen:
1) The undersigned hereby tenders this subscription and applies for the
purchase of the number of shares of Common Stock of the Company (the
"Shares") set forth on the signature page of this agreement, at a purchase
price of $5.56 per Share. For every 180,000 shares of the Common Stock
(the "Common Stock"), investors shall receive 90,000 Class A Warrants (the
"Warrants") to purchase 90,000 Shares of Common Stock at an exercise price
of $7.50 per share. The minimum purchase is 180,000 shares ($1,000,000),
provided, however, that less amount may be purchased in the discretion of
the Company. Together with this Subscription Agreement, the undersigned is
delivering to the Company, a check payable to "U.S. TRUST COMPANY OF NEW
YORK, AS ESCROW AGENT FOR TTR TECHNOLOGIES, INC." in the full amount of
the purchase price for the Shares which the undersigned is subscribing for
pursuant hereto or funds by wire transfer as instructed by the Company.
The Shares and Warrants to be purchased by the undersigned are part of a
private placement of securities (the "Private Placement") of up to
1,800,000 Shares and 900,000 Warrants. The Common Stock will be offered by
the Company on a "best efforts all or none" basis as to the Minimum
Offering of $7,000,000 and thereafter on a "best efforts" basis up to the
Maximum Offering of $10,000,000. There is a minimum number of 1,260,000
Shares that must be sold in order for the Private Placement to become
effective. If all the Shares are sold, the Company will receive an
aggregate of ten million ($10,000,000) less the expenses of the Private
Placement, which management estimates will be approximately six hundred
thousand ($600,000).
2) Representations and Warranties. In order to induce the Company to accept
this subscription, the undersigned hereby represents and warrants to, and
covenants with, the Company as follows:
(a) The undersigned has received and reviewed the Offering Materials,
and except for the Offering Materials, the undersigned has not
relied upon any other materials or literature relating to the offer
and sale of the Shares;
(b) The undersigned has had a reasonable opportunity to ask questions of
and receive answers from the Company concerning the Company and the
offering, and all such questions, if any, have been answered to the
full satisfaction of the undersigned;
<PAGE>
(c) The undersigned has such knowledge and expertise in financial and
business matters that the undersigned is capable of evaluating the
merits and risks involved in an investment in the Shares
(d) The information provided by the investor in this Subscription
Agreement being delivered by the undersigned to the Company herewith
is true, complete and correct in all material respects, and the
undersigned understands that the Company has determined that the
exemption from the registration provisions of the Securities Act of
1933, as amended (the "Act"), which is based upon non-public
offerings is applicable to the offer and sale of the Shares, based,
in part, upon the representations, warranties and agreements made by
the undersigned herein ;
(e) Except as set forth in the Offering Materials, no representations or
warranties have been made to the undersigned by the Company or by
any agent, employee, or affiliate of the Company, and in entering
into this transaction the undersigned is not relying upon any
information, other than that contained in the Offering Materials and
the results of independent investigation by the undersigned;
(f) The undersigned understands that: (A) the Shares have not been
registered under the Act or the securities laws of any state, and
are being offered by the Company based upon an exemption from such
registration requirements for non-public offerings pursuant to
Regulation D under the Act; (B) the Shares are and will be
"restricted securities", as said term is defined in Rule 144 of the
Rules and Regulations promulgated under the Act; (C) the Shares may
not be sold or otherwise transferred unless they have been first
registered under the Act and all applicable state securities laws,
or unless exemptions from such registration provisions are available
with respect to said resale or transfer; (D) other than as set forth
in the Offering Materials, the Company is under no obligation to
register the Shares under the Act or any state securities laws, or
to take any action to make any exemption from any such registration
provisions available; (E) the certificates for the Shares will bear
a legend to the effect that the transfer of the securities
represented thereby is subject to the provisions hereof; and (F)
stop transfer instructions will be placed with the Company's
transfer agent, if any, for the Shares.
(g) The undersigned is acquiring the Shares solely for the account of
the undersigned, for investment purposes only, and not with a view
towards their resale or distribution;
(h) The undersigned will not sell or otherwise transfer any of the
Shares unless and until: (A) said Shares, shall have first been
registered under the Act and all applicable state securities laws;
or (B) the undersigned shall have first delivered to the Company a
written opinion of counsel (which counsel and opinion (in form and
substance) shall be reasonably satisfactory to the Company), to the
effect that the proposed sale or transfer is exempt from the
registration provisions of the Act and all applicable state
securities laws;
(i) The undersigned has full power and authority to execute and deliver
this Subscription Agreement and to perform its obligations
hereunder, and this Subscription Agreement is a legally binding
obligation of the undersigned in accordance with its terms;
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<PAGE>
(j) The undersigned meets the requirements of at least one of the
suitability standards for an "accredited investor," as such term is
defined in Regulation D of the Rules and Regulations promulgated
under the Act and as set forth in this Subscription Agreement and
contained in the Offering Materials;
(k) The undersigned has carefully reviewed the Risk Factors listed below
associated with an investment in the Shares outlined in the Offering
Materials and understands that the securities offered hereby are
highly speculative and involve a high degree of risk and should not
be purchased by anyone who cannot afford the loss of his entire
investment;
RISK FACTORS
This offering involves a high degree of risk. You should be able to bear a
complete loss of your investment. You should carefully consider the risks
described below and the other information in this prospectus before
deciding to invest in shares of our common stock. If any of the following
risks actually occur, our business, financial condition and results of
operations would likely suffer. In such case, the market price of our
common stock could decline, and you may lose all or a part of the money
you pay to buy our common stock.
Our relationship with Macrovision is very important to us, since it will
be the exclusive licensee of our anti-piracy products and it is solely
responsible for marketing them.
As of November 24, 1999, we entered into a ten year agreement with
Macrovision to jointly develop a commercially viable anti-piracy
protection technology and product for audio content distribution on
optical media. We granted to Macrovision exclusive worldwide royalty
bearing rights to our proprietary anti-piracy technology, MusicGuard,
which serves as the primary basis for the proposed audio content
protection technology. Under the terms of our agreement, Macrovision is
solely responsible for promoting and marketing the proposed music
protection technology or product. Macrovision has the sole discretion to
determine the staffing and resources it allocates to commercialize the
technology consistent with Macrovision's good faith determination as to
the technology's commercial potential. Macrovision also has sole
discretion to determine the naming, branding and pricing for the
technology. We also granted to Macrovision exclusive rights to our
proprietary CD software anti-piracy protection technology, DiscGuard,
which is the only commercially available product we currently have. Only a
limited portion of the license for DiscGuard is royalty bearing and
Macrovision is not required to pay any minimum royalties in order to
retain its exclusivity. We expect that sales through Macrovision will
account for all of our revenues for at least the next two years. We
believe that the rapid penetration of the proposed music protection
technologies in the recording industry in the United States and Europe to
be crucial to our success. If we are unable to effectively manage and
maintain our relationship with Macrovision or for any reason Macrovision
cannot successfully market MusicGuard, our business will be materially
adversely affected. In addition, our condition could be adversely affected
by changes in the financial condition of Macrovision or by any other
changes to Macrovision's business.
We do not currently have any commercially viable products or technologies
and we cannot assure you that we will develop any.
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MusicGuard, our proprietary anti-piracy protection technology for audio
content distributed on CDs, is not currently commercially viable but will
serve as the primary basis for the proposed music protection technology
that we and Macrovision are jointly designing and developing. Under the
terms of our agreement with Macrovision, we will work jointly with
Macrovision to complete a product suitable for commercial launch. We
estimate that this project will take nine months, six months until the
commercial launch and three months following the commercial launch. We
have also given to Macrovision an exclusive worldwide partially royalty
bearing license to DiscGuard, which we launched commercially in February,
1998. We expect that Macrovision will use components of DiscGuard to
support its CD-ROM product, SafeDisc. Although we are working to develop
technologies with applications in other areas, these technologies are at
an early stage. Currently, we have no other commercially viable product or
technology.
Even if we develop other commercially viable technologies, the right of
first refusal we have granted to Macrovision with respect to other
products may impair our ability to exploit them.
Under the terms of our agreement with Macrovision, we have granted to
Macrovision first refusal rights until December 31, 2009 with respect to
any music protection technology we develop which is not included in the
license to Macrovision and any Internet digital rights management
technologies we develop which are applicable to music, music video, video,
software or data publishing products or markets. These rights include
rights of ownership if we decide to sell the technology or worldwide
exclusive marketing or distribution rights if we decide to license the
technology. Our obligation is to negotiate a sale or license to
Macrovision in good faith should we receive a bona fide offer from a third
party to purchase or license the technology and should Macrovision notify
us of its interest in acquiring the technology. As is ordinarily the case
where a right of first refusal is granted, the existence of this right may
impair our ability to fully exploit the commercial potential inherent in
other technology we may develop which is subject to this right by creating
the possibility that an interested third party may abstain from making an
offer for our technology due to a possible concern on the part of such
third party that its offer will be utilized by us solely for negotiating
an offer from Macrovision on more favorable terms.
We may need additional financing to continue operating after June, 2001.
Giving effect to the sale in October 1999 of an additional $500,000 of our
10% Convertible Debentures; the subsequent conversion into common stock of
all of the outstanding Debentures and accrued interest; the exercise in
November 1999 of investors warrants which yielded to us net proceeds of
approximately $1.325 million; the conversion of approximately $1.32
million of long-term debt and accrued interest into common stock; and the
purchase by Macrovision in January 2000 of 1,880,937 shares of our common
stock for a purchase price of $4 million, we had working capital of
approximately $4.18 million as of September 30, 1999 on a pro forma basis.
We are contractually obligated to reimburse Macrovision up to $1 million
during the year 2000 for their expenses related to the development and
marketing of the new audio content copy protection technology. In
addition, we have current payables of approximately $800,000. Based upon
our current and anticipated rate of expenditures, we believe that unless
we receive revenues from our licenses to Macrovision, as soon as July 2001
we may require additional financing or funding by strategic partners in
order to continue to operate at projected levels. We have no
4
<PAGE>
commitments for any such financing and there can be no assurance that we
will obtain additional capital when needed.
We do not anticipate receiving any funding from commercial lenders. There
can be no assurance that any additional financing can be obtained on
favorable terms, if at all. Any additional equity financing may result in
dilution to our stockholders.
The rights of first refusal we have granted to Macrovision relating to the
sale of our equity securities may impair our ability to obtain other
financing.
In the January 12, 2000 stock purchase agreement under which we sold to
Macrovision $4 million of our common stock, we granted to Macrovision
rights of first refusal to purchase equity securities (including
securities convertible or exchangeable into common stock) we propose to
sell to third parties if the amount of the securities to be sold would
constitute a majority of our outstanding common stock. Subject to some
exceptions, we further granted to Macrovision a right to purchase its pro
rata share (based on Macrovision's then current ownership of common stock)
of any equity securities we offer in private transactions above a certain
amount. The existence of these rights may impair our ability to obtain
equity financing from third parties on terms satisfactory to us or at all
because investors may be reluctant to devote the time and expense
necessary to negotiate the terms of a transaction which we may not be able
to consummate with them if Macrovision elects to exercise its rights.
We have lost money in every quarter and year, and we expect these losses
to continue in the foreseeable future.
Since we began our operations in 1994, we have lost money in every quarter
and year. As of September 30, 1999, we had an accumulated deficit of
approximately $15.5 million. If our revenue does not increase and we
cannot adjust our level of spending adequately, we may not generate
sufficient revenue to become profitable. Even if we do become profitable,
we may not be able to sustain or increase profitability on a quarterly or
annual basis in the future. Our ability to generate revenue depends
primarily upon our ability to jointly develop with Macrovision the audio
content copy protection technology to the point it becomes commercially
viable and Macrovision's success in promoting and marketing the
technology.
"Going concern" statement in auditor's report may make it difficult to
raise new capital.
We have not had any significant revenues to date. As of September 30,
1999, we had an accumulated deficit of approximately $15.5 million from
July 14, 1994 (date of inception). 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.
We have only been in business for a short period of time, so your basis
for evaluating us is limited.
We are a development stage company with a limited history of operations.
Prior to the commencement of our joint efforts with Macrovision to develop
a commercially viable audio
5
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content protection product and before our software product, DiscGuard,
first became commercially available in February 1998, we were engaged
primarily in research and development. As a result, there is a limited
history of operations for evaluating our business. You must consider the
risks and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets, including the audio content copy
protection and anti-piracy market. Some of these risks and uncertainties
relate to our ability to:
o complete, together with Macrovision, the design and development of audio
content protection technology of a commercially viable product or
technology;
o stay ahead of the efforts of hackers and counterfeiters to circumvent our
copy protection technologies;
o respond effectively to actions taken by our competitors;
o build our organizational and technical infrastructures to manage our
growth effectively;
o design, develop and implement effective products for existing clients and
new clients;
o extend MusicGuard protection to DVDs; and
o attract, retain and motivate qualified personnel.
If we are unsuccessful in addressing these risks and uncertainties, our
business, financial condition and results of operations will be materially
and adversely affected.
The market for audio content copy protection technology is unproven.
The market for copy protection technology for audio content distribution
on CDs, especially in the consumer multi-media market, is unproven. For us
to be successful in entering this market, recording studios and artists
must accept copy protection generally and also adopt the solution that we
are developing with Macovision. There can be no assurance that copy
protection of multi-media audio content distributed on CDs will be widely
commercially accepted. For example, consumers may react negatively to the
introduction of copy protected CDs if they are prevented from copying the
content of their favorite audio content. Moreover, copy protection may not
be effective or compatible with all hardware platforms or configurations
or may prove to be easily circumvented. Further, the technology we are
developing with Macrovision may not achieve or sustain market acceptance
under emerging industry standards. If the market for copy protection of
audio content distributed on CDs fails to develop or develops more slowly
than expected, or if MusicGuard does not achieve or sustain market
acceptance, our business, financial condition and results of operations
would be materially adversely affected.
You should not rely on our quarterly operating results as an indication of
how we will do in the future.
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Our quarterly operating results may vary significantly in the foreseeable
future due to a number of factors that could affect our revenue, expenses
or prospects during any particular quarter. These factors include:
o the success of Macrovision in promoting and marketing any music protection
technology developed through our joint efforts.
o the demand for audio content anti-piracy protection in general and for CDs
in particular, and, potentially, for DVDs;
o the degree of acceptance of our copy protection technologies by recording
studios and artists;
o changes in our operating expenses;
o changes in fees paid for copy protection of audio content distributed on
CDs resulting from competition or other factors;
o economic conditions specific to the recording industry;
o anticipated seasonality of revenues relating to sales of music CDs to
consumers in our target market.
In any given quarter, we may expend substantial funds and management
resources and yet not obtain adequate revenue, and we may not be able to
adjust spending in a timely manner to compensate for any unexpected
shortfall in our revenue. Any significant shortfall could have an
immediate material and adverse effect on our business, financial condition
and results of operations.
Due to all of the foregoing factors, and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of future performance. It is
possible that in some future periods our operating results will be below
the expectations of public market analysts and investors. In this event,
the price of our common stock would likely fall.
For at least the next two years, we expect to derive all of our net
revenues and operating income from royalties collected from Macrovision in
respect of sales of copy protection technology or products. We cannot
assure you that we will receive any revenues from these royalties or if
revenues are received, that they will grow significantly or at all. Any
growth in revenues from these fees will depend on the use of our copy
protection technology by a larger number of recording studios and artists.
In order to increase our market penetration, we must persuade recording
studios and artists that the cost of licensing our technology is
outweighed by the increase in revenues from additional sales of the copy
protected material that the recording studios and artists would achieve as
a result of using copy protection.
There are many competitors in the copy protection industry and we may not
be able to compete effectively against them.
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There is currently no commercially available technology which prevents the
faithful copying of compact discs. There can be no assurance that
companies with substantially greater financial, technological, marketing,
personnel and research development resources than ours will not develop
and begin marketing a similar technology. While no technology is currently
available, the Secure Digital Music Initiative is a forum of companies who
have agreed to develop a standard for copy protection of digital music.
The standard developed and being improved upon by the Initiative will
apply to next generation portable playback devices. There can be no
assurance that if and when the standard is implemented, the MusicGuard
technology will be able to effectively compete against copy protection
technologies based on the Initiative's standard.
Third parties may be able to circumvent our anti-piracy technology.
We must continually enhance and upgrade audio content protection
technology to stay ahead of the efforts of counterfeiters and hackers to
circumvent our technologies, even in the face of the new United States
Digital Millennium Copyright Act. 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. It is conceivable
that counterfeiters and hackers could develop a way to circumvent our copy
protection techniques, which may result in a potentially substantial
decrease in the demand for our products. Additionally, music rights owners
could choose not to use our anti-piracy technology if they believe that
our technology will be unable to deter counterfeiters or if they believe
it interferes with legitimate consumer use of the original copyrighted
product. In this regard, the copy protection technologies are intended to
prevent both consumer copying and professional remastering and
replication. Any reduction in demand for our products could have a
material adverse effect on our business, financial condition and results
of operations.
We are vulnerable to technological obsolescence.
The proposed audio protection technology is based upon a single set of
core technologies. The market for this technology and products is
characterized by rapid change, often resulting in product obsolescence or
short product life cycles. Although we are not aware of any developments
in the audio content protection industry which would render our planned
products less competitive or obsolete, there can be no assurance that
future technological changes or the development of new or competitive
products by others will not do so.
We have very few employees and are particularly dependent on our Chief
Technology Officer.
We have a small number of employees. Although we believe we maintain a
core group sufficient for us to effectively conduct our operations, the
loss of certain of our key personnel could, to varying degrees, have an
adverse effect on our operations and product development. The loss of Dr.
Baruch Sollish, our Chief Technology Officer, would have a material
adverse affect. We have not obtained "key-man" life insurance on the life
of Dr. Sollish. Our key employees and corporate officers all reside in
Israel.
We are subject to risks associated with international operations.
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We conduct business from our facilities in Israel and the United States,
and through our exclusive licensee, Macrovision. Our international
operations and activities subject us to a number of risks, including the
risk of political and economic instability, difficulty in managing foreign
operations, potentially adverse taxes, higher expenses and difficulty in
collection of accounts receivable. In addition, although we receive most
of our revenue in U.S. dollars, a substantial portion of our payroll and
other expenses are paid in the currency of Israel, where most of our
employees reside and our research and development operations are located.
Because our financial results are reported in U.S. dollars, they are
affected by changes in the value of the various foreign currencies that we
use to make payments in relation to the U.S. dollar. We do not currently
cover known or anticipated operating exposures through foreign currency
exchange option or forward contracts.
We are subject to risks associated with operations in Israel.
Our Israeli subsidiary maintains offices and research and development
facilities in Israel and is directly affected by prevailing economic,
military and political conditions that affect Israel.
We need to establish and maintain licensing relationships with companies
in related fields.
Our success in developing and commercializing other technologies will
depend in part upon our ability to establish and maintain licensing
relationships with companies in related business fields, including
international distributors. We believe that these relationships can allow
us greater access to manufacturing, sales and distribution resources.
However, the amount and timing of resources to be devoted to these
activities by these other companies may not be within our control. We may
not be able to maintain relationships or enter into beneficial
relationships in the future. Other parties may not perform their
obligations as expected. Our reliance on others for the development,
manufacturing and distribution of our technologies and products may result
in unforeseen problems. There can be no assurance that our licensees will
not develop or pursue alternative technologies either on their own or in
collaboration with others, including our competitors, as a means of
developing or marketing products targeted by the collaborative programs
and by our products.
Our efforts to protect our intellectual property rights may not be
adequate.
Our success depends on our proprietary technologies. We rely on a
combination of patent, trademark, copyright and trade secret laws,
nondisclosure and other contractual provisions, and technical measures to
protect our intellectual property rights. Our patents, trademarks or
copyrights may be challenged and invalidated or circumvented. Any patents
that issue from our pending or future patent applications or the claims in
pending patent applications may not be of sufficient scope or strength or
be issued in all countries where our products can be sold or our
technologies can be licensed to provide meaningful protection or any
commercial advantage to us. Others may develop technologies that are
similar or superior to our technologies, duplicate our technologies or
design around our patents. Effective intellectual property protection may
be unavailable or limited in certain foreign countries. Despite efforts to
protect our proprietary rights, unauthorized parties may attempt to copy
or otherwise use aspects of processes and devices that we regard as
proprietary. Policing unauthorized use of our proprietary information is
9
<PAGE>
difficult, and there can be no assurance that the steps we have taken will
prevent misappropriation of our technologies. In the event that our
intellectual property protection is insufficient to protect our
intellectual property rights, we could face increased competition in the
market for our products and technologies, which could have a material
adverse effect on our business, financial condition and results of
operations.
Litigation may be necessary in the future to enforce any patents that may
issue and other intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of
others. There can be no assurance that any litigation of these types will
be successful. Litigation could result in substantial costs, including
indemnification of customers, and diversion of resources and could have a
material adverse effect on our business, financial condition and results
of operations, whether or not this litigation is determined adversely to
us. In the event of an adverse ruling in any litigation, we might be
required to pay substantial damages, discontinue the use and sale of
infringing products, expend significant resources to develop
non-infringing technology or obtain licenses to infringed technology. Our
failure to develop or license a substitute technology could have a
material adverse effect on our business, financial condition and results
of operations.
Future sales of our common stock by our holders of outstanding stock,
options and warrants could have an adverse effect on the market price of
our common stock.
We anticipate that some or all of the selling stockholders may from time
to time sell all or part of the shares offered hereby. In addition, there
are currently outstanding options or warrants to purchase 3,754,710 shares
of our common stock (including 1,166,400 options granted under our 1996
Stock Option Plan, 2,443,310 options and warrants held by selling
stockholders (of which 2 million warrants have a nominal exercise price
and the remainder have exercise prices ranging from $1.50 to $7.80 per
share) and 145,000 options and warrants not held by selling stockholders).
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of common stock in
the market after this offering, or the perception that these sales may
occur. These sales also might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem
appropriate.
Our stock price is volatile and could continue to be volatile.
Investment interest in our common stock may not lead to the development of
an active or liquid trading market. The market price of our common stock
has fluctuated in the past and is likely to continue to be volatile and
subject to wide fluctuations. In addition, the stock market has
experienced extreme price and volume fluctuations. The stock prices and
trading volumes for many "high tech" companies fluctuate widely for
reasons that may be unrelated to their business or results of operations.
The market price of our common stock may decline below the offering price.
General economic, market and political conditions could also materially
and adversely affect the market price of our common stock and investors
may be unable to resell their shares of common stock at or above the
offering price.
It may be difficult for a third party to acquire us.
10
<PAGE>
Provisions of Delaware law could make it more difficult for a third party
to acquire us, even if it would be beneficial to our stockholders.
Penny Stock Regulation may be applicable to investment in our shares.
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the Nasdaq system, provided
that current prices and volume information with respect to transactions in
such securities are provided by the exchange or system). The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally
require that prior to a transaction in a penny stock the broker-dealer
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction. These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules.
(l) The undersigned has carefully reviewed the jurisdictional notice listed
below and agrees to abide by any restrictions contained therein applicable
to the undersigned; and
JURISDICTIONAL NOTICE
Residents of All States:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN
STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD
11
<PAGE>
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH 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. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR
ANY OTHER REGULATORY AUTHORITY. NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON OR ENDORSED THE MERITS OR THIS OFFERING OR THE ACCURACY OR
ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
* * *
3) The undersigned understands that this subscription is not binding upon the
Company until the Company accepts it, which acceptance is at the sole
discretion of the Company and is to be evidenced by the Company's
execution of this Subscription Agreement where indicated. This
Subscription Agreement shall be null and void if the Company does not
accept it as aforesaid.
4) The undersigned understands that the Company may, in its sole discretion,
reject this subscription and, in the event that the offering to which the
Offering Materials relates is oversubscribed, offer partial Units or
reduce this subscription in any amount and to any extent, whether or not
pro rata reductions are made of any other investor's subscription.
5) The undersigned agrees to indemnify the Company and hold it harmless from
and against any and all losses, damages, liabilities, costs, and expenses
which it may sustain or incur in connection with the breach by the
undersigned of any representation, warranty, or covenant made by the
undersigned.
6) Neither this Subscription Agreement nor any of the rights of the
undersigned hereunder may be transferred or assigned by the undersigned.
7) This Subscription Agreement: (i) may only be modified by a written
instrument executed by the undersigned and the Company; (ii) sets forth
the entire agreement of the undersigned and the Company with respect to
the subject matter hereof; (iii) shall be governed by the laws of the
State of New York applicable to contracts made and to be wholly performed
therein; and (iv) shall inure to the benefit of, and be binding upon the
Company and the undersigned and its respective heirs, legal
representatives, successors, and assignees.
8) Unless the context otherwise requires, all personal pronouns used in this
Subscription Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
9) All notices or other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally or mailed
by certified or registered mail, return receipt requested, postage
prepaid, as follows: if to the undersigned, to the address set forth on
the signature page hereof; and if to the Company, to the address provided
above or to such other address as the Company or the undersigned shall
have designated to the other by like notice.
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TTR Technologies, Inc.
ACCREDITED INVESTOR CERTIFICATION
PURCHASE OF THE SHARES AND WARRANTS INVOLVES SIGNIFICANT RISKS AND IS A
SUITABLE INVESTMENT ONLY FOR CERTAIN TYPES OF POTENTIAL INVESTORS. SEE
"RISK FACTORS."
The purchase of Shares and Warrants is suitable only for investors who
have no need for liquidity in their investments and who have adequate
means of providing for their current needs and contingencies even if the
investment in the Shares results in a total loss. Shares will be sold only
to prospective investors which are "accredited investors" under Regulation
D promulgated under the Securities Act. "Accredited Investors" are those
investors which make certain written representations that evidence the
investor comes within one of the following categories:
(Initial the appropriate category)
____ (a) Any bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; any insurance company as defined in
Section 2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940, as amended, or a business development company as
defined in Section 2(a)(48) of that act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958, as amended; any 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 its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, as amended, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which plan fiduciary is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
____ (b) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended;
____ (c) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership not
formed for the specific purpose of acquiring the Shares offered, with total
assets in excess of $5,000,000;
____ (d) Any natural person whose individual net worth or joint net worth with
that person's spouse, at the time of investment in the Shares, exceeds
$1,000,000;
____ (e) Any natural person who had an individual income in excess of $200,000
in each of the two most recent calendar 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 that same income level in the current year;
____ (f) Any partnership or trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D and who has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of an investment
in the units; or
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<PAGE>
____ (g) Any entity in which all of the equity owners are accredited investors.
As used in this Offering Materials the term "net worth" means the excess
of total assets over total liabilities. In determining income, an investor
should add to his or her adjusted gross income any amounts attributable to
tax exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to an
IRA or Keogh retirement plan, alimony payments and without any amount by
which income from long-term capital gains has been reduced in arriving at
adjusted gross income.
The Company may make or cause to be made such further inquiry and obtain
such additional information as it deems appropriate with regard to the
suitability of prospective investors. The Company may reject subscriptions
in whole or in part if, in its discretion, it deems such action to be in
the best interests of the Company. If the Offering is oversubscribed, the
Company will determine which subscriptions will be accepted.
If any information furnished or representations made by a prospective
investor or others acting on its behalf mislead the Company or the Company
as to the suitability or other circumstances of such investor, of if,
because of any error or misunderstanding as to such circumstances, a copy
of this Offering Materials is delivered to any such prospective investor,
the delivery of this Offering Materials to such prospective investor shall
not be deemed to be an offer and this Offering Materials must be returned
to the Company immediately.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement
this ___ day of ___ _______________, 2000.
_______________ X $5.56 = ______________________
No. of Shares (Share Price) Subscription Price
($1,000,000 = 180,000 shares and 90,000 Class A Warrants)
If the Investor is a PARTNERSHIP, CORPORATION or TRUST:
_______ Signature __________
_______ Print Name of Subscriber Organization _______Print Name and Title of
Person Signing
- --------------------------------------------------------------------------------
(All Subscribers should please print information
below exactly as you wish it to appear
in the records of the Company)
_______ Name and capacity in which subscription is made -- see below for
particular requirements _______________ Taxpayer I.D. Number
14
<PAGE>
Address: _______ Number and Street ____ City State Zip Code
Address for notices, if different: ___ Number and Street _ City
State Zip Code
ACCEPTANCE OF SUBSCRIPTION
The foregoing subscription is hereby accepted by TTR Technologies, Inc. this
_____ day of __________ 2000, for _________ Shares.
TTR Technologies, Inc.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
15
<PAGE>
SUBSCRIPTION AGREEMENT supplement
SUBSCRIPTION AGREEMENT
Section 1, paragraph 1 should read as follows:
1) The undersigned hereby tenders this subscription and applies for the
purchase of the number of shares of Common Stock of the Company (the
"Shares") set forth on the signature page of this agreement, at a purchase
price of $5.56 per Share. For every 180,000 shares of the Common Stock
(the "Common Stock"), investors shall receive 90,000 Class A Warrants (the
"Warrants") to purchase 90,000 Shares of Common Stock with a term of 60
months at an exercise price equal to the higher of 135% of the purchase
price of the common shares ($7.50) or 5% above the average closing price
for the twenty trading days prior to closing, subject to a maximum
exercise price of $9.00 per share. The Company may redeem the Class A
Warrants for $.10 per warrant 6 months following issuance if the
underlying common stock is registered and the Company's common shares have
traded at or above 200% of the exercise price (the "trigger price") for a
period of twenty consecutive trading days. Upon exercise of the Class A
Warrants, the investors will be issued 450,000 Class B warrants with a
term of 36 months and an exercise price of 120% of the Class A Warrant
trigger price. The Class B warrants may be redeemed by the Company if the
underlying common stock is registered and the common shares have traded at
$26 or above for a period of twenty consecutive trading days.
Initial _________
16
Exhibit 10.48
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made by and among
TTR Technologies, Inc. (the "Company"), and the investors listed on Schedule I
hereto (collectively, the "Investors" and each an "Investor"), each of whom has
executed a signature page hereto.
RECITALS
I. The Investors desire to purchase from the Company and the Company desires
to issue and sell to the Investors Shares of its Common Stock of the
Company (the "Common Stock"), upon the terms set forth in the Company's
Subscription Agreement dated February 18, 2000 (the "Agreement").
II. To induce Investors to purchase Shares, the Company is willing under
certain circumstances to register under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively, the
"Securities Act"), Common Stock underlying the Common Stock to be
purchased by the Investors.
NOW THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Required Registrations.
i) The Company will include the Registrable Securities in a
registration statement (the "Automatic Registration Statement")
which the Company will prepare and file within 45 days after the
closing of this private placement with the SEC under the Securities
Act of 1933 and use its best efforts to have declared effective by
the SEC within 60 days following the closing of this private
placement so as to permit the public trading of the Registrable
Securities no later than 90 days following the closing of this
private placement.
ii) If the Company fails to have the registration statement which is
ultimately used to register the Registrable Securities, declared
effective by the SEC within 90 days following the Closing Date,
then, the Company shall continue to use its best efforts to cause
the SEC to promptly declare the effectiveness of, the Automatic
Registration Statement so as to permit the public trading of the
Registrable Securities pursuant thereto.
iii) Once the Automatic Registration Statement is declared effective by
the SEC, the Company will maintain the effectiveness of the
Automatic Registration Statement until at least the earlier date to
occur (the "Release Date") of (i) the date that all of the
Registrable Securities have been sold pursuant to the Automatic
Registration Statement and (ii) the date that the holders of the
Registrable Securities receive an opinion of counsel to the Company
that they may sell their Registrable Securities (without limitation
or restriction as to quantity or timing and without registration
under the Act) pursuant to Rule 144(k) of the Act or otherwise. If
the Company fails to keep the Automatic Registration Statement
continuously effective
<PAGE>
during such period, then the Company shall, promptly upon the
request of the Investors holding at least 50% of the unsold
Registrable Securities included therein, use its best efforts to
update the Automatic Registration Statement or file a new
registration statement covering the unsold Registrable Securities,
subject to the terms and provisions hereof.
iv) The Registration Expenses shall be paid by the Company with respect
to all registrations effected pursuant to this Section.
2. Restrictions on Transfer. Notwithstanding the registration of any
Registrable Securities, each Investor shall not sell or offer to sell any
Registrable Securities until after the automatic registration has been
declared effective.
3. Registration Procedures. In connection with any registration of
Registrable Securities, the Company shall:
i) prepare and file with the Securities and Exchange Commission a
registration statement on the appropriate form under the Securities
Act, which form shall be available for the sale of such Registrable
Securities in accordance with the intended method or methods of
distribution thereof, and use its commercially reasonable efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the
counsel selected by the holders of a majority of the Registrable
Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents shall be subject to
the review and comment of such counsel);
ii) notify each holder of Registrable Securities of the effectiveness of
the registration statement filed hereunder and prepare and file with
the Securities and Exchange Commission such amendments,
post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary or appropriate to keep such registration statement
effective for the period required for sale of the Registrable
Securities and cause such prospectus as so supplemented to be filed
as required under the Securities Act, and comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or
supplement to the prospectus;
iii) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
iv) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions where such registration or qualification is required
as any seller reasonably requests and do any and all other' acts and
things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the
Registrable
2
<PAGE>
Securities owned by such seller (provided that the Company shall not
be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this subparagraph (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
v) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which the prospectus included in such
registration statement as then in effect, contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading in the light of the circumstances
under which they were made, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such
prospectus so that, thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact required to be stated therein or omit
to state any fact necessary to make the statements therein not
misleading;
vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the
Company are then listed or traded, and, if not so listed or traded,
to be listed on the NASD automated quotation system and, if listed
on the NASD automated quotation system, use commercially reasonable
efforts to secure NASDAQ authorization for such Registrable
Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with
respect to such Registrable Securities with the NASD;
vii) cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and enable such
Registrable Securities to be in such denominations and registered in
such names as the selling holders or the managing underwriters, if
any, may request at least ten Business Days prior to any sale of
Registrable Securities; provide a transfer agent and registrar for
all such Registrable Securities not later than the effective date of
such registration statement;
viii) enter into such customary agreements (including, if there is an
underwriter, underwriting agreements in customary form);
ix) make available for inspection by any sellers of Registered
Securities any underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company that is customary, and cause the Company's officers,
directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement;
x) cooperate, and cause the Company's officers, directors, employees
and independent accountants to cooperate, with the selling holders
of Registrable
3
<PAGE>
Securities and the managing underwriters, if any, in the sale of the
Registrable Securities and take any actions necessary to promote,
facilitate or effectuate such sale;
xi) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission;
xii) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company
shall use its best efforts promptly to obtain the withdrawal of such
order.
4. Registration Expenses.
i) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration
and filing fees (including, if applicable, the fees and expenses of
any "qualified independent underwriter" and its counsel as may be
required under the rules and regulations of the NASD), fees and
expenses of compliance with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters or selling
holders in connection with blue sky qualifications and determination
of their eligibility for investment under applicable laws), printing
expenses, messenger, telephone and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel
for the Company and all independent certified public accountants
(including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), underwriters
(excluding underwriters' discounts and commissions) and other
Persons retained by the Company (all such expenses being herein
called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its
internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance if such insurance
coverage is obtained by the Company and the expenses and fees for
listing the securities to be registered on each securities exchange
on which similar securities issued by the Company are then listed or
on the NASD automated quotation system.
ii) Each holder of securities included in any registration hereunder
shall pay the discounts and commissions allocable to the Registrable
Securities of the holder and the Fees and expenses of such holder's
counsel.
5. Registration Penalty
a) In the event the Company fails to have the registration statement
covering the registrable securities declared effective within 90
days following the closing, the Company will pay to the holder an
amount equal to 2% of the amount invested per month until the
registration statement has been declared effective.
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<PAGE>
6. Indemnification and Contribution
i) The Company agrees to indemnify each holder of Registrable
Securities which is included in a registration statement pursuant to
Section 1 herein, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information
furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with
a sufficient number of copies of the same. In connection with an
underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
ii) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as
the Company and any underwriter reasonably requests for use in
connection with any such registration statement or prospectus and
shall indemnify the Company, its directors and officers and each
Person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of
material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit
so furnished in writing by such holder.
iii) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any Person's right to
indemnification hereunder to the extent such failure has not
materially prejudiced the indemnifying party) and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying
party shall not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent shall
not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim shall
not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party
5
<PAGE>
a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim.
iv) If the indemnification provided for in this Section 5 is unavailable
to an indemnified party under paragraphs (a) or (b) hereof in
respect to any losses, claims, damages, liabilities or expenses
referred to therein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion
as is appropriate to reflect the relative fault of the Company and
the holder of Registrable Securities in connection with the
statements or omissions that resulted in such losses, claim,
damages, liabilities or expenses. The relative fault of the Company
and the holder of Registrable Securities in connection with the
statements that resulted in such losses, claims, liabilities or
expenses shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material facts or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or the holder of the Registrable
Securities and the parties relative intent, knowledge, access to
information and opportunity to correct such statement or omission.
v) Notwithstanding any other provision of this Section, the liability
of any holder of Registrable Securities for indemnification or
contribution under this Section shall be individual to each holder
and shall not exceed an amount equal to the number of shares sold by
such holder of Registrable Securities multiplied by the net amount
per share which he receives in such underwritten offering.
vi) The indemnification and contribution provided for under this
Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party
and shall survive the transfer of securities.
7. Definitions.
"Common Stock" means the Company's Common Stock, without par value.
"NASD" means the National Association of Securities Dealers.
"Person" means any individual, corporation, partnership, limited liability
company, trust, estate, association, cooperative, government or
governmental entity (or any branch, subdivision or agency thereof) or any
other entity.
"Registrable Securities" means any Common Stock issued or issuable upon
conversion of the Series A Preferred Stock.
"Registrable Securities" means any of the Warrant Share Registrable
Securities, the Note Share Registrable Securities or the Preferred Share
Registrable Securities. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the
Securities Act or eligible to be sold to the public through a broker,
dealer or market maker
6
<PAGE>
in compliance with Rule 144 under the Securities Act (or any such rule
then in force). For purposes of this Agreement, a Person shall be deemed
to be a holder of Registrable Securities whenever such Person has the
right to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the
exercise of such right), whether or not such acquisition has actually been
effected.
"Securities Act" means the Securities Act of 1933, as amended.
8. Miscellaneous.
i) No Inconsistent Agreements. The Company shall not hereafter enter
into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
ii) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of a majority of
the Registrable Securities.
iii) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of
the parties hereto whether so expressed or not In addition, whether
or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of purchasers or holders of
Registrable Securities are also for the benefit of, and enforceable
by, any subsequent holder of Registrable Securities. A person is
deemed to be a holder of Registrable Securities whenever such person
is the registered holder of Registrable Securities. Upon the
transfer of any Registrable Securities, the transferring holder of
Registrable Securities shall cause the transferee to execute and
deliver to the Company a counterpart of this Agreement.
iv) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
v) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement.
vi) Descriptive Heading. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
vii) Governing Law. The corporate law of New York shall govern all issues
and questions concerning the relative rights of the Company and its
shareholders. All issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement shall be
governed by, and construed in accordance
7
<PAGE>
with, the laws of New York, without giving effect to any choice of
law or conflict of law rules or provisions (whether of New York or
any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than New York.
viii) Consent to Jurisdiction: Service of Process. Company and Investor
hereby irrevocably consent to the jurisdiction of the Courts of New
York State and any and all actions and proceedings in connection
with this Agreement, and irrevocably consent, in addition to any
methods of service of process permissible under applicable law, to
service of process by certified mail, return receipt requested to
the address of Company and Investor as set forth herein. Nothing in
this Section shall affect or limit the right of any Investor to
serve legal process in any other manner permitted by law. Company
and Investor agree that in any action or proceeding brought by them
in connection with this Agreement or the transactions contemplated
hereby, exclusive jurisdiction shall be in the courts of the Courts
of New York.
8
<PAGE>
SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has executed this Registration Rights
Agreement this ________ day of _________________, 2000.
PARTNERSHIP, CORPORATION or TRUST:
Signature
Print Name of Subscriber Organization
Print Name and Title of Person Signing
Address:
- -------------------------------------------------
Number and Street
- -------------------------------------------------
City State Zip Code
ACCEPTED AND AGREED to this _____ day of ____________, 2000.
TTR Technologies, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT SUPPLEMENT
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Add Section 3 Paragraphs m and n to Registration Rights Agreement
xiii) Notwithstanding the forgoing, if at any time or from time to time after
the date of effectiveness of the Automatic Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to
the Registrable Securities, from the time of the giving of notice with
respect to a Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided
however, that the Company may not so suspend the right to such holders of
Registrable Securities to such holders of Registrable Securities during
the periods the Automatic Registration Statement is required to be in
effect other than during a Permitted Suspension Period. The term (I)
"Permitted Suspension Period" means one or more suspension periods during
any consecutive 12-month period which suspension periods, in the
aggregate, do not exceed fifty (50) days, provide, however, that no one
such suspension period shall either (I) be for more than twenty (20) days
or (ii) begin less than ten (10) business days after the last day of the
preceding suspension (whether or not such last day was during or after a
Permitted Suspension Period) and (ii) 'Potential Material Event any of the
following: (I) the possession by the Company of material information not
ripe for disclosure in a registration statement, which shall be evidenced
determinations in good faith by the Board Directors of the Company that
disclosure of such information in the registration statement, which shall
be evidenced by determinations in good faith by the Board of Directors of
the Company that disclosure of such information in registration statement
would be detrimental to the business and aggairs of the Company; or (ii)
any material engagement or activity by the Company which would, in the
good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination.
xiv) Notwithstanding the effectiveness of the Automatic Registration Statement
the undersigned agrees not to sell any shares purchased in this private
placement for a period of 90 days following the closing.
Initial ____________
Exhibit 10.49
AGREEMENT
AGREEMENT made this 17th day of February, 2000, among TTR Technologies,
Inc., a Delaware company with offices at 1841 Broadway, New York, New York ("TTR
Inc.") and TTR Technologies Ltd., an Israeli company with offices at 2 HaNagar
Street, Kfar Saba, Israel ("TTR Ltd." together with "TTR Inc." the "Companies"),
K & D Equities, Inc., with offices at 1425 E. University Drive, Suite 108, Tempe
AZ 85281-8412 ("K&D") Isaac Winehouse, with an address at ____________
("Winehouse") and Wall & Broad Equities, Inc. with an address at
_____________("W&B").
W I T N E S S E T H
WHEREAS, a dispute has arisen amongst the Parties in connection with the
provision by K&D to TTR Inc. of certain services, which dispute resulted in
certain claims brought by K&D (hereinafter, the "Complaint"), against the
remaining Parties for, inter-alia, breach of contract; K&D's claims are fully
set forth in Civil File No. CV-00472 filed on January 21, 2000, with the United
States District Court for the Eastern District of New York (hereinafter, the
"Complaint");
WHEREAS, each of TTR Inc., W&B and Winehouse, the named defendants in the
Complaint, deny each and every claim and allegation set forth in the Complaint;
WHEREAS, the parties desire to resolve all disputes amongst them on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions hereafter set
forth, the parties agree hereafter as follows:
1. Exercise of Warrants issued to K&D. Reference is hereby made to the Warrant
issued by TTR Inc. to K&D on July 29, 1999, to purchase up to an aggregate of
400,000 shares of TTR Inc. Common Stock, par value $0.01 (the "Common Stock"),
on the terms and conditions set forth therein, including, without limitation, at
an exercise price per share of $2.75 (hereinafter, the "Warrant"). Subject to
the terms and conditions set forth herein and in consideration of the releases
contained herein, without acknowledging any admittance of liability, TTR Inc.
agrees that K&D shall be entitled to exercise the Warrants, on the terms and
conditions set forth herein, including, without limitation, the payment of
exercise price per share set forth in the Warrant, for 200,000 shares of Common
Stock (as issued, the "Warrant Shares"). K&D agrees that, except as provided
hereunder, K&D hereby waives any and all rights it may have under the Warrant,
or any other agreement with the Company, relating to the exercise of the Warrant
with respect to the remaining 200,000 shares of Common Stock. Except as
otherwise expressly amended hereunder, the terms and conditions set forth in the
Warrant shall continue to apply in full force and effect. All capitalized terms
used herein shall, unless otherwise defined, have the meanings ascribed thereto
in the Warrant.
2. Issuance of Stock Certificates. TTR Inc. and K&D agree that K&D' right under
Section 1 above of this Agreement to exercise the Warrant Shares for an
aggregate of 200,000 Warrant Shares shall be exercised by the issuance to K&D on
the Closing (as hereinafter defined) of two
<PAGE>
(2) stock certificates containing standard restrictive legends, each certificate
representing 100,000 Warrant Shares (each stock certificate shall hereinafter be
referred to as a "Stock Certificate" and collectively the "Stock Certificates").
One Stock Certificate shall be deposited with Joel C. Schneider, of Sommer &
Schneider LLP, 595 Stewart Avenue, Suite 710, Garden City New York 11530 (the
"Schneider Escrow Agent") in escrow pursuant to Section 8 hereunder pending
exercise of the Warrant for the Warrant Shares represented thereby and one stock
certificate shall be deposited with Brounstein Aboudi Trustees Ltd., of 3 Gavish
Street, K'Far Saba, Israel ("B&A Escrow Agent") in escrow pursuant to Section 8
hereunder pending exercise of the Warrant for the Warrant Shares represented
thereby.
3. Exercise of the Stock Certificate held by Schneider Escrow Agent. Subject to
the terms and conditions set forth herein, K&D shall be entitled to exercise the
Warrant for the Warrant Shares represented by the Stock Certificate deposited
with the Schneider Escrow Agent at any time immediately following Closing upon
receipt by the Company and the Company's counsel, from Joel Schneider, Esq., of
written confirmation (furnished by facsimile with an original to follow by
overnight courier) that the amount of $275,000 (the "First Warrant Exercise
Installment") has been wire-transferred to TTR Inc.'s bank account designated by
the Company, together with the wiring bank's trace number (ftk) reference for
such wire-transfer. Upon delivery of such confirmation and ftk number reference
as provided above, the Schneider Escrow Agent shall be entitled to release to
K&D the Stock Certificate deposited with the Schneider Escrow Agent. Under no
circumstance may the Schneider Escrow Agent release the Stock Certificate held
by him to K&D prior to delivery of the confirmation and the stk number reference
as provided above.
4. Exercise of the Stock Certificate held by the B&A Escrow Agent. Subject to
the terms and conditions set forth herein, K&D shall be entitled to exercise the
Warrant for the Warrant Shares represented by the Stock Certificate deposited
with the B&A Escrow Agent at any time immediately following Closing upon receipt
by the Company of $275,000 (the "Second Warrant Exercise Installment") AND the
satisfaction of the Release Conditions. For the purposes of this Agreement, the
term "Release Conditions" shall mean , (i) completion by K&D of coverage of TTR
Inc. on the Website stockrocket.com, which coverage shall continue for not less
than a consecutive ninety (90) days but the condition shall be satisfied upon
such coverage continuing for a consecutive 30 day period and (ii) the
confirmation in writing by the Schneider Escrow Agent to the B&A Escrow Agent of
the payment by K&D to stockreporter.com of an aggregate of $108,000, provided,
however, that, K&D's obligation to make such payment is subject to the condition
that for a period of consecutive ten (10) business days following the
effectiveness of TTR Inc.'s registration statement filed on Form S-1 relating to
certain shares held by stockholders (including the Warrant Shares) through the
30th day following such effectiveness the per share sale price at which TTR
Inc.'s publicly traded Common Stock trades in the over-the-counter market (OTC)
shall equal or exceed $5.50,. If the per share sale price does not close at or
exceed the price designated above for the period specified above, then K&D shall
have no obligation to make such payment to stockreporter.com. Under no
circumstance shall the B&A Escrow Agent be required to transfer to K&D the Stock
Certificate deposited with it until the receipt by B&A of the Second Warrant
Exercise Installment and the satisfaction of the Release Conditions.
5. Registration Rights
K&D understands that the Company is in the process of filing with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to certain Company securities held by certain Company shareholders
or the holders of certain rights in
2
<PAGE>
Company securities, (the "Registration Statement"). That Registration Statement
is being filed pursuant to the terms of registration rights granted to certain
investors (the "Investors"). The Company shall include the Warrant Shares in the
Registration Statement filed on behalf of such Investors. The Company Shall
notify Joel Schneider, Esq., on behalf of K&D, of the effectiveness of such
registration statement, if any, within 24 of the commencement of such
effectiveness; the Company understands that that the provision of such notice to
Joel Schneider, Esq., on behalf of K&D, is a material term for K&D.
6. Closing. The Closing shall take place on February 17, 2000 or such other
subsequent date acceptable to the parties (the "Closing"). At the Closing, TTR
Inc. shall deliver by facsimile a signed copy of this Agreement. K&D shall
deliver by facsimile a (i) signed copy of this Agreement, (ii) the Warrant
instrument with the notation "VOID" written across the face thereof and (iii) a
Notice of Dismissal with prejudice and without costs in accordance with the
Federal Rules of Civil Procedure dismissing the Complaint properly executed by
K&D, with the originally signed notice being forwarded by messenger or courier
on the Closing date to an address forwarded to the Escrow Agent.. TTR Inc. shall
instruct its stock transfer agent to forward to each of the Schnieder Escrow
Agent and the B&A Escrow Agent a Stock Certificate.
7. Release.
(a) Upon the due execution of this Agreement by all of the parties hereto and
the issuance by TTR Inc. of the two Stock Certificates, K&D (and its officers,
directors, employees, shareholders, attorneys for this matter, agents,
successors, personal representatives and assigns) hereby absolutely and
unconditionally waive, release and forever discharge each of the Companies, W&B
and Winehouse, and their respective affiliates, officers, directors,
shareholders, employees, agents, attorneys, insurers, successors, heirs and
assigns, from any claims, demands, obligations, liabilities, rights, causes of
action and damages, whether liquidated or unliquidated, absolute or contingent,
known or unknown, arising prior to or concurrent with the date hereof including
specifically, but without limiting the generality of the foregoing, claims
relating to or arising as a result of any allegation set forth in the Complaint
and any and all claims that K&D could have asserted against any of the
Companies, W&B or Winehouse.
(b) In consideration of the releases in Section 7 (a) above, each of Companies,
W&B and Winehouse (and each of their respective officers, directors, employees,
shareholders, attorneys, agents, heirs, successors, executors, personal
representatives and assigns) does hereby absolutely and unconditionally waive,
release and forever discharge K&D and its affiliates, officers, directors,
shareholders, employees, agents, attorneys in this matter, insurers, successors
and assigns, from any claims, demands, obligations, liabilities, rights, causes
of action and damages, whether liquidated or unliquidated, absolute or
contingent, known or unknown, arising prior to or concurrent with the date
hereof.
8. Stipulation of Dismissal
Concurrently with the due execution of this Agreement by all the parties
hereto, K&D shall take all action necessary to dismiss the Complaint with
Prejudice and without costs. The delivery to TTR Inc. of a Notice of Dismissal
with prejudice and without costs dismissing the Complaint shall be a condition
precedent to K&D's exercise of any of its rights under the Warrant. This
Agreement shall not be filed with the Court.
9. Provision relating to each of the Schnieder Escrow Agent and the B&A Escrow
Agent
3
<PAGE>
(a) The Escrow Agents herein, in their actions pursuant to this Agreement, shall
be fully protected in every reasonable exercise of its discretion and shall have
no obligation hereunder either to any of the other Parties herein, except as
expressly set forth herein. The Escrow Agents may rely upon any instrument or
writing believed by them to be genuine and sufficient and properly and shall not
be liable or responsible for any action taken or omitted in accordance with the
provisions hereof. The Escrow Agents shall not be liable or responsible for any
act they may do or omit to do in the exercise of reasonable care.
(b) The Escrow Agents shall hold the Stock Certificates without compensation as
a stakeholder only. The Escrow Agents are not and shall not be deemed to be a
trustee for any party for any purpose and are merely acting as depository and in
a ministerial capacity hereunder with the limited duties herein described. The
Escrow Agents shall have no obligation to anyone to invest any of the deposited
shares.
(c) The duties and obligations of the Escrow Agents shall be determined solely
by the express provisions of this Agreement and the Escrow Agents shall not be
responsible except for the performance of such duties and obligations as are
specifically set out in this Agreement.
(d) The Escrow Agents shall not be responsible in any manner whatsoever for any
failure or inability of TTR Inc. to deliver Stock Certificates to the Escrow
Agents or otherwise to honor any of the provisions of this Agreement.
(e) Each of the Companies, K&D, Winehouse and W&B, jointly and severally, agrees
to indemnify the Escrow Agents and to hold them harmless against any loss,
liability or expense incurred on its part arising out of or in connection with
its acting as Escrow Agents under this Agreement, as well as the cost and
expense of defending against any claim of liability. The Escrow Agents shall be
entitled to consult with counsel of its choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel.
10. Confidentiality. The Parties hereby undertakes (i) to keep confidential and
(ii) not to disclose to any party any and all matters relating to this
Agreement, unless required by applicable law or relevant regulations. K&D
acknowledges that TTR Inc. will file an executed copy of this Agreement and the
dismissal order of the Court with the Securities and Exchange Commission in
accordance with the requirements of the Securities Act of 1933, as amended
and/or the Securities and Exchange Act of 1934.
11. Reliance and Complete Agreement. The parties acknowledge and agree that in
the execution of this Agreement, neither has relied upon any representation by
any party or attorney, except as expressly stated herein. Moreover, this
Agreement shall represent the complete and entire agreement between the parties,
to the exclusion of any and all other prior or concurrent terms, written or
oral. No supplement, modification or waiver or termination of this Agreement or
any provision hereof shall be binding unless executed in writing by the parties
to be bound thereby.
12. Headings. Section and subsection headings are not to be considered part of
this Agreement and are included solely for convenience and are not intended to
be full or accurate descriptions of the content thereof.
4
<PAGE>
13. Successors and Assigns. Except as otherwise provided in this Agreement, all
the terms and provisions of this Agreement shall be upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns.
14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
15. Governing Law; Forum
15.1 This Agreement, its validity, construction and effect shall be
governed by and construed under the laws of the State of New York. All disputes,
controversies, differences or questions arising out of or relating to this
Agreement, or to the validity, interpretation, breach, violation or term
thereof, will be finally and solely determined and settled by an arbitrator in
New York, mutually agreed upon or appointed by the Parties.
15.2 Such arbitrator shall not be bound by the rules of evidence or civil
procedure but shall give written reasons for any decision. The signing of this
Agreement constitutes a an agreement to arbitrate under Article 75 of the New
York Civil Practice Law and Rules.
15.3 The arbitrator shall be authorized to render interim decisions and
partial verdicts and shall have the right to issue verdicts whether of law or
compromise.
15.4 In the absence of agreement between the Parties either shall have the
right to apply to American Arbitration Association, New York Office to appoint
an arbitrator to act in accordance with the provisions set out in this section
15.
16. Representation. Each Party acknowledges that they have had the opportunity
to consult with legal counsel respecting this Agreement. Each person executing
this Agreement on behalf of a corporation hereby represents and warrants that he
has been authorized to do so by all necessary corporate action.
5
<PAGE>
17. Non-Disparagement. None of the Parties(and their representatives,
successors, agents or respective officers, directors, employees, agents,
attorneys, insurers, successors and assigns) shall disparage the other Parties
hereto or their businesses.
IN WITNESS WHEREOF, each of the parties has set forth its/ his signature
as of the date first written above.
K&D Equities Inc. . TTR Technologies, Inc.
By: /s/ Steven DeVoss By: /s/ Marc D. Tokayer
------------------------------- ----------------------------------
Title: President Title: President
/s/ Isaac Winehouse
- -----------------------------------
Isaac Winehouse
TTR Technologies Ltd.
By: /s/ Marc D. Tokayer
----------------------------------
Title: President
Wall & Broad Equities Inc. Brounstein Aboudi Trustees Ltd.
By: /s/ Isaac Winehouse By: /s/ David Aboudi
------------------------------- ----------------------------------
Title: President
/s/ Joel Schneider
- -----------------------------------
Joel Schneider, as Escrow Agent
6
AGREEMENT
THIS AGREEMENT is made and entered into as of the 15th day of February,
2000 by and between TTR Technologies, Inc., a Delaware corporation (hereafter
"TTR" or the "Company") and Mantle International Investment Ltd. ( hereafter the
"Mantle").
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, Mantle represents that it is able to locate potential investors
in the Company who will invest an amount not less than $7,500,000 in gross
proceeds to the Company ("Investment");
WHEREAS, the Company desires remunerate the Mantle in the event that the
Investment takes place;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Compensation The Company hereby issues to Mantle the a warrant to purchase up
to 200,000 shares of common stock of the Company at an exercise price per share
of $2.75, all on the terms and conditions set forth in the Warrant attached
hereto as Exhibit A (the "Warrant"). The Warrant shall become exercisable upon
the closing of the Investment in the Company.
2. Proprietary Information;
2.1 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 Mantle 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 Mantle or
similar agreements by other Company Mantles or employees (c) shall have been
received by the Mantle from another person or entity having no obligation to the
Company or (d) is approved in writing by the Company for release by the Mantle.
<PAGE>
2.2 The Mantle 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.
2.3 The Mantle 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.
3. Registration
The Company has agreed to include the shares issuable upon the exercise of
the Warrant (the "Warrant Shares") 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.
3. General Provisions
3.1 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.
3.2 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Mantle relating to the subject thereof.
3.3 Mantle 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. Mantle is not, expressly
or by implication, an employee of the Company for any purpose whatsoever.
3.4 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. Mantle International Investment Ltd.
/s/ Marc D. Tokayer /s/ Benjamin Bloch
- --------------------- ------------------------------------
President
<PAGE>
Exhibit A
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
MANTLE INTERNATIONAL INVESTMENT LTD.
DATE:
WARRANT NO. __ 200,000 Shares of Common
Stock of TTR Technologies, Inc.
FOR VALUE RECEIVED, TTR TECHNOLOGIES INC., a Delaware company (the
"Company"), hereby grants to MANTLE INTERNATIONAL INVESTMENT LTD. (the
"Holder"), the right to purchase, subject to the terms and conditions hereof,
200,000 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 $2.75, 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 or in part at any time commencing
9:00 a.m., New York City time, on the date set forth above through January 31,
2001 (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, subject to the closing
of the Investment. As used herein,
<PAGE>
the term "Investment" shall mean the closing of a private investment in the
Company with gross proceeds equal to or exceeding $7,500,000.
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. If this warrant should
be exercised in part only, the Company shall, upon surrender of the Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder hereof to purchase the balance of the Shares purchasable hereunder.
1.3 Any stamp tax attributable to the issuance of the Shares shall be borne
solely by Holder.
2. Representations and Warranties
2.1 The Holder (i) represents, warrants, covenants and agrees that the Warrant
and the underlying Warrant Shares are being acquired by the Holder for the
Holder's own account, for investment purposes only, and not with a view to or
for sale in connection with any distribution thereof or with any present
intention of selling or distributing all or any part of the Warrant or the
underlying Warrant Shares thereof; (ii) understands (x) that if it should
thereafter decide to dispose of such Warrant or Warrant Shares (which it does
not contemplate at such time) it may do so only in compliance with the
Securities Act, (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. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the
<PAGE>
Company will execute and deliver a new Warrant of like tenor and date and any
such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to
any rights of a stockholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
6. Stock Dividends, Reclassifications, Reorganization, Anti-Dilution Provisions,
Etc.
6.1 In case prior to the expiration of this Warrant by exercise or by its terms
the Company shall issue any shares of its Common Stock as a stock dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases, the Exercise Price per share of the
Warrant Shares purchasable pursuant to this Warrant in effect at the time of
such action shall be proportionately reduced and the number of Warrant Shares
purchasable at that time shall be proportionately increased; and, conversely, in
the event the Company shall contract the number of outstanding shares of Common
Stock by combining such shares into a smaller number of shares, then, in such
case, the Exercise Price per share of the Warrant Shares purchasable pursuant to
this Warrant shall be proportionately decreased. Any dividend paid or
distributed upon the Common Stock in stock of any other class of securities
convertible into shares of Common Stock shall be treated as a dividend paid in
Common Stock to the extent that shares of Common Stock are issuable upon
conversion thereof.
6.2 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.
6.3 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
<PAGE>
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.
6.4 Upon the occurrence of each event requiring an adjustment of the Exercise
Price and the number of Warrant Shares purchasable at such adjusted Exercise
Price by reason of such event in accordance with the provision of this Section
6, the Company shall compute the adjusted Exercise Price and the adjusted number
of Warrant Shares purchasable at such adjusted Exercise Price by reason of such
event in accordance with the provisions of this Section 6 and shall prepare a
certificate setting forth such adjusted Exercise Price and the adjusted number
of Warrant Shares and showing in reasonable detail the facts upon which such
determination is made. The Company shall mail to the holder of this Warrant a
copy of such Certificate, and thereafter said certificate shall be conclusive
and shall be binding upon such holder unless contested by such holder in a
written notice furnished to the Company within 15 days of the receipt thereof
setting forth in reasonable detail the basis of such contention.
6.5 In case:
(a) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or any other distribution in
respect of the Common Stock (including cash), pursuant to without limitation,
any spin-off, split-off or distribution of the Company's assets; or
(b) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to subscribe for or purchase any shares of stock of
any class or to receive any other rights; or
(c) of any classification, reclassification or other reorganization of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, or conveyance of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up of
the Company;
then, and in any such case, the Company shall mail to the Holder, at least
twenty (20) days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend or distribution
of rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in said dividend on
distribution of rights, or shall be entitled to exchange their shares of Common
stock for securities or other property deliverable upon such classification,
<PAGE>
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation, or winding up, as the case may be. The failure to give
such notice shall not affect the validity of any such proceeding or transaction
and shall not affect the right of the holder of this Warrant to participate in
said dividend, distribution of rights, or any such exchange and acquire the kind
and amount of cash, securities or other property as the Holder would have been
entitled to acquire if it was the record holder of the Warrant Shares which
could be obtained upon the exercise of the Warrants immediately before such
proceeding or transaction; provided that the Holder exercises the Warrants
within 30 days after discovery that such action or proceeding has taken place.
6.6 In case the Company at any time while this Warrant shall remain unexpired
and unexercised, shall dissolve, liquidate, or wind up its affairs, the holder
of this Warrant may thereafter receive upon exercise hereof in lieu of each
share of Common Stock of the Company which it would have been entitled to
receive, the same kind and amount of any securities or assets as may be
issuable, distributable or payable upon any such dissolution, liquidation or
winding up with respect to each share of Common Stock of the Company.
7. Limited Transfer
7.1 The Company may treat the registered holder of record as the holder for all
purposes.
7.2 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, ASAMENDED, 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."
8. Registration Rights
The Holder understands that the Company is in the process of filing with
the Securities and Exchange Commission a registration statement under the
Securities Act relating to certain Company securities held by certain Company
shareholders or the holders of certain rights in Company securities, (the
"Registration Statement"). That Registration Statement is being filed pursuant
to the terms of a investment agreement between the Company and certain parties.
The Company agrees to include the
<PAGE>
Warrant Shares in the Registration Statement subject to the Holder executing any
lock up which all other selling shareholders shall be required to execute.
9. Representations and Warranties of the Company.
The Company represents and warrants to the holder as follows:
9.1 The Company is duly organized and, as of the date of the original issuance
hereof, validly existing and in good standing under the laws of the State of
Delaware.
9.2 The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuing Warrant
Shares upon the exercise of this Warrant, such shares as may be issuable upon
the exercise hereof.
9.3 The Warrant Shares, when issued and paid for in accordance with the terms of
this Warrant, will be fully paid and not assessable.
9.4 This Warrant has been duly authorized and approved by all required corporate
action by the Company and does not violate the certificate of incorporation or
the bylaws of the Company.
10. 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.
11. 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:________________
Marc. D. Tokayer
<PAGE>
ELECTION TO PURCHASE
TTR Technologies, 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,
Exhibit 10.51
AMENDMENT
Amendment to Employment Agreement dated December 1, 1994 as amended on December
15, 1996 between TTR Technologies Ltd. and Baruch Sollish (the "Agreement") made
this 22nd day of July, 1998.
1. Section 3.1 of the Agreement is hereby amended so that after the expiry of
the current term (other than for reasons set forth in clauses 3.1 (i) and (ii))
the Agreement shall automatically be renewed the for additional three (3) year
periods on the same terms and conditions set forth therein (unless mutually
agreed otherwise), unless either party elects not to renew the term of the
Agreement by giving written notice to the other at least 60 days before the
expiration date.
In Witness Whereof, the Parties have executed this Amendment on the date stated
above.
TTR Technologies Ltd.
/s/ Marc D. Tokayer /s/ Baruch Sollish
- ----------------------------------- ----------------------------------------
Marc D. Tokayer Baruch Sollish
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of TTR Technologies, Inc. (the "Company") (a
development-stage company), we hereby consent to the inclusion of our report,
dated March 1, 2000, on the Company's consolidated balance sheets as of December
31, 1999 and 1998 and the related consolidated statements of operations,
comprehensive loss, shareholders' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1999 and to the references to
our firm under the heading "Experts" in the Company's Registration Statement on
Form S-1 and related prospectus to be filed in March, 2000.
Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu
Tel Aviv, Israel
March 15, 2000
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<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements accompanying the filing of Form S-1 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
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0
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