SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
TTR TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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TTR TECHNOLOGIES, INC.
4424 16TH AVENUE
BROOKLYN, NEW YORK 11204
Notice of Annual Meeting of Stockholders
NOTICE IS HEREBY GIVEN that the 2004 annual meeting (the "Annual
Meeting") of stockholders of TTR TECHNOLOGIES, INC. (the "Company") will be held
at 9:30 A.M., on Tuesday, May 25, 2004, at the Company's offices at 4424 16th
Avenue, Brooklyn, New York, 11204, to:
(i) elect seven directors of the Company to hold office until their
respective successors shall have been duly elected and qualified;
(ii) to change the Company's corporate name from "TTR Technologies,
Inc." to "Amedia Networks, Inc." and to amend the Company's Certificate of
Incorporation to effect the change in corporate name; and
(iii) increase the number of shares of Common Stock, reserved for
issuance under the Company's 2000 Equity Incentive Plan from 3,500,000 to
5,000,000 shares;
(iv) increase the number of shares of Common Stock, reserved for
issuance under the Company's 2002 Non-Employee Directors Stock Option Plan from
275,000 to 1,000,000 shares;
(v) approve an amendment to the Company's amended and restated
certificate of incorporation to effect a reverse stock split of the Company's
common stock in the range of 1:3 to 1:6, as determined in the sole discretion of
the Board, which discretion will be used SOLELY for the purpose of qualifying
for quotation on the Nasdaq National Market, SmallCap Market or the American
Stock Exchange and ONLY following satisfaction by the Company of all listing
requirements but for the minimum per share price, and the Board determines that
it is in the best interests of the Company and the Stockholders to be listed on
such exchange;
(vi) ratify the appointment of Marcum & Kliegman LLP as independent
public accountants of the Company for the year ending December 31, 2004; and
(vii) transact such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on April 20,
2004, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting or any adjournment thereof.
If you do not expect to be personally present at the Annual Meeting but
wish your stock to be voted for the business to be transacted thereat, the Board
of Directors requests that you complete, sign and date the enclosed proxy and
promptly return it by mail in the postage paid envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS
FRANK GALUPPO,
Chief Executive Officer
April 28, 2004
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
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TTR TECHNOLOGIES, INC.
4424 16TH AVENUE
BROOKLYN, NEW YORK 11204
PROXY STATEMENT
For the Annual Meeting of Stockholders
to be held on Tuesday, May 25, 2004
This Proxy Statement is being sent to stockholders of TTR Technologies,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors" or
the "Board") of the Company for use at the 2004 annual meeting (the "Annual
Meeting") of stockholders (the "Stockholders") of the Company's common stock,
par value $0.001 per share (the "Common Stock"), to be held at the Company's
offices at 4424 16th Avenue, Brooklyn, New York, 11204, on Tuesday, May 25,
2004, at 9:30 a.m., and any adjournment(s) thereof. The purposes of the Annual
Meeting are to:
(i) elect seven directors of the Company to hold office until their
respective successors shall have been duly elected and qualified;
(ii) amend the Certificate of Incorporation of the Company to change the
Company's corporate name from "TTR Technologies, Inc." to "Amedia Networks,
Inc.";
(iii) increase the number of shares of Common Stock, reserved for
issuance under the Company's 2000 Equity Incentive Plan (the "2000 Plan") from
3,500,000 to 5,000,000 shares;
(iv) increase the number of shares of Common Stock, reserved for
issuance under the Company's 2002 Non-Employee Directors Stock Option Plan from
275,000 to 1,000,000 (the "2002 Directors Plan");
(v) approve an amendment to the Company's amended and restated
certificate of incorporation to effect a reverse stock split ("Reverse Split")
of the Company's common stock in the range of 1:3 to 1:6, as determined in the
sole discretion of the Company's Board, which discretion will be used SOLELY for
the purpose of qualifying for quotation on the Nasdaq National Market, SmallCap
Market or the American Stock Exchange and ONLY following satisfaction by the
Company of all listing requirements but for the minimum per share price, and the
Board determines that it is in the best interests of the Company and the
Stockholders to be listed on such exchange;
(iv) ratify the appointment of Marcum & Kliegman, LLP ("Marcum") as
independent public accountants of the Company for the year ending December 31,
2004; and
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted as
instructed on the proxy. If no instructions are given, the individuals named as
proxies will vote your
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shares (i) FOR the election as directors of the nominees of the Board of
Directors named below; (ii) FOR the proposal to amend the Certificate of
Incorporation to change the name of the Company; (iii) FOR the proposal to
increase the number of shares of Common Stock, reserved for issuance under the
2000 Plan (iv) FOR the proposal to increase the number of shares of Common
Stock, reserved for issuance under the Company's 2002 Directors Plan (v) FOR the
Reverse Split; (vi) FOR the ratification the appointment of Marcum, as
independent public accountants of the Company for the year ending December 31,
2004; and (vii) in the discretion of the Proxies named in the proxy card on any
other proposals to properly come before the Annual Meeting or any adjournment
thereof.
Any stockholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise by filing with the Secretary of the Company a
duly executed proxy bearing a later date or a written instrument revoking the
proxy or by personally appearing at the Annual Meeting.
This Proxy Statement is first being mailed to stockholders on or about
April 29, 2004.
VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
Common Stock. Only holders of Common Stock of record at the close of business
on, April 20, 2004 (the "Record Date"), will be entitled to receive notice of
and to vote at the Annual Meeting. As of the Record Date, the Company had
outstanding a total of 16,440,330 shares of Common Stock. Each holder of Common
Stock is entitled to one vote for each share held.
The holders of a majority of the issued and outstanding Common Stock,
present in person or by proxy at the Annual Meeting, will constitute a quorum
for the transaction of business at the Annual Meeting or any adjournment
thereof. Abstentions and broker non-votes are counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
Assuming a quorum is present, the affirmative vote of a plurality of the shares
present in person or by proxy is required for approval of Proposal No. 1
(Election of Directors); the affirmative vote of a majority of the shares issued
and outstanding is required for approval of Proposal No. 2 (Change the name of
the Company) and Proposal No. 5 (Reverse Split). , The affirmative vote of a
majority of the shares present in person or by proxy is required for approval of
Proposal Nos. 3 (Increase in the number of shares available under the 2000
Plan), 4 (Increase in the number of shares available under the 2002 Director's
Plan) and (Ratification of Independent Public Accountants). Abstentions will
have no effect on Proposal No. 1 and will be counted as votes against each of
Proposals Nos. 2,3,4 and 5. Broker non-votes will have no effect on Proposals
No. 1 and 4 and will be counted as votes against Proposal Nos. 2.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL HOLDERS
The following table sets forth certain information, as of the Record
Date, concerning the ownership of the Common Stock by (a) each person who, to
the best of the Company's knowledge, beneficially owned on that date more than
5% of the outstanding Common Stock, (b) each of the Company's directors and
Named
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Executive Officers (as defined under "Executive Compensation") and (c) all
current directors and executive officers of the Company as a group.
Number of Shares Percent of
Name of Beneficial Owner (1) Beneficially Owned (2) Common Stock (2)
Frank Galuppo, Chief Executive Officer
And Director (3) 109,604 (4) 0.7%
Sam Brill, Vice President, Internal Operations
and Director 250,000 (5) 1.5%
Juan Mendez, Director 1,163,626 (6) 7.0%
Judah Marvin Feigenbaum, former interim Chief
Executive Officer and former director 164,406 (7) 1.0%
Richard Rosenblum, Director 164,406 (8) 1.0%
Yokim Asset Management Corp. 1,635,468 (9) 9.9%
Ronald Durando 1,620,000 (10) 9.85%
Puritan LLC 1,533,334 (11) 9.3%
Melton Management Limited 1,405,275 (12) 8.5%
All directors and executive officers as
a group(4 persons) 1,687,636 9.9%
* Indicates less than 1%.
(1) Unless otherwise indicated, the address of each person listed is c/o
TTR Technologies, Inc., 4424 16th Avenue, Brooklyn, New York 11204.
(2) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission (the "SEC") and generally includes voting
or investment power with respect to securities. In accordance with SEC rules,
shares of Common Stock issuable upon the exercise of options or warrants which
are currently exercisable or which become exercisable within 60 days of the
Record Date are deemed to be beneficially owned by, and outstanding with respect
to, the holder of such options or warrants. Except as indicated by footnote, and
subject to community property laws where applicable, to the knowledge of the
Company, each person listed is believed to have sole voting and investment power
with respect to all shares of Common Stock owned by such person.
(3) Mr. Galuppo was appointed Chief Executive Officer and became a
director as of March 15, 2004.
(4) Represents shares of Common Stock issuable upon the exercise of
currently exercisable employee stock options issued under the Company's 2000
Equity Incentive Plan. Does not include options for an additional 1,205,646
shares of Common Stock scheduled to vest over the next two and half years.
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(5) Represents shares of Common Stock issuable upon the exercise of
currently exercisable employee stock options issued under the Company's 2000
Equity Incentive Plan.
(6) Includes (i) 999,220 shares of Common Stock and (ii) 164,406 shares
of Common Stock issuable upon exercise of currently exercisable non-plan
options. The foregoing is based on the Schedule 13D filed by the stockholder on
February 11, 2004.
(7) Represents shares of Common Stock issuable upon exercise of
currently exercisable non-plan options. Mr. Feigenbaum resigned from all
position held with the Company in January 2004.
(8) Represents shares of Common Stock issuable upon exercise of
currently exercisable non-plan options.
(9) The address of such person is Akara Building, 24 De Castro Street,
Wickhams Cay I, Road Town, Tortola, British Virgin Islands. The foregoing is
based on a Schedule 13D (Amended) filed by the stockholder on June 30, 2003.
(10) The address of such person is 43 Alexander Avenue, Nutley, New
Jersey 07110. The foregoing is based on a Schedule 13G filed by the stockholder
on January 26, 2004.
(11) The stockholder is a limited liability company. The address of such
person is 314 McDonald Avenue, Brooklyn, New York 11218. The foregoing is based
on a Schedule 13D filed by the stockholder on August 14, 2003.
(12) The address of such person is P.O. Box 3161, Road Town, Tortola,
British Virgin Islands. The foregoing is based on a Schedule 13G filed by the
stockholder on October 8, 2003.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by the Company's
Chief Executive Officer and the most highly compensated executive officers and
key employees of the Company whose total annual salaries and bonuses exceeded
$100,000 for the year ended December 31, 2003 (the "Named Executive Officers"):
Annual Compensation Long-Term Compensation
------------------------------------------- ------------------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options (#)(1) Compensation ($)
- ------------------ ---- --------- -------- ------------------ -------------- ----------------
Sam Brill 2003 170,000 68,000 -- -- --
Vice President, Internal 2002 157,226 -- -- -- --
Operations and former 2001 14,423 -- -- 250,000 --
Chief Operating
Officer (2)
Daniel C. Stein 2003 184,615 108,000 -- -- 145,000(4)
Former CEO and 2002 159,414 -- -- 550,000 (5) 34,224(6)
President (3) 2001 -- -- -- -- --
Judah Marvin Feigenbaum 2003 11,000 -- -- -- --
Former interim CEO (7) 2002 -- -- -- -- --
2003 -- -- -- -- --
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(1) Represents shares of Common Stock issuable upon exercise of employee
stock options issued in the year indicated under the Company's 2000 Equity
Incentive Plan.
(2) Mr. Brill resigned from the position of Chief Operating Officer as
of April 11, 2004, whereupon he assumed the non-executive position of
Vice-President, Internal Operations.
(3) Mr. Stein resigned from the Company's employment and directorship as
of October 10, 2003.
(4) Comprised of (i) $78,000 paid to Mr. Stein in connection with his
resignation from the Company in October 2003 and (ii) the balance of
approximately $67,000 in principal amount of a three year loan in the principal
amount of $100,000 made by the Company to Mr. Stein in May 2002 in connection
with his employment, with interest accruing at the rate of 4% per annum. The
Company agreed that, at the end of each calendar year beginning December 31,
2002, it would forgive one-third of the loan (and the related accrued interest
thereon) as additional compensation, except under certain conditions. The
balance of loan was forgiven upon Mr. Stein's resignation in October 2002 in
accordance with its terms.
(5) Upon Mr. Stein's resignation in October 2003, these options were
forfeited by him.
(6) Represents principal amount of the three-year loan in the principal
amount of $100,000 made by the Company to Mr. Stein in May 2002 in connection
with his employment and discussed in footnote 6 above.
(7) Mr. Feigenbaum was appointed acting Chief Executive Officer as of
October 10, 2003 upon Mr. Stein's resignation. Mr. Feigenbaum resigned from the
Company's employment and directorship as of January 29, 2004.
OPTION GRANTS IN 2003
There were no option grants during the year ended December 31, 2003 to
any of the Named Executive Officers.
AGGREGATE OPTIONS EXERCISED IN 2003 AND 2003 YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at Fiscal Year At Fiscal Year End ($)
Acquired on Realized End (#) Exercisable/
Name Exercise (#) ($) Exercisable/Unexercisable Unexercisable (1)
- ---- ------------- --- ------------------------- -----------------
Sam Brill -- -- 250,000/0 0/0
(1) Based upon the difference between the exercise price of such options and
the closing price of the Common Stock ($0.33) on December 31, 2003, as
reported on the Over-The-Counter Market.
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EMPLOYMENT AGREEMENTS
On May 2, 2002, the Company entered into a three-year employment
agreement with Daniel C. Stein as Chief Executive Officer. The agreement
provided for an annual base salary of $240,000 with increases of 10% per annum
provided that the previous year's gross revenues are greater than the base
salary. The agreement further provided that if Mr. Stein were to be terminated
other than for cause (as defined in the employment agreement) or if Mr. Stein
were to terminate his employment for good reason (as defined in the employment
agreement), he would be entitled to receive the equivalent of base salary and
benefits through the remaining term of his agreement.
Mr. Stein resigned from the position of Chief Executive Officer in
October 2003 from all other positions held with the Company. In connection with
his resignation, the Company paid to Mr. Stein a one-time gross payment of
$78,000 under the terms of his Termination and Settlement Agreement with the
Company. Additionally, in consideration of Mr. Stein's waiver of certain claims
under his employment agreement, the outstanding balance of approximately $67,000
of the advance of $100,000 made to Mr. Stein upon the commencement of his
employment in May 2002 was extinguished. The initial one-third of such advance
(approximately $33,000) was, consistent with the terms of Mr. Stein's employment
agreement, extinguished at year-end 2002. In addition, the 550,000 stock options
held by Mr. Stein were extinguished and are no longer exercisable.
In connection with Sam Brill's promotion in April 2002 to Chief
Operating Officer (from Vice President, Corporate Strategy), on May 27, 2002 the
Company and Mr. Brill entered into an amended and restated three-year employment
agreement, which provides for an annual base salary of $170,000. If Mr. Brill is
terminated other than for cause (as defined in the employment agreement) or if
Mr. Brill terminates his employment for good reason (as defined in the
employment agreement), he will be entitled to receive the equivalent of base
salary and benefits through the remaining term of his agreement. Additionally,
upon (and subject to) the consummation of the sale of the Copy Protection
Business, then all outstanding stock options will vest and become exercisable.
On April 5, 2004, Mr. Brill resigned from the position of Chief
Operating Officer and assumed the non-executive position of Vice President,
Internal Operations. See "Certain Relationships and Related Transactions."
Each of the executives with an agreement has agreed to certain customary
confidentiality and non-compete provisions that prohibit him from competing with
the Company for one year, or soliciting our employees for one year, following
the termination of his employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with his resignation as the Company's Chief Operating
Officer on April 5, 2004 and in consideration of the release of certain rights,
the Company paid to Mr. Sam Brill, the Company's Vice President, Internal
Operations and a director, the gross amount of $75,000, less payroll deductions.
The Company and Mr. Brill also entered into an employment agreement, commencing
as of April 5, 2003 and continuing through September 30, 2004, pursuant to which
Mr. Brill is employed as
8
the Company's Vice-President, Internal Operations, at a monthly rate of $7,500.
The agreement may be extended for successive one month periods unless either the
Company or Mr. Brill notifies the other prior to the expiration of the agreement
of its election to not so extend.
The Company and Mr. Frank Galuppo, the Company's Chief Executive officer
and a director, entered into three year employment agreement, effective as of
March 15, 2004, pursuant to which Mr. Galuppo is paid an annual salary at the
rate of $180,000. Mr. Galuppo's salary is scheduled to increase to $210,000 for
the second year of employment and to $235,000 for the third year of employment.
The agreement further provided that if Mr. Galuppo's employment is terminated
other than for cause (as defined in the employment agreement) or if Mr. Galuppo
terminates his employment for good reason (as defined in the employment
agreement), he will be entitled to receive the equivalent of three months' base
salary and benefits, if such termination takes place during the first 12 months
of the effective date of the agreement. If such termination takes place after
the first year of employment, then Mr. Galuppo will be entitled to receive the
equivalent of six months' base salary and benefits. The Company also issued to
Mr. Galuppo option under the Company's 2000 Equity Incentive Plan to purchase up
to 1,315,250 shares of the Company's Common Stock at a per share exercise price
of $0.79, which option is scheduled to vest over 12 succeeding quarters,
beginning June 30, 2004.
In connection with his employment by the Company in November 2001, Mr.
Brill was granted 250,000 options under the 2000 Equity Incentive Plan,
originally scheduled to vest periodically through May 2005. Upon the closing of
the sale of the Company's copy protection business in May 2003, the options
vested and became exercisable in their entirety.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires officers and directors of
the Company and persons who own more than ten percent of the Common Stock, to
file initial statements of beneficial ownership (Form 3), and statements of
changes in beneficial ownership (Forms 4 or 5), of Common Stock with the SEC.
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all such forms they file.
Based solely on review of the copies of such forms received by the
Company with respect to 2003, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors and officers and persons who own more than 10% of a registered class
of the Company's equity securities have been complied with.
PERFORMANCE GRAPH
The following graph compares, for the period of five years commencing on
December 31, 1998 through December 31, 2003, the cumulative stockholder return
for the Company, the Russell 2000 Index ("Russell 2000 Index") and the Russell
2000-Technology Index ("Russell 2000-Technology Index"). The Russell 2000 Index
is comprised of the 2,000 publicly traded companies with market capitalizations
ranked immediately below the 1,000 companies with the highest market
capitalizations. The Russell 2000-Technology Index is comprised of the 2000
publicly
9
traded companies in the high-technology industry with market capitalizations
ranked immediately below the 1,000 companies in the high-technology industry
with the highest market capitalizations. The graph assumes that $100 was
invested on January 1, 1998 in the Common Stock, the Russell 2000 and the
Russell 2000-Technology Index, and further assumes no payment or reinvestment of
dividends. The Common Stock is quoted on the Over-The-Counter-Bulletin Board.
From February 7, 2001 to January 8, 2003, the Common Stock was quoted on the
Nasdaq National Market. From October 23, 2000 until February 2, 2001, the Common
Stock was quoted on the Nasdaq SmallCap Market. Prior to October 23, 2000, the
Common Stock was quoted on the over-the-counter Bulletin Board market.
The graph shall not be deemed filed or incorporated by reference I to
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934.
[CHART]
Cumulative Total Return ($) Based Upon an Initial Investment of $100 on
December 31, 1998.
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
The Company 100 535.71 618.75 163.39 16.52 29.46
Russell 2000 Index 100 119.62 114.60 115.77 90.79 131.99
Russell 2000-
Technology Index 100 205.01 122.07 94.59 50.89 84.29
PROPOSAL NO. 1
ELECTION OF DIRECTORS
INFORMATION AS TO NOMINEES FOR DIRECTOR
The persons named below, all of who are current directors of the
Company, have been nominated for election as directors by the Board of
Directors. If elected, each nominee will hold office until the next annual
meeting of the stockholders.
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It is the intention of the persons named in the accompanying proxy to
vote FOR the election of the seven persons named in the table below as directors
of the Company, unless authority to do so is withheld. Proxies cannot be voted
for a greater number of persons than the nominees named. If events not now known
or anticipated make any of the nominees unwilling or unable to serve, the
proxies will be voted (in the discretion of the holders of such proxies) for
other nominees not named herein in lieu of those unwilling or unable to serve.
The Board is not aware of any circumstances likely to cause any nominee to
become unavailable for election.
The following table sets forth the name, age and position of each
Director nominee:
Name Age Position
Frank Galuppo 57 Chief Executive Officer, Director
Sam Brill 30 Vice President, Internal Operations
And Director
Juan Mendez 40 Director
Richard Rosenblum 45 Director
Gerald Butters 60 Director Nominee
Bob Martin 61 Director Nominee
Ivan Berkowitz 58 Director Nominee
The business experience, principal occupations and employment, as well
as the periods of service, of each of the Company's directors and executive
officers during at least the last five years are set forth below.
FRANK GALUPPO has been a director and Chief Executive Officer since
March 15, 2004. Mr. Galuppo possesses nearly 40 years of experience in the
Telecommunications Industry, serving in a number of senior management positions
with Lucent Technologies and AT&T. From March 2003 until he began his employment
with the Company, Mr. Galuppo had been assisting several companies with business
development support in the U.S. Government market where he has extensive sales
experience. Mr. Galuppo was employed by Lucent since its formation in September
1996 until March 2003 in a series of management level and operational positions.
His most recent role at Lucent was President of Lucent's Optical Networking
Group, which he held since September 2002 and had worldwide responsibility for
the development and marketing of Lucent's global optical portfolio which had
annual sales of over $1 billion.
SAM BRILL has been a director of the Company since February 2002 and the
Chief Operating Officer from April 15, 2002 through April 5, 2004, the date of
his resignation from such position. Mr. Brill currently serves as the Company's
Vice President, Internal Operations. From November 2001 to immediately prior to
his appointment as Chief Operating Officer, he served as the Company's
Vice-President, Corporate Strategy. Prior to joining the Company, from February
1998 through November 2001 Mr. Brill was employed by JDS Capital Management,
Inc., a New
11
York based hedge fund and an affiliate of the Company's largest stockholder,
where he worked as a Senior Financial Analyst evaluating for market viability
and investment potential a diverse group of public and private companies. Mr.
Brill received a BS in Finance, cum laude, in January 1998 from Touro College.
JUAN MENDEZ has been a director of the Company since July 28, 2003. Mr.
Mendez is President, Chief Executive Officer and co-founder of Total Claims
Management, Inc., a privately held company based in Miami, Florida. Mr. Mendez
has held that position since March 1999. Prior to co-founding Total Claims
Management, Inc., Mr. Mendez was a Public Insurance Adjuster from 1996 to 1999.
RICHARD ROSENBLUM has been a director of the Company since September 3,
2003. Since July 2001, Mr. Rosenblum has been the Managing Director of
Investment Banking for vFinance Investments in New York, where he is responsible
for advising, structuring and financing publicly and privately held companies.
Additionally, Mr. Rosenblum is currently a Senior Managing Partner at ACP
Advisors in New York, where he is responsible for advising and raising capital
for emerging growth companies. Prior to joining vFinance Investments and ACP
Advisors, Mr. Rosenblum was a Managing Director at Robb Peck McCooey Financial
Services, Inc. in New York since April 1999.
GERALD BUTTERS is a communications industry veteran with more than 39
years experience in this sector. His career encompasses senior executive
positions at Nortel Networks, AT&T, and Lucent Technologies. These include
Chairman of the Board of AGCS (a joint venture of GTE and AT&T), President of
NTI (a Nortel Networks US subsidiary). He was President of Global Public
Networks at AT&T Network Systems from October 1997 to November 1999, President
of the Optical Networks Group at Lucent Technologies from December 1999 to
August 2000 and Senior Vice President Marketing and Technology at Lucent
Technologies. Mr. Butters retired from Lucent Technologies in August 2000. Since
August 2000 through the present time, Mr. Butters has been a board director of
Lambda Optical Systems a privately held company since October 2003 and a
technical advisor to several privately held technology firms.
BOB MARTIN retired as the Chief Technology Officer of Lucent
Technologies' Bell Laboratories in September 2003, a position he held for seven
years. In this role, he helped guide Lucent's directions in next generation
networks and in approaches the company used for research and development. His
background at Bell Laboratories and Bellcore included a variety of positions
related to large systems development. He has been responsible for Unix, network
management systems, intelligent network systems, packet switching, and broadband
access systems developments. Bob received his Bachelor of Science in Electrical
Engineering from Brown University in 1964, and his Master of Science and Doctor
of Philosophy degrees in Electrical Engineering and Computer Science from
Massachusetts Institute of Technology in 1965 and 1967, respectively. In 1985,
he attended the MIT Alfred P. Sloan School Senior Executive Program. A Fellow of
the Institute of Electrical and Electronics Engineers, Bob was member and first
chair of its Software Industrial Advisory Board. He has served on the National
Research Council's Computer Science and Telecommunications Board and the FCC's
Technological Advisory Board. He is on technical advisory boards for venture
capitalist's and startups in telecommunications, optical devices & product
innovation.
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Ivan Berkowitz, Ph.D. has over 30 years of professional experience in
the financial and real estate industries, Dr. Berkowitz has acted as an
international corporate advisor on matters that pertain to corporate structure
and governance, transfer pricing, EEC anti-trust law, mergers and international
syndication. He holds a Ph.D. in International Law from Cambridge University, an
M.B.A. in Finance from Baruch College and a B.A. in Economics from Brooklyn
College. Currently, Dr. Berkowitz serves as Vice Chairman of the Board of
Directors for New Visual Corp. (OTC: NVEI). Since August 2003, Dr. Berkowitz has
also been Chairman of the Board of Directors for Great Court Capital. Prior to
its sale in 2003, Dr. Berkowitz was a senior managing partner of Avatar
Associates, a New York-headquartered institutional asset management firm
managing $1.7 billion in assets. Since 1993, Dr. Berkowitz has served as
Managing General Partner of Steib & Company, a privately-held New York-based
investment company. Additionally, from 1997 through 2002, Dr. Berkowitz served
as President of Great Court Holdings, also a privately-held New York-based
investment company. Between 1995 and 1997, Dr. Berkowitz led Polyvision
Corporation (recently acquired by Steelcase) as its Chief Executive Officer.
There are no family relationships between any of the above executive
officers or directors, and there is no arrangement or understanding between any
of the above executive officers or directors and any other person pursuant to
which the officer or director was elected to hold office.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of a successor.
DIRECTOR RESIGNATIONS
Michael Paolucci, a non-employee director, resigned from the Board in
July 2003 and was replaced by Juan Mendez. Joel Schoenfeld and Richard
Gottehrer, non-employee directors, resigned from the Board in August 2003 and
were replaced by Judah Feigenbaum. Neil Subin, a non-employee director, resigned
from the Board in September 2003 and was replaced by Richard Rosenblum. Mr.
Danny Stein, the Company's former Chief Executive Officer and a director,
resigned from the Board and from all other position held with the Company in
October 2003. Mr. Judah Feigenbaum, the Company's former interim Chief Executive
Officer and a director, resigned from the Board and from all other position held
with the Company in January 2004.
DIRECTOR COMPENSATION
CASH COMPENSATION: Each of the non-employee directors was paid a monthly
cash payment of $2,000 in 2003 for serving on the Board. The Company also
reimbursed directors for reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors and any meetings of its committees.
OPTION GRANTS: In February 2004, the Board granted to each of Messrs.
Mendez and Rosenblum options to purchase up to 164,406 shares of the Company's
Common Stock at a per share exercise price of $0.56. The options were vested
upon grant.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
13
The Board met 19 times during the year ended December 31, 2003. No
director who served during the 2003 fiscal year attended fewer than 75% of the
meetings of the Board and of committees of the Board of which he was a member.
The Board does not have a formal policy with respect to attendance by
Board members at annual stockholder meetings, although it encourages directors
to attend such meetings. The Company did not hold an annual meeting in 2003.
BOARD COMMITTEES
The Company has two standing committees: the audit committee (the "Audit
Committee") and the compensation/stock option committee (the "Compensation/Stock
Option Committee").
The Company currently does not have a nominating committee. Instead,
nominations for the election of directors have been handled by the full Board of
Directors, which permits all directors to participate in the process. Due to the
small size of the Company and its Board of Directors, the Company believes that
this is appropriate.
In identifying and evaluating candidates to be nominated as directors,
the Board seeks individuals with stated relevant experience that can add to the
ability of the Board to fulfill its fiduciary obligations and its stated
business goals. Director candidates must also have high personal and
professional ethics, integrity and values. Additionally, director nominees must
have sufficient time to devote to the Company's affairs.
As a small company, the Company has generally used an informal process
to identify and evaluate director candidates. The Company has encouraged both
independent directors and directors that are not independent to identify
nominees for the Board of Directors. The Company has not paid any third party a
fee to assist in the nomination process or to identify or evaluate candidates.
The Company will consider candidates that are nominated by its
stockholders. The name, together with the business experience and other relevant
background information of a candidate, should be sent to the Chief Executive
Officer who will then forward such information to the independent directors for
their review and consideration. The process for determining whether to nominate
a director candidate put forth by a stockholder is the same as that used for
reviewing candidates submitted by directors. Other than candidates submitted by
its directors and executive officers, the Company has never received a proposed
candidate for nomination from any security holder that beneficially owned more
than 5% of the Company's voting Common Stock.
The Company has not, to date, implemented a policy or procedure by which
its stockholders can communicate directly with its directors. Due to the small
size of the Company and its resources, the Company believes that this is
appropriate.
AUDIT COMMITTEE
14
The Audit Committee is responsible for selecting the Company's
independent auditors, reviewing the Company's accounting policies, financial
procedures and internal controls, the engagement of independent auditors and the
general scope of the annual audit and any other services that the auditors may
be asked to perform, and review with the auditors their report on the Company's
financial statements following the completion of each audit.
The Audit Committee currently consists of Juan Mendez and Richard
Rosenblum. The Company believes that each of Messrs. Mendez and Rosenblum meet
the independence criteria set out in Rule 4200 of the Marketplace Rules of the
National Association of Securities Dealers ("NASD") and the rules of the and
other requirements of the Securities and Exchange Commission ("SEC").
The Board has not made a determination whether any existing audit
committee member is an "audit committee financial expert" as the term is defined
in the SEC rules. It is difficult for a company with a financial profile such as
ours to attract and to afford a director who qualifies as an audit committee
financial expert". The Board intends to make such determination during fiscal
2004. In the event that the Company determines that it does not have a qualified
individual, it will consider retaining over fiscal 2004 an appropriate candidate
who qualifies as an audit committee financial expert. It may however be
difficult for a company with a financial profile such as ours to attract and to
afford a director who qualifies as a financial expert.
Mr. Mendez was appointed to the Audit Committee in October 2003 and Mr.
Rosenblum was appointed in September 2003, shortly following their appointment
to the Board of Directors. Until September 2003, the Audit Committee was
comprised of Neil Subin, Joel Schoenfeld and Michael Paolucci, until their
resignation from the Board in, respectively, September 2003, August 2003 and
July 2003.
In 2003, the Audit Committee has held four meetings.
The Company's Board of Directors has adopted in January 2003 a charter
governing the duties and responsibilities of the audit committee. A copy of such
charter is attached hereto as Appendix A.
COMPENSATION COMMITTEE
The Compensation/Stock Option Committee is responsible for reviewing the
compensation arrangements in effect for the Company's executive officers and for
administering the Company's 2000 Incentive Plan. This committee held two
meetings in 2003. This committee currently consists of two members Juan Mendez
and Richard Rosenblum.
Mr. Mendez was appointed to the Compensation/Stock Option Committee in
September 2003 and Mr. Rosenblum was appointed in September 2003, shortly
following their appointment to the Board of Directors. Until September 2003, the
Compensation/Stock Option Committee was comprised of Neil Subin and Joel
Schoenfeld until their resignation from the Board in, respectively, September
and August 2003.
None of the members of the Compensation Committee was employed by the
Company or any of its subsidiaries or had any other relationship requiring
disclosure
15
by the Company under any paragraph of Item 404 of Regulation S-K.
REPORT OF THE COMPENSATION COMMITTEE
The following report of the Compensation Committee is provided solely to
the stockholders of the Company pursuant to the requirements of Schedule 14A
promulgated under the Securities Exchange Act of 1934, and shall not be deemed
to be "filed" with the SEC for the purpose of establishing statutory liability.
Unless otherwise specifically incorporated by reference, this report shall not
be deemed to be incorporated by reference in any document previously or
subsequently filed with the SEC that incorporates by reference all or any
portion of this Proxy Statement
The Compensation/Stock Option Committee of the Board of Directors (the
"Compensation Committee") evaluates compensation levels of senior management and
evaluates the various factors affecting compensation of the Company highest paid
officers. The Compensation Committee believes that compensation to the Company's
executive officers should be designed to encourage and reward management's
efforts to further strengthen the Company's business and to create added value
for stockholders. Such a compensation program helps to achieve the Company's
business and financial objectives and also provides incentives needed to attract
and retain well-qualified executives. The Company operates in a competitive
marketplace and needs to attract and retain highly qualified senior management
and executive personnel in order for the Company to achieve its goals of growth.
The Compensation Committee believes that the chief executive officer's
compensation should be heavily influenced by Company performance. The base
salary for Mr. Stein, who served as Chief Executive Officer until his
resignation in October 2003, was fixed with reference to his experience,
responsibilities and performance and the competitive marketplace. The
Compensation Committee will determine the appropriate level of bonuses and
increases for the Chief Executive Officer, if any, based in large part on
Company performance. The Compensation Committee also considers the salaries of
chief executive officers of comparably-sized companies and their performance.
Stock options will be granted to the Chief Executive Officer, primarily based on
the executive's ability to influence the Company's long-term growth.
The Compensation Committee has similar policies with respect to
compensation of other officers of the Company. The Compensation Committee
believes that the base salaries of current officers are within the range of
salaries for persons holding positions of similar responsibility at other
companies. In addition, the Compensation Committee intends to consider factors
such as relative Company performance, the executive's past performance and
future potential in establishing the base salaries of executive officers.
The philosophy of granting stock options to the other officers is
similar to that for options granted to the Chief Executive Officer, and is
determined by the subjective evaluation of the executive's ability to influence
the Company's long-term growth. There were no option grants to any officer
during 2003. The Compensation Committee views stock options as an important
component of its long-term, performance-based compensation philosophy. The
Compensation Committee will endeavor, to the extent that it deems consistent
with the best interests of the Company and its stockholders, to cause the awards
of any options under the 2000 Incentive Plan
16
to comply with the requirements of Section 162(m) of the Internal Revenue Code.
Each of Neil Subin and Joel Schoenfeld was a member of the Compensation
Committee from September 2002 through their respective dates of resignation from
the Board in September 2003 and August 2003.
April 16, 2004
COMPENSATION COMMITTEE
Richard Rosenblum
Juan Mendez
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other into any other Company filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, except to the
extent the Company specifically incorporates this report by reference therein.
The Audit Committee acts under a written charter, which was adopted by
the Board of Directors in January 2003. The charter, which includes standards
set forth in SEC regulations and rules of the National Association of Securities
Dealers, Inc. includes assisting the Company with:
o auditing and integrity of the Company's financial statements;
o qualification and independence of the Company's independent
accountants;
o performance of the Company's independent accountants;
o compliance by the Company with legal and regulatory requirements
as promulgated by the SEC; and
o accounting and financial reporting process.
As part of its auditing and integrity of the Company's financial
statements, the Audit Committee reviewed and discussed with both management and
the Company's independent accountants all financial statements prior to their
issuance. Management advised the audit committee in all cases that all financial
statements were prepared in accordance with generally accepted accounting
principals and reviewed any significant accounting issues with the audit
committee. These reviews included discussion with the independent accountant of
matters required to be discussed pursuant to Statement on Auditing Standards No.
61 (Communication with Audit Committees).
The Audit Committee also discussed with the Company's independent
accountants matters relating to its independence, including a review of audit
fees and the disclosures made to the Audit Committee pursuant to Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
Taking all of these reviews and discussions into account, the audit
committee recommended to the Board of Directors that the Board approve the
inclusion of the
17
Company's audited financial statements in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003, for filing with the Securities
and Exchange Commission.
Judah Marvin Feigenbaum was a member of the Audit Committee from
September 2003 through January 2004, when he resigned from the Board of
Directors of the Company.
Each of Neil Subin, Joel Schoenfeld and Michael Paolucci, was a member
of the Audit Committee from September 2002 through their respective dates of
resignation from the Board in September 2003, August 2003 and July 2003.
Dated: April 16, 2004
AUDIT COMMITTEE
Juan Mendez
Richard Rosenblum
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ELECTION OF ALL OF THE NOMINEES TO THE BOARD OF DIRECTORS.
PROPOSAL NO. 2
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO
CHANGE THE COMPANY'S CORPORATE NAME FROM "TTR
TECHNOLOGIES, INC. " TO "AMEDIA NETWORKS, INC. "
In March 2004 the Company embarked on its new business direction in the
telecommunications equipment field following stockholder approval of the
Development and Licensing Agreement entered into by the Company and Lucent
Technologies, Inc. ("Lucent"). Pursuant to the agreement, Lucent agreed to
develop for and license to the Company next-generation management and routing
technologies and equipment designed to provide Fiber-to-the-Premises (FTTP)
capabilities for voice, video, data, and voice-over-Internet protocol (VoIP)
services.
In order to reflect the change in the Company's business direction
following the sale of its copy protection business in May 2003, the Board
adopted a resolution in April 2004 to change the corporate name of the Company
from "TTR Technologies, Inc." to "Amedia Networks, Inc." and, subject to
approval of the stockholders, to amend the Company's Amended and Restated
Certificate of Incorporation to effect the change in corporate name (the
"Amendment"). The resolution also provided that the Amendment be proposed to the
stockholders entitled to vote thereon for consideration at the 2004 Annual
Meeting of Stockholders, all in accordance with Section 242 of the Delaware
General Corporation Law.
The Amendment is consistent with the recent launch of the Company's new
18
corporate identity and its shift in its core business to the area of advanced
telecommunications technologies that enable rapid access to a variety of media
over broadband connections. The Company believes that the name "TTR
Technologies, Inc." is historically associated with its former copy protection
business. The Company believes that the proposed new corporate name better
conveys to investors and the public the substance of the Company's new business
direction.
The form of the Amendment is attached as Appendix B.
REASONS FOR STOCKHOLDER APPROVAL
Section 242 of the Delaware General Corporation Law requires that
Delaware corporations, such as the Company, obtain stockholder approval of an
amendment to the certificate of incorporation. In order to change the corporate
name of the Company, it is necessary to amend the Company's Amended and Restated
Certificate of Incorporation.
It should be noted that at any time prior to the effectiveness of the
filing of a Certificate of Amendment effecting the Amendment, and
notwithstanding authorization by the stockholders of the Amendment, the Board
may abandon the Amendment without further action by the stockholders of the
Company.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S 2000 EQUITY INCENTIVE PLAN
INCREASING THE NUMBER OF SHARES OF COMMON STOCK,
RESERVED FOR ISSUANCE THERE UNDER, TO 5,000,000 SHARES.
At the Annual Meeting, the Stockholders will be asked to approve an
amendment to the Company's 2000 Equity Incentive Plan (the "2000 Incentive
Plan") to increase the number of shares of the Company's Common Stock reserved
for issuance under the 2000 Plan to a total of 5,000,000 shares of Common Stock.
A summary of the principal terms of the 2000 Plan is set forth below.
The Board believes that equity based awards are an important incentive
for attracting, retaining and motivating employees and officers through the
opportunity of equity participation in the Company. The amendment to increase
the number of shares of Common Stock under the 2000 Plan is intended to enable
the Company to continue to have an adequate number of shares of Common Stock
available for the grant of stock options to attract new employees, as well as
retain current employees.
Of the total of 3,500,000 shares of Common Stock reserved for issuance
under the 2000 Plan, as of the Record Date, options for 2,880,859 shares of
Common Stock have been issued and are outstanding under the 2000 Plan.
Although the Company cannot currently determine the number of options
that may be granted in the future to the executive officers of the Company, each
of the
19
executive officers and key employees of the Company has an interest in the
approval of the amendment to the 2000 Plan in so far as they are eligible
recipients of options under the plan.
SUMMARY OF THE TERMS OF THE 2000 INCENTIVE PLAN
The summary of the 2000 Incentive Plan below is qualified in its
entirety by the 2000 Incentive Plan attached hereto as Appendix C.
The 2000 Incentive Plan Administration
The 2000 Incentive Plan is administered by the Board of Directors of the
Company or, at the discretion of the Board, by a committee composed of at least
two members of the Board. The Compensation Committee of the Board, established
in October 2000, administers the 2000 Incentive Plan. Such committee, and the
Board itself acting in its capacity as administrator of the 2000 Incentive Plan,
is referred to herein as the "Committee." The Committee is authorized, among
other things, to construe, interpret and implement the provisions of the 2000
Incentive Plan, to select the key employees to whom awards will be granted, to
determine the terms and conditions of such awards and to make all other
determinations deemed necessary or advisable for the administration of the 2000
Incentive Plan.
Shares Available
If Proposal No. 3 is approved by Stockholders, the aggregate number of
shares of Common Stock available for issuance, subject to adjustment as
described below, under the 2000 Incentive Plan will be 5,000,000. Such shares
may be authorized and unissued shares or treasury shares. Currently, there are
issued and outstanding options for 2,880,859 shares of Common Stock under the
2000 Incentive Plan. If Proposal No. 3 is approved, shares reserved for issuance
for grants under the 2000 Incentive Plan will represent approximately 30.4% of
the Company's issued and outstanding Common Stock as of the Record Date.
Together with the shares reserved for issuance under the 2002 Directors Plan
(assuming Proposal No. 4 is approved), the shares reserved for issuance under
these plans will represent 36.5% of the Company's outstanding Common Stock as of
the Record Date. If all of the shares reserved for issuance under the foregoing
plans are actually issued, such shares will represent 26.7% of the Company's
then outstanding Common Stock.
If any shares of Common Stock subject to an award are forfeited or an
award is settled in cash or otherwise terminates for any reason whatsoever
without an actual distribution of shares, the shares subject to such award will
again be available for awards. If any Performance Units awarded under the 2000
Incentive Plan are forfeited or canceled, the Performance Units will again be
available for awards. If the Committee determines that any stock dividend,
recapitalization, split, reorganization, merger, consolidation, combination,
repurchase, or other similar corporate transaction or event, affects the Common
Stock or the book value of the Company such that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of participants, then the
Committee shall adjust any or all of (i) the number and kind of shares of Common
Stock which may thereafter be issued in connection with awards, (ii) the number
and kind of shares of Common Stock issuable in respect of outstanding awards,
(iii) the aggregate number and kind of shares of Common Stock available, (iv)
the number of Performance Units which may thereafter be granted and
20
the book value of the Company with respect to outstanding Performance Units, and
(v) the exercise price, grant price, or purchase price relating to any award. If
deemed appropriate, the Committee may also provide for cash payments relating to
outstanding awards, provided, however, in each case that no adjustment shall be
made which would cause the plan to violate Section 422(b)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") with respect to ISOs (defined
below) or would adversely affect the status of a Performance-Based Award
(defined below) as "performance based compensation" under Section 162(m) of the
Code. The Committee may also adjust performance conditions and other terms of
awards in response to unusual or nonrecurring events or to changes in applicable
laws, regulations, or accounting principles, except to the extent that such
adjustment would adversely affect the status of any outstanding
Performance-Based Awards as "performance-based compensation" under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Eligibility
Persons eligible to participate in the 2000 Incentive Plan include all
key employees and consultants of the Company and its subsidiaries, as determined
by the Committee. While the specific individuals to whom awards will be made in
the future cannot be determined at this time, it is anticipated that currently
approximately six key employees presently are eligible for participation in the
2000 Incentive Plan.
Awards
The 2000 Incentive Plan is designed to give the Committee the maximum
flexibility in providing incentive compensation to key employees and
consultants. The 2000 Incentive Plan provides for the grant of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted
stock, bonus stock, awards in lieu of cash obligations, other stock-based awards
and Performance Units. The 2000 Incentive Plan also permits cash payments either
as a separate award or as a supplement to a stock-based award, and for the
income and employment taxes imposed on a participant in respect of any award.
Stock Options and Stock Appreciation Rights
The Committee is authorized to grant stock options, including both
incentive stock options ("ISOs"), which can result in potentially favorable tax
treatment to the participant, and nonqualified stock options. The Committee can
also grant stock appreciation rights ("SARs") entitling the participant to
receive the excess of the fair market value of a share of Common Stock on the
date of exercise over the grant price of the SAR. The exercise price per share
of Common Stock subject to an option and the grant price of an SAR are
determined by the Committee, provided that the exercise price of an ISO or SAR
may not be less than the fair market value (110% of the fair market value in the
case of an ISO granted to a 10% shareholder) of the Common Stock on the date of
grant. However, the 2000 Incentive Plan also allows the Committee to grant an
option, an SAR or other award allowing the purchase of Common Stock at an
exercise price or grant price less than fair market value when it is granted in
substitution for some other award or retroactively in tandem with an outstanding
award. In those cases, the exercise or grant price may be the fair market value
at that date, at the date of the earlier award or at that date reduced by the
fair market value of the award required to be surrendered as a condition to the
receipt of
21
the substitute award. The terms of each option or SAR, the times at which each
option or SAR will be exercisable, and provisions requiring forfeiture of
unexercised options or SARs and relating to exercisability or following
termination of employment will be fixed by the Committee. However, no ISO or SAR
granted in tandem will have a term exceeding ten years (or shorter period
applicable under Section 422 of the Code). Options may be exercised by payment
of the exercise price in cash or in Common Stock, outstanding awards or other
property (including notes or obligations to make payment on a deferred basis, or
through "cashless exercises") having a fair market value equal to the exercise
price, as the Committee may determine from time to time. The Committee also
determines the methods of exercise and settlement and certain other terms of the
SARs.
Restricted Stock
The 2000 Incentive Plan also authorizes the Committee to grant
restricted stock. Restricted stock is an award of shares of Common Stock which
may not be disposed of by participants and which may be forfeited in the event
of certain terminations of employment or certain other events prior to the end
of a restriction period established by the Committee. Such an award entitles the
participant to all of the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any dividends thereon, unless
otherwise determined by the Committee.
Other Stock-based Awards, Bonus Stock and Awards in Lieu of Cash Obligations
In order to enable the Company to respond to business and economic
developments and trends in executive compensation practices, the 2000 Incentive
Plan authorizes the Committee to grant awards that are denominated or payable
in, or valued in whole or in part by reference to the value of, Common Stock.
The Committee will determine the terms and conditions of such awards, including
consideration to be paid to exercise awards in the nature of purchase rights,
the period during which awards will be outstanding and forfeiture conditions and
restrictions on awards. In addition, the Committee is authorized to grant shares
as a bonus, free of restrictions, or to grant shares or other awards in lieu of
Company obligations to pay cash or deliver other property under other plans or
compensatory arrangements, subject to such terms as the Committee may specify.
Cash Payments
The Committee may grant the right to receive cash payments whether as a
separate award or as a supplement to any stock-based awards. Also, to encourage
participants to retain awards payable in stock by providing a source of cash
sufficient to pay the income and employment taxes imposed as a result of a
payment pursuant to, or the exercise or vesting of, any award, the 2000
Incentive Plan authorizes the Committee to grant a Tax Bonus in respect of any
award.
Performance Units
The Committee is also authorized to grant Performance Units. A
Performance Unit is a right to receive a payment in cash equal to the increase
in the book value of the Company if specified performance goals during a
specified time period are met. The Committee has the discretion to establish the
performance goals and the performance periods relating to each Performance Unit.
A performance goal is a goal
22
expressed in terms of growth in book value, earnings per share, return on equity
or any other financial or other measurement selected by the Committee, in its
discretion, and may relate to the operations of the Company as a whole or any
subsidiary, division or department, and the performance periods may be of such
length as the Committee may select. Neither the performance goals nor the
performance periods need be identical for all Performance Units awarded at any
time or from time to time.
Performance-based awards
The Committee may (but is not required to) grant awards pursuant to the
2000 Incentive Plan to a participant who, in the year of grant, may be among the
Company's Chief Executive Officer and the four other most highly compensated
executive officers ("Covered Employees"), which are intended to qualify as a
Performance-Based Award. If the Committee grants an award as a Performance-Based
Award, the right to receive payment of such award, other than stock options and
SARs granted at not less than fair market value on the date of grant, will be
conditional upon the achievement of performance goals established by the
Committee in writing at the time such Performance-Based Award is granted. Such
performance goals may vary from participant to participant and Performance-Based
Award to Performance-Based Award. The goals will be based upon (i) the
attainment of specific amounts of, or increases in, one or more of the
following, any of which may be measured either in absolute terms or as compared
to another company or companies: revenues, earnings, cash flow, net worth, book
value, stockholder's equity, financial return ratios, market performance or
total stockholder return, and/or (ii) the completion of certain business or
capital transactions. Before any Performance-Based Award is paid, the Committee
will certify in writing that the performance goals applicable to the
Performance-Based Award were in fact satisfied.
Other Terms of Awards
The maximum amount which may be granted as Performance-Based Awards to
any participant in any calendar year shall not exceed (i) stock-based awards for
500,000 shares of Common Stock (whether payable in cash or stock), subject to
adjustment as provided in the 2000 Incentive Plan, (ii) 500,000 Performance
Units, (iii) a Tax Bonus payable with respect to the stock-based awards and
Performance Units and (iv) cash payments (other than Tax Bonuses) of $1,000,000.
The Committee has the discretion to grant an award to a participant who may be a
Covered Employee which is not a Performance-Based Award.
In the discretion of the Committee, awards may be settled in cash,
Common Stock, other awards or other property. The Committee may require or
permit participants to defer the distribution of all or part of an award in
accordance with such terms and conditions as the Committee may establish,
including payment of reasonable interest on any amounts deferred under the 2000
Incentive Plan. Awards granted under the 2000 Incentive Plan may not be pledged
or otherwise encumbered. Generally, unless the Committee determines otherwise,
awards are not transferable except by will or by the laws of descent and
distribution, or (except in the case of an ISO) otherwise if permitted under
Rule 16b-3 of the Exchange Act and by the Committee. The 2000 Incentive Plan
grants the Committee broad discretion in the operation and administration of the
2000 Incentive Plan. This discretion includes the authority to make adjustments
in the terms and conditions of, and the criteria included in performance
conditions related to, any awards in recognition of unusual or
23
nonrecurring events affecting the Company or in response to changes inapplicable
laws, regulations or accounting principles. However, no such adjustment may
adversely affect the status of any outstanding award as a Performance-Based
Award. The Committee can waive any condition applicable to any award, and may
adjust any performance condition specified in connection with any award, if such
adjustment is necessary, to take account of a change in the Company's strategy,
performance of comparable companies or other circumstances. However no
adjustment may adversely affect the status of any outstanding award as a
Performance-Based Award. Awards under the 2000 Incentive Plan generally will be
granted for no consideration other than services. The Committee may, however,
grant awards alone, in addition to, in tandem with, or in substitution for, any
other award under the 2000 Incentive Plan, other awards under other Company
plans, or other rights to payment from the Company. Awards granted in addition
to or in tandem with other awards may be granted either at the same time or at
different times. If an award is granted in substitution for another award, the
participant must surrender such other award in consideration for the grant of
the new award.
Change of Control
In the event of a change of control of the Company, all awards granted
under the 2000 Incentive Plan (including Performance-Based Awards) that are
outstanding and not yet vested or exercisable or which are subject to
restrictions, will become immediately 100% vested in each participant or will be
free of any restrictions, and will be exercisable for the remaining duration of
the award. All awards that are exercisable as of the effective date of the
change of control will remain exercisable for the remaining duration of the
award. Under the 2000 Incentive Plan, a change of control occurs upon any of the
following events: (i) the acquisition, in one or more transactions, of
beneficial ownership by any person or group, (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
subsidiary), of any securities of the Company such that, as a result of such
acquisition, such person or group, either (A) beneficially owns, directly or
indirectly, more than 50% of the Company's outstanding voting securities
entitled to vote on a regular basis for a majority of the members of the Board
or (B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of the Board; (ii) a change in the composition of the Board such
that a majority of the members of the Board are not Continuing Directors (as
defined in the 2000 Incentive Plan); or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 50% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company, in one or more transactions, of all
or substantially all the Company's assets. The foregoing events will not be
deemed to be a change of control if the transactions causing such change are
approved in advance by the affirmative vote of at least a majority of the
Continuing directors.
Amendment and Termination
24
The 2000 Incentive Plan is of indefinite duration; continuing until all
shares and performance units reserved therefore have been issued or until
terminated by the Board. The Board may amend, alter, suspend, discontinue, or
terminate the 2000 Incentive Plan or the Committee's authority to grant awards
thereunder without further stockholder approval or the consent of the
participants, except stockholder approval must be obtained within one year after
the effectiveness of such action if required by law or regulation or under the
rules of the securities exchange on which the Common Stock is then quoted or
listed or as otherwise required by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, unless approved by the stockholders, no amendment
will: (i) change the class of persons eligible to receive awards; (ii)
materially increase the benefits accruing to participants under the 2000
Incentive Plan; or (iii) increase the number of shares of Common Stock subject
to the 2000 Incentive Plan.
Certain Federal Income Tax Consequences to the Company and the Participant
The following discussion is a brief summary of the principal United
States Federal income tax consequences under current Federal income tax laws
relating to awards under the 2000 Incentive Plan. This summary is not intended
to be exhaustive and, among other things, does not describe state, local or
foreign income and other tax consequences. A participant will not realize any
income upon the award of an option (including any other stock-based award in the
nature of a purchase right), an SAR or a Performance Unit, nor will the Company
be entitled to any tax deduction. When a participant who has been granted an
option which is not designated as an ISO exercises that option and receives
Common Stock which is either "transferable" or not subject to a "substantial
risk of forfeiture" under Section 83(c) of the Code, the participant will
realize compensation income subject, in the case of an employee, to withholding
taxes. The amount of that compensation income will equal the excess of the fair
market value of the Common Stock (without regard to any restrictions) on the
date of exercise of the option over its exercise price, and the Company will
generally be entitled to a tax deduction in the same amount and at the same time
as the compensation income is realized by the participant. The participant's tax
basis for the Common Stock so acquired will equal the sum of the compensation
income realized and the exercise price. Upon any subsequent sale or exchange of
the Common Stock, the gain or loss will generally be taxed as a capital gain or
loss and will be a long-term capital gain or loss if the Common Stock has been
held for more than one year after the date of exercise.
If a participant exercises an option which is designated as an ISO and
the participant has been an employee of the Company or its subsidiaries
throughout the period from the date of grant of the ISO until three months prior
to its exercise, the participant will not realize any income upon the exercise
of the ISO (although alternative minimum tax liability may result), and the
Company will not be entitled to any tax deduction. If the participant sells or
exchanges any of the shares acquired upon the exercise of the ISO more than one
year after the transfer of the shares to the participant and more than two years
after the date of grant of the ISO, any gain or loss (based upon the difference
between the amount realized and the exercise price of the ISO) will be treated
as long-term capital gain or loss to the participant. If such sale, exchange or
other disposition takes place within two years of the grant of the ISO or within
one year of the transfer of shares to the participant, the sale, exchange or
other disposition will generally constitute a "disqualifying disposition" of
such shares. In such event, to the extent that the gain realized on the
disqualifying disposition does
25
not exceed the difference between the fair market value of the shares at the
time of exercise of the ISO over the exercise price, such amount will be treated
as compensation income in the year of the disqualifying disposition, and the
Company will be entitled to a deduction in the same amount and at the same time
as the compensation income is realized by the participant. The balance of the
gain, if any, will be treated as capital gain and will not result in any
deduction by the Company.
With respect to other awards (including an SAR or a Performance Unit)
granted under the 2000 Incentive Plan that may be settled either in cash or in
Common Stock or other property that is either transferable or not subject to a
substantial risk of forfeiture under Section 83(c) of the Code, the participant
will realize compensation income (subject, in the case of employees) to
withholding taxes) equal to the amount of cash or the fair market value of the
Common Stock or other property received. The Company will be entitled to a
deduction in the same amount and at the same time as the compensation income is
realized by the participant.
With respect to awards involving Common Stock or other property that is
both nontransferable and subject to a substantial risk of forfeiture, unless an
election is made under Section 83(b) of the Code, as described below, the
participant will realize compensation income equal to the fair market value of
the Common Stock or other property received at the first time the Common Stock
or other property is either transferable or not subject to a substantial risk of
forfeiture. The Company will be entitled to a deduction in the same amount and
at the same time as the compensation income is realized by the participant. Even
though Common Stock or other property may be nontransferable and subject to a
substantial risk of forfeiture, a participant may elect (within 30 days of
receipt of the Common Stock or other property) to include in gross income the
fair market value (determined without regard to such restrictions) of such
Common Stock or other property at the time received. In that event, the
participant will not realize any income at the time the Common Stock or other
property either becomes transferable or is not subject to a substantial risk of
forfeiture, but if the participant subsequently forfeits such Common Stock or
other property, the participant's loss would be limited only to the amount
actually paid for the Common Stock or other property. While such Common Stock or
other property remains nontransferable and subject to a substantial risk of
forfeiture, any dividends or other income will be taxable as additional
compensation income. Finally, special rules may apply with respect to
participants subject to Section 16(b) of the Exchange Act.
The Committee may condition the payment, exercise or vesting of any
award on the payment of the withholding taxes and may provide that a portion of
the Common Stock or other property to be distributed will be withheld (or
previously acquired stock or other property surrendered by the participant) to
satisfy such withholding and other tax obligations. Finally, amounts paid
pursuant to an award which vests or becomes exercisable, or with respect to
which restrictions lapse, upon a Change in Control may constitute a "parachute
payment" under Section 280G of the Code. To the extent any such payment
constitutes an "excess parachute payment," the Company would not be entitled to
deduct such payment and the participant would be subject to a 20 percent excise
tax (in addition to regular income tax).
Section 162(m) Provisions
26
The 2000 Incentive Plan was designed to permit the deduction by the
Company of the compensation realized by certain officers in respect of long-term
incentive compensation granted under the 2000 Incentive Plan which is intended
by the Committee to qualify as "performance-based compensation" under Section
162(m) of the Code. Section 162(m) of the Code generally disallows a deduction
to the Company for compensation paid in any year in excess of $1 million to any
Covered Employee. Certain compensation, including compensation that meets the
specified requirements for "performance-based compensation," is not subject to
this deduction limit. Among the requirements for compensation to qualify as
"performance-based compensation" is that the material terms pursuant to which
the compensation is to be paid be disclosed to, and approved by, the
stockholders of the Company in a separate vote prior to the payment.
Accordingly, because the 2000 Incentive Plan has been approved by the
Stockholders, the compensation payable pursuant to awards granted to officers
who in the year of grant may be Covered Employees and which are intended by the
Committee to qualify as "performance-based compensation" should not be subject
to the deduction limit of Section 162(m) of the Code, provided the Plan
continues to be administered by a Committee consisting solely of two or more
"outside directors" and the other requirements of Section 162(m) of the Code are
satisfied. Nonqualified stock options granted with an option price less than the
fair market value at the time of grant will not qualify as performance-based
compensation. Not withstanding the foregoing, the Committee may, in the exercise
of its discretion, issue stock option grants that would be subject to the
deductibility limit where it deems such issuance to be in the best interests of
the Company and it's stockholders.
New Plan Benefits
Because awards under the 2000 Incentive Plan are discretionary, the
Company cannot currently determine the number of options that may be granted
under the 2000 Incentive Plan, as amended.
No options under the 2000 Incentive Plan were awarded in 2003.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE AMENDMENT TO THE 2000 EQUITY INCENTIVE PLAN.
PROPOSAL 4
AMENDMENT TO THE COMPANY'S 2002 NON-EMPLOYEE DIRECTOR'S
PLAN INCREASINGTHE NUMBER OF SHARES OF COMMON STOCK,
RESERVED FOR ISSUANCE THEREUNDER, TO 1,000,000 SHARES.
At the Annual Meeting, the Stockholders will be asked to approve an
amendment to the Company's 2002 Non-Employee Director's Plan (the "2002
Director's Plan") to increase the number of shares of the Company's Common Stock
reserved for issuance under the 2002 Director's Plan to a total of 1,000,000
shares of Common Stock.
The Board believes that stock options are an important incentive for
attracting and retaining on the Company's Board the service of individuals of
stature who are
27
not otherwise employed by the Company or any subsidiary. Accordingly, in June
2002 the Board adopted and recommended the approval by the Company's
stockholders of the 2002 Director's Plan providing for the issuance of up to
275,000 shares of Common Stock to non-employee directors.
Of the total of 275,000 shares of Common Stock reserved for issuance
under the 2002 Director's Plan, no options are currently issued and outstanding.
Nonetheless, the Board believes that it will need to have a sufficient number of
shares available for issuance in order to be able to attract to the Board
individuals of stature. .
SUMMARY OF THE TERMS OF THE 2002 DIRECTOR'S PLAN
The summary of the 2002 Directors Plan below is qualified in its
entirety by the 2002 Directors Plan attached hereto as Appendix D.
The 2002 Directors Plan is administered by the Board of Directors or, if
so determined by the Board, by a committee consisting solely of two or more
non-employee directors of the Company. The body administrating the 2002
Directors Plan is referred to herein as the "Administrative Body." The
Administrative Body is authorized to construe, interpret and implement the
provisions of the 2002 Directors Plan, to select the non-employee directors to
whom awards will be granted, to determine the amount, terms and conditions of
such awards and to make all other determinations deemed necessary or advisable
for the administration of the 2002 Directors Plan. The shares available for
grant under the 2002 Directors Plan may be authorized and unissued shares or
treasury shares. If any shares of Common Stock subject to an award are forfeited
or the award otherwise terminates for any reason whatsoever without an actual
distribution of shares, the shares subject to such award will again be available
for awards. Only directors not employed by the Company or any of its
subsidiaries are eligible to participate in the 2002 Directors Plan.
Under the 2002 Directors Plan, the Administrative Body may issue only
non-qualified options. Each option granted under the 2002 Directors Plan will,
unless earlier terminated as provided in the 2002 Directors Plan, expire six
years from the date of grant. If a non-employee director ceases to serve as a
director of the Company, options issued to such a director under the 2002
Directors Plan will (i) in the case of removal for cause, terminate immediately;
(ii) in the case of death or disability, terminate one year after the date on
which such director ceased to serve; and (iii) in all other the cases (including
failure to be renonimated or reelected), terminate three months after such
director ceased to serve. The exercise price of the option will be the fair
market value of the Common Stock on the date of the grant of the option. The
number of options and prices at which they are exercisable are subject to
adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends.
The 2002 Directors Plan continues in effect through December 31, 2012.
The Board may amend, alter, suspend, discontinue, or terminate the 2002
Directors Plan. Notwithstanding the foregoing, any such amendment, alteration,
suspension, discontinuation or termination shall be subject to the approval of
the Company's stockholders if such approval is required by any applicable law or
regulation or any applicable stock exchange rule. Additionally, without the
consent of the an affected non-employee director, no amendment, alteration,
suspension, discontinuation or
28
termination of the 2002 Directors Plan may materially, adversely affect the
rights of such non-employee director under any option theretofore granted.
Federal Tax Consequences
Set forth below is a description of the federal income tax consequences
under the Code, of the grant and exercise of the benefits awarded under the 2002
Directors Plan. This description does not purport to be a complete description
of the federal income tax aspects of the 2002 Directors Plan. The summary does
not include any discussion of state, local or foreign income tax consequences or
the effect of gift, estate or inheritance taxes, any of which may be significant
to a particular director eligible to receive options.
A director to whom an option is granted under the 2002 Directors Plan
will not recognize any taxable income upon the grant of an option. Upon the
exercise of such option, an optionee will generally recognize ordinary
compensation income equal to the difference between the exercise price of the
option and the fair market value of the Common Stock acquired on the date of
exercise. The tax basis of such Common Stock to the optionee will equal the
amount includable in the optionee's income as compensation, and the optionee's
holding period for such Common Stock will commence on the day on which the
optionee recognizes the compensation income in respect of such Common Stock. Any
additional gain or any loss recognized on the subsequent disposition of the
shares of Common Stock will be a capital gain or loss and will be a long-term
gain or loss if the shares are held for more than one year. Generally, the
Company will be entitled to a tax deduction upon the exercise of an option under
the 2002 Directors Plan at the same time and in the same amount as the ordinary
income recognized by the optionee.
New Plan Benefits
Because awards under the 2002 Directors Plan are discretionary, the
Company cannot currently determine the number of options that may be granted
under the 2002 Directors Plan. In 2003, there were no grants of options under
the 2002 Directors' Plan to purchase shares made and the all current
non-executive officer directors as a group hold no shares.
Only non-employee directors are eligible to receive options under the
2002 Directors Plan. PROPOSAL NO. 5
BOARD DISCRETION TO EFFECT REVERSE STOCK SPLIT
BACKGROUND
In March 2004 the Company embarked on its new business direction in the
telecommunications equipment field following stockholder approval of the
Development and Licensing Agreement entered into by the Company and Lucent.
Pursuant to such agreement, Lucent agreed to develop for and license to the
Company next-generation management and routing technologies and equipment
designed to provide Fiber-to-the-Premises (FTTP) capabilities for voice, video,
data, and voice-over-Internet protocol (VoIP) services.
29
The Company believes that its new business direction affords the Company
an opportunity to enter into the rapidly expanding field of providing
Fiber-to-the-premises capabilities for ultra-broadband access for video, data
and VoIP. Management believes that this field affords the Company the
opportunity for rapid growth and revenues. Management's beliefs are based on
certain assumptions regarding its ability to penetrate the market for
Fiber-to-the-Premises equipment, satisfy and anticipate customer demands,
achieve economies of scale and, as a preliminary matter, raise sufficient funds
to achieve these objectives. While management believes that the assumptions
underlying its beliefs are reasonable, no assurance can be given that in fact
these beliefs will prove correct.
If in fact the Company is able to record revenues or otherwise achieve
prospective growth levels and/or raise capital financing, then the Company may
be able to satisfy the listing requirements (i.e., stockholders' equity, pre-tax
income) for any of the Nasdaq National Market, the Nasdaq SmallCap Market or the
American Stock Exchange. The Company's Common Stock is currently quoted on the
OTC Bulletin Board of the National Association of Securities Dealers, Inc. A
higher per share price for the Common Stock may further the Company efforts to
meet the $5.00 minimum bid price requirement for the initial listing of the
Common Stock on the Nasdaq National Market, the $4.00 minimum bid price
requirement for initial listing on the Nasdaq SmallCap Market and the $3.00
minimum bid price for initial listing on the American Stock Exchange. While the
Company does not currently meet the other quantitative listing requirements for
listing on either the Nasdaq National Market, Nasdaq SmallCap market or the
American Stock Exchange, if at a future date the Company met the listing
standards of the Nasdaq National Market, the Nasdaq SmallCap Market or the
American Stock Exchange, and the Board determines that it is in the best
interests of the Company and the Stockholders for the Company's Common Stock to
be listed on such exchange or market, then it may elect to effect the Reverse
Split. In order to increase the Company's prospects for having its Common Stock
listed on any of the Nasdaq National Market, Nasdaq SmallCap Market or the
American Stock Exchange, the Board adopted a resolution approving an amendment
to the Company's Certificate of Incorporation to effect a reverse split of all
outstanding shares of the Common Stock in a range of 1:3 to 1:6, as determined
in the sole discretion of the Board following the Company's satisfaction of all
other listing requirements of the aforementioned exchanges.
Of course, no assurance can be provided that the Company will in fact be
able to achieve or sustain any of the required listing standards (i.e, minimum
stockholders equity or pre-tax income) of any of these exchanges. Even if the
Company satisfies the minimum per share bid price and the other criteria of any
of these exchanges, no assurance can be given that the Company's Common Stock
will in fact be quoted on any such exchange.
OVERVIEW
The Stockholders are being asked to approve a reverse stock split of the
Company's outstanding Common Stock in the range of 1:3 to 1:6, as determined in
the sole discretion of the Board (the "Reverse Split"). The Board has adopted a
resolution (i) declaring the advisability of a reverse stock split in the range
of 1:3 to 1:6, subject to Stockholder approval, (ii) in connection therewith,
amending the Company's Certificate of Incorporation to effect such a reverse
stock split, subject to stockholder approval, and (iii) authorizing any other
action it deems necessary to effect such a
30
reverse stock split, without further approval or authorization of the Company's
stockholders, at any time on or prior to the date of the 2005 annual stockholder
meeting. If the proposed Reverse Split is approved, the Company's Board would
have the discretion to elect, as it determines to be in the best interests of
the Company and its Stockholders, to effect the Reverse Split at any exchange
ratio within the range at any time before the Company's 2005 annual stockholder
meeting. The Board may elect not to implement the approved Reverse Split at its
sole discretion. The Board believes that approval of a proposal granting this
discretion to the Board provides the Board with appropriate flexibility to
achieve the purposes of the Reverse Split, if implemented, and to act in the
best interests of the Company and its Stockholders.
The Board would effect the Reverse Split as provided above SOLELY for
the purpose of qualifying for a listing on the Nasdaq National Market, the
Nasdaq SmallCap Market or the American Stock Exchange and ONLY following
satisfaction by the Company of all listing requirements but for the per share
price. If the Company were to satisfy the all of the listing conditions for any
of the above exchanges where it applied for listing except for the per share
price, then the Board may, in the exercise of its discretion, elect to effect
the Reverse Split in one of the above ratios.
The text of the form of proposed amendment to the Company's certificate
of incorporation is attached to this proxy statement as Appendix E. By approving
this amendment, Stockholders will approve an amendment to the Company's
certificate of incorporation pursuant to which any whole number of outstanding
shares between and including three and six would be combined into one share of
the Company's Common Stock, and authorize the Board to file only one such
amendment, as determined by the Board in the manner described herein. The Board
may also elect not to do any Reverse Split.
If approved by the Stockholders and following such approval the Board
determines that effecting the Reverse Split is in the best interests of the
Company and its Stockholders, the Reverse Split will become effective upon
filing one such amendment with the Secretary of State of the State of Delaware.
The amendment filed thereby will contain the number of shares selected by the
Board within the limits set forth in this proposal to be combined into one share
of the Common Stock.
If the Board elects to effect a Reverse Split following Stockholder
approval, the number of issued and outstanding shares of Common Stock would be
reduced in accordance with an exchange ratio determined by the Board within the
limits set forth in this proposal. Except for adjustments that may result from
the treatment of fractional shares as described below, each Stockholder will
hold the same percentage of our outstanding common stock immediately following
the Reverse Split as such Stockholder held immediately prior to the reverse
stock split. The par value of the Company's Common Stock would remain unchanged
at $0.001 per share. The amendment would not change the number of authorized
shares of Common Stock.
For the above reasons, management believes that the Reverse Split may,
under certain circumstances, be in the best interests of the Company and its
Stockholders. However, there can be no assurances that any Reverse Split that
the Board may elect to effect will have the desired consequences.
No further action on the part of Stockholders would be required to
either effect or abandon the Reverse Split.
31
POTENTIAL EFFECTS OF THE PROPOSED REVERSE SPLIT
The immediate effect of the Reverse Split would be to reduce the number
of shares of the outstanding Common Stock and to increase the trading price of
such Common Stock. However, the effect of any effected Reverse Split upon the
market price of the Common Stock cannot be predicted, and the history of reverse
stock splits for companies in similar circumstances sometimes improves stock
performance, but in many cases does not. There can be no assurance that the
trading price of the Common Stock after the Reverse Split will rise in
proportion to the reduction in the number of shares of the Company's Common
Stock outstanding as a result of the Reverse Split or remain at an increased
level for any period. Also, there is no assurance that a Reverse Split would not
eventually lead to a decrease in the trading price of the Common Stock, that the
trading price would remain above the thresholds required by the exchange or
market or that the Company will be able to continue to meet the other continued
listing requirements of the Exchange or Market. The trading price of the Common
Stock may change due to a variety of other factors, including our operating
results, other factors related to the Company's business and general market
conditions.
EFFECTS ON OWNERSHIP BY INDIVIDUAL STOCKHOLDERS
If the Company implements the Reverse Split, the number of shares of its
Common Stock held by each Stockholder would be reduced by multiplying the number
of shares held immediately before the Reverse Split by the selected exchange
ratio, and then rounding up to the nearest whole share. The Company would not
pay cash to each Stockholder in respect of any fractional interest in a share
resulting from the Reverse Stock Split. The Reverse Split would not affect any
Stockholder's percentage ownership interests in the Company or proportionate
voting power, except to the extent that interests in fractional shares would be
rounded up to the nearest whole share.
EFFECT ON OPTIONS, WARRANTS AND OTHER SECURITIES
In addition, all outstanding options, warrants and other securities
entitling their holders to purchase shares of the Company's Common Stock would
be adjusted as a result of the Reverse Split, as required by the terms of these
securities. In particular, the exchange ratio for each instrument would be
reduced, and the exercise price per share, if applicable, would be increased, in
accordance with the terms of each instrument and based on the selected exchange
ratio of the Reverse Split. Also, the number of shares reserved for issuance
under the existing employee stock option plans would be reduced proportionally
based on the selected exchange ratio of the Reverse Split.
OTHER EFFECTS ON OUTSTANDING SHARES
If the Reverse Split is implemented, the rights and preferences of the
outstanding shares of the Common Stock would remain the same after the Reverse
Split. Each share of Common Stock issued pursuant to the Reverse Split would be
fully paid and nonassessable.
32
The Reverse Split would result in some Stockholders owning "odd-lots" of
less than 100 shares of the Common Stock. Brokerage commissions and other costs
of transactions in odd-lots are generally higher than the costs of transactions
in "round-lots" of even multiples of 100 shares.
The Company's Common Stock is currently registered under Section 12(g)
of the 1934 Securities Exchange Act of 1934 (the "1934 Act"). As a result, the
Company is subject to the periodic reporting and other requirements of the 1934
Act. The proposed Reverse Split would not affect the registration of the
Company's Common Stock under the 1934 Act.
AUTHORIZED SHARES OF COMMON STOCK
The Reverse Split, if implemented, would not change the number of
authorized shares of the Common Stock as designated by the Certificate of
Incorporation. Therefore, because the number of issued and outstanding shares of
Common Stock would decrease, the number of shares remaining available for
issuance under the Company's authorized pool of Common Stock would increase.
These additional shares of Common Stock would also be available for
issuance from time to time for corporate purposes such as raising additional
capital, acquisitions of companies or assets and sales of stock or securities
convertible into Common Stock. The Company believes that the availability of the
additional shares will provide it with the flexibility to meet business needs as
they arise, to take advantage of favorable opportunities and to respond to a
changing corporate environment. There are no current plans or arrangements to
issue any additional shares of Common Stock.
The additional shares of Common Stock that would become available for
issuance if the Reverse Split is approved could also be used by the Company's
management to oppose a hostile takeover attempt or delay or prevent changes of
control or changes in or removal of management, including transactions that are
favored by a majority of the Stockholders or in which the Stockholders might
otherwise receive a premium for their shares over then-current market prices or
benefit in some other manner. For example, without further Stockholder approval,
the Board could sell shares of the Common Stock in a private transaction to
purchasers who would oppose a takeover or favor the current Board. Although the
proposed Reverse Stock Split has been prompted by business and financial
considerations, Stockholders nevertheless should be aware that approval of the
proposal could facilitate future efforts by Company management to deter or
prevent a change in control of the Company. The Board has no plans to use any of
the additional shares of Common Stock that would become available following the
approval of the Reverse Split, if any, for any such purposes.
In the event that the Board does in fact effect a Reverse Split, then it
anticipates that it will present to the Company's stockholders at the 2005
annual stockholder meeting a proposal to decrease the number of authorized
shares of Common Stock available for issuance by a factor equal to the ratio in
which the Reverse Split was effected.
PROCEDURE FOR IMPLEMENTING THE PROPOSED REVERSE SPLIT AND EXCHANGE OF STOCK
CERTIFICATES
33
If Stockholders approve the proposed amendment to the Certificate of
Incorporation, the Board may elect whether or not to declare a Reverse Split at
any time before the Company's 2005 annual stockholders meeting. The Reverse
Split would be implemented by filing the appropriate amendment to the Company's
Certificate of Incorporation with the Delaware Secretary of State, and the
Reverse Split would become effective on the date the filing is accepted by the
Delaware Secretary of State.
As of the effective date of the Reverse Split, each certificate
representing shares of the Company's Common Stock before the Reverse Stock Split
would be deemed, for all corporate purposes, to evidence ownership of the
reduced number of shares of the Company's Common Stock resulting from the
Reverse Split, except that holders of unexchanged shares would not be entitled
to receive any dividends or other distributions payable by the Company after the
effective date until they surrender their old stock certificates for exchange.
All shares, underlying options and warrants and other securities would also be
automatically adjusted on the effective date.
The Company's transfer agent would act as the exchange agent for
purposes of implementing the exchange of stock certificates. As soon as
practicable after the effective date, Stockholders and holders of securities
convertible into the Company's Common Stock would be notified of the
effectiveness of the Reverse Split. Stockholders of record would receive a
letter of transmittal requesting them to surrender their stock certificates for
stock certificates reflecting the adjusted number of shares as a result of the
Reverse Split. Persons who hold their shares in brokerage accounts or "street
name" would not be required to take any further actions to effect the exchange
of their certificates. No new certificates would be issued to a Stockholder
until such Stockholder has surrendered the outstanding certificate(s) together
with the properly completed and executed letter of transmittal to the exchange
agent. Until surrender, each certificate representing shares before the Reverse
Stock Split would continue to be valid and would represent the adjusted number
of shares based on the exchange ratio of the Reverse Stock Split, rounded up to
the nearest whole share. Stockholders should not destroy any stock certificate
and should not submit any certificates until they receive a letter of
transmittal.
ACCOUNTING CONSEQUENCES
The par value per share of the Company's Common Stock would remain
unchanged at $0.001 per share after the Reverse Stock Split. As a result, on the
effective date of the Reverse Stock Split, the stated capital on the Company's
balance sheet attributable to the Common Stock will be reduced proportionally,
based on the selected exchange ratio of the Reverse Stock Split, from its
present amount, and the additional paid-in capital account will be credited with
the amount by which the stated capital is reduced. The per share Common Stock
net income or loss and net book value will be increased because there will be
fewer shares of the Common Stock outstanding. The Company does not anticipate
that any other accounting consequences would arise as a result of the Reverse
Stock Split.
FRACTIONAL SHARES
The Company will not issue fractional shares in connection with the
Reverse Split. In order to avoid the expense and inconvenience of issuing and
transferring
34
fractional shares of its Common Stock to Stockholders who would otherwise be
entitled to receive fractional shares of Common Stock following the Reverse
Split, any fractional shares which result from the Reverse Split will be rounded
up to the next whole share.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, the Stockholders are not
entitled to appraisal rights with respect to the proposed amendment to the
Company's Certificate of Incorporation to effect the Reverse Split.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following is a summary of important U.S. tax considerations of the
Reverse Split. It addresses only Stockholders who hold the pre-Reverse Split
shares and post-Reverse Split shares as capital assets. It does not purport to
be complete and does not address Stockholders subject to special rules, such as
financial institutions, tax-exempt organizations, insurance companies, dealers
in securities, mutual funds, foreign stockholders, stockholders who hold the
pre-Reverse Split shares as part of a straddle, hedge, or conversion
transaction, Stockholders who hold the pre-Reverse Split shares as qualified
small business stock within the meaning of Section 1202 of the Internal Revenue
Code of 1986, as amended (the "Code"), Stockholders who are subject to the
alternative minimum tax provisions of the Code, and Stockholders who acquired
their pre-Reverse Split shares pursuant to the exercise of employee stock
options or otherwise as compensation. This summary is based upon current law,
which may change, possibly even retroactively. It does not address tax
considerations under state, local, foreign, and other laws. Furthermore, the
Company has not obtained a ruling from the Internal Revenue Service or an
opinion of legal or tax counsel with respect to the consequences of the Reverse
Split. Each Stockholder is advised to consult a qualified tax advisor.
The proposed Reverse Split is intended to constitute a reorganization
within the meaning of Section 368 of the Code. Assuming the Reverse Split
qualifies as a reorganization, a Stockholder generally will not recognize gain
or loss on the Reverse Split. The aggregate tax basis of the post-Reverse Stock
Split shares received will be equal to the aggregate tax basis of the
pre-Reverse Split shares exchanged therefor (excluding any portion of the
holder's basis allocated to fractional shares), and the holding period of the
post-Reverse Split shares received will include the holding period of the
pre-Reverse Split shares exchanged. The rounding up in respect of fractional
shares will not result in a taxable event to a Stockholder; however, there will
be an adjustment to the Stockholder's basis equal to the fractional share times
the market value on the date of issuance.
No gain or loss will be recognized by the Company as a result of the
Reverse Split.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO
APPROVE THE REVERSE SPLIT.
PROPOSAL NO. 6
35
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Marcum & Kliegman, LLP ("Marcum") as
the Company's independent auditors for the year ending December 31, 2004. The
Board has directed that such appointment be submitted for ratification by the
shareholders at the Annual Meeting.
Brightman Almagor & Co, a member of Deloitte Touche Tohmatsu, audited
the Company's financial statements for the year ended December 31, 2002. In June
2003, , Brightman advised the Company that as it had effectively terminated all
of its research and design activities in the State of Israel, declined to stand
for re-election as the Company's auditor for the year ending December 31, 2003.
This action was taken by mutual agreement of the Company and Brightman.
During the fiscal years ended December 31, 2001 and 2002 and the period
between January 1, 2003, up to and including the day of its declination to stand
for re-election, there were no disagreements between the Company and Brightman
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures which if not resolved to Brightman's
satisfaction would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement. Brightman's report on our
financial statements for such fiscal years 2002 and 2001 indicated that
substantial doubt exists regarding our ability to continue as a going concern.
On June 11, 2003, the Audit Committee engaged Marcum, to serve as the
Company's independent public accountants for the audit of our consolidated
financial statements for the fiscal year ending December 31, 2003.
It is not anticipated that a member of Marcum will be present at the
stockholder meeting.
If you do not ratify the selection of independent accountants, the Audit
Committee will reconsider the appointment. However, even if you ratify the
selection, the Audit Committee may still appoint new independent accountants at
any time during the year if it believes that such a change would be in the best
interests of Company and its stockholders.
FEES
The following table presents fees for professional audit services
rendered by Marcum and Brightman, respectively, for the audit of the Company's
annual financial statements for 2003 and 2002, and fees billed for other
services rendered by Marcum or Brightman, as the case may be, during 2003 and
2002.
Type of Service/Fee Fiscal 2003 Fiscal 2002
Audit Fees (1) $41,120 $37,000
Audit Related Fees (2) $0 $0
Tax Fees (3) $3,000 $5,000
All Other Fees (4) $0 $0
36
(1) Audit Fees consist of fees for professional services rendered for
the audit of our consolidated financial statements included in the annual report
and the review of the interim financial statements included in the quarterly
reports, and for the services that are normally provided in connection with
regulatory filings or engagements.
(2) Includes fees associated with assurance and related services that
are reasonably related to the performance of the audit or review of the
Company's financial statements. This category includes fees related to
consultation regarding generally accepted accounting principles.
(3) Tax Fees consist of fees for tax compliance, tax advice and tax
planning.
(4) All Other Fees consist of fees for products and services not
included in the above categories.
The Audit Committee reviewed the non-audit services rendered for fiscal
2002 and fiscal 2003 as set forth in the above table and concluded that such
services were compatible with maintaining the accountants' independence. The
Audit Committee's policy is to pre-approve all audit services and all non-audit
services that Company's independent auditor is permitted to perform for Company
under applicable federal securities regulations. As permitted by the applicable
regulations, the Audit Committee's policy utilizes a combination of specific
pre-approval on a case-by-case basis of individual engagements of the
independent auditor and general pre-approval of certain categories of
engagements up to predetermined dollar thresholds that are reviewed annually by
the Audit Committee. Specific pre-approval is mandatory for the annual financial
statement audit engagement, among others.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE RATIFICATION OF THE INDEPENDENT AUDITORS.
OTHER MATTERS
At the Annual Meeting, management does not intend to present any matters
other than matters referred to herein, and as of this date management does not
know of any matter that will be presented by other persons named in the attached
proxy to vote thereon in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Under the rules of the SEC, proposals of stockholders intended to be
presented at the 2005 annual meeting of Stockholders must be made in accordance
with the by-laws of the Company and received by the Company, at its principal
executive offices, for inclusion in the Company's proxy statement for that
meeting, no later than January
37
25, 2005. The Company's Board of Directors will review any stockholder proposals
that are filed as required and will determine whether such proposals meet
applicable criteria for inclusion in its 2005 proxy statement.
ANNUAL REPORT
Enclosed is the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003, including audited financial statements. Such annual
Report on Form 10-K does not form any part of the material for the solicitation
of proxies.
SOLICITATION OF PROXIES
The Company will pay the cost of the solicitation of proxies.
Solicitation of proxies may be made in person or by mail, telephone, or telecopy
by directors, officers, and employees of the Company. The Company may also
engage the services of others to solicit proxies in person or by telephone or
telecopy. In addition, the Company may also request banking institutions,
brokerage firms, custodians, nominees, and fiduciaries to forward solicitation
material to the beneficial owners of Common Stock held of record by such
persons, and the Company will reimburse such persons for the costs related to
such services.
It is important that your shares be represented at the Annual Meeting. If
you are unable to be present in person, you are respectfully requested to sign
the enclosed proxy and return it in the enclosed stamped and addressed envelope
as promptly as possible.
BY ORDER OF THE BOARD OF DIRECTORS
Frank Galuppo
Chief Executive Officer
April 28, 2004
38
TTR TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2004
The undersigned hereby constitutes and appoints FRANK GALUPPO and SAM
BRILL, and each of them, with full power of substitution, attorneys and proxies
to represent and to vote all the shares of common stock, par value $.001 per
share, of TTR TECHNOLOGIES, INC. (the "Company") that the undersigned would be
entitled to vote, with all powers the undersigned would possess if personally
present, at the Annual Meeting of Stockholders of the Company, to be held on May
25, 2004, and at any adjournment thereof, on the matters set forth on the
reverse side and such other matters as may properly come before the meeting.
1. ELECTION OF DIRECTORS. Nominees: FRANK GALUPPO, SAM BRILL, JUAN MENDEZ,
RICHARD ROSENBLUM, GERALD BUTTERS, ROBERT MARTIN AND Ivan Berkowitz.
(Mark only one of the following boxes.)
|_| VOTE FOR all nominees listed above, except vote withheld as to the following
nominees (if any): _________________
|_| VOTE WITHHELD from all nominees.
2. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO CHANGE ITS CORPORATE NAME TO "AMEDIA NETWORK, INC.".
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 2000 EQUITY INCENTIVE PLAN
TO INCREASE THE SHARES AVAILABLE FOR ISSUANCE THEREUNDER FROM 3,500,000 TO
5,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 2002 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN TO INCREASE THE SHARES AVAILABLE FOR ISSUANCE
THEREUNDER FROM 275,000 TO 1,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
5. . PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY'S
COMMON STOCK IN THE RANGE OF 1:3 TO 1:6, AS MAY be DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY'S BOARD OF DIRECTORS.
39
|_| FOR |_| AGAINST |_| ABSTAIN
6. PROPOSAL TO RATIFY THE APPOINTMENT OF MARCUM & KLIEGMAN, PC AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
In their discretion, upon any other business that may properly come
before the meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted (i) FOR the election as directors of the nominees of the Board of
Directors, (ii) FOR the proposal to amend the Certificate of Incorporation to
change the name of the Company; (iii) FOR the proposal to increase the number of
shares of Common Stock, reserved for issuance under the 2000 Plan (iv) FOR the
proposal to increase the number of shares of Common Stock, reserved for issuance
under the Company's 2002 Directors Plan (v) FOR the Reverse Split; (vi) FOR the
ratification the appointment of Marcum, as independent public accountants of the
Company for the year ending December 31, 2004; and (vii) in the discretion of
the Proxies named in the proxy card on any other proposals to properly come
before the Annual Meeting or any adjournment thereof.
The undersigned acknowledges receipt of the accompanying Proxy Statement
dated April 28, 2004.
Dated: __________________, 2004
SIGNATURE OF SHAREHOLDER(S)
(When signing as attorney,
trustee, executor,
administrator, guardian,
corporate officer, etc., please
give full title. If more than
one trustee, all should sign.
Joint owners must each sign.)
Please date and sign exactly as
name appears above.
I plan |_| I do not plan |_| to
attend the Annual Meeting.
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
TTR TECHNOLOGIES, INC.
I. AUDIT COMMITTEE PURPOSE
The Audit Committee of the Board of Directors of TTR Technologies, Inc. (the
"Company") is appointed by the Board of Directors to assist the Board of
Directors in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
o Monitor and review the accuracy and fairness of the Company's financial
reports and monitor and ensure the adequacy of the Company's systems of
internal controls regarding finance, accounting, and legal compliance.
o Monitor the independence and performance of the Company's independent
auditors.
o Provide an avenue of communication between the independent auditors,
management, internal auditors and the Board of Directors.
The Audit Committee has the authority to conduct or authorize investigations
into any matter within the scope of its responsibilities and it shall have
direct access to the independent auditors as well as anyone in the organization.
The Audit Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or advisors it deems necessary in the
performance of its duties or to assist in the conduct of any investigation.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the National Association
of Securities Dealers and the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley
Act"). The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall be independent
non-executive directors, free from any relationship that would interfere with
the exercise of his or her independent judgment. All members of the Audit
Committee shall have a basic understanding of finance and accounting and be able
to read and understand fundamental financial statements, and at least one member
of the Audit Committee shall have accounting or related financial management
expertise and be considered a "financial expert" within the meaning of the
Sarbanes-Oxley Act. Members of the Audit Committee may enhance their familiarity
with finance and accounting by participating in educational programs.
Audit Committee members shall be appointed by the Board of Directors. If the
Audit Committee Chair is not designated or present, the members of the Audit
Committee may designate a Chair by majority vote of the Audit Committee
membership.
A-1
The Audit Committee will have regular meetings at least five times per year
(four of which should coincide with, and precede, the Company's public
announcement of its quarterly and annual results) or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Audit Committee should meet privately and
separately, on a regular basis, with management and with the independent
auditors, to discuss any matters that the Audit Committee or each of these
groups believes should be discussed.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit this Charter to the Board of Directors for approval and have this
Charter published in a proxy or information statement at least every
three years in accordance with the Securities and Exchange Commission
regulations.
2. Review the Company's annual audited financial statements and related
footnotes prior to filing or distribution. The review should include
separate discussions with management and with the independent auditors
of significant issues and disagreements regarding accounting principles,
practices and judgments, any significant difficulties encountered during
the course of the audit, including any restrictions on the scope of work
or access to required information and the effect of using different
accounting principles, practices and judgments.
3. Review the Company's quarterly earnings prior to filing or distribution
and discuss with management and with the independent auditors.
4. Review any reports or other documents that include public financial
disclosures prior to filing or distribution and discuss with management,
if appropriate, whether the information contained in these documents is
consistent with the information contained in the Company's financial
statements.
5. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting processes
and adequacy of controls. Discuss significant financial risk exposures
and the steps management has taken to monitor, control and report such
exposures. Review and assess management's critical accounting estimates.
6. Review written reports and significant findings prepared by the
independent auditors, if any, including reports regarding the Company's
critical accounting policies, alternative treatments of financial
information and material communications between the independent auditor
and management, and if appropriate, discuss the information contained in
the reports with the independent auditors. Review management's
responses, if any, to such reports and findings, including the status of
previous recommendations.
7. Receive copies of reports to management prepared by the internal
auditing department and management's responses to any such reports.
Obtain confirmation from internal auditors that the Company is in
compliance with its financial reporting requirements.
A-2
8. Review, annually, the procedures, organizational structure, and
qualifications of the internal audit department, and review and approve
the hiring of employees of the independent auditors who were engaged on
the Company's account. Discuss with independent auditors the performance
of the internal audit department and any recommendations the independent
auditors may have.
9. Review, annually, policies and procedures, as well as audit results,
associated with directors' and officers' expense accounts and
perquisites, and other uses of corporate assets. Review, annually, a
summary of directors' and officers' related party transactions and
potential conflicts of interest.
INDEPENDENT AUDITORS AND INTERNAL AUDITORS
10. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors, and the Audit Committee has the
ultimate authority and responsibility to select and hire, evaluate and
where appropriate, replace the independent auditors. The Audit Committee
shall review the performance of the independent auditors; the experience
and qualifications of the senior members of the independent auditor
team; and the quality control procedures of the independent auditors.
11. Approve the fees and other significant compensation to be paid to the
independent auditors.
12. Review the non-audit services to determine whether they are prohibited
under the Sarabanes-Oxley Act. Pre-approve the provision of any
permissible non-audit services by the independent auditors and the
related fees of the independent auditors therefor. Consider whether the
provision of these other services is compatible with maintaining the
auditors' independence.
13. On an annual basis, the Audit Committee should receive from the
independent auditors a formal written statement delineating all
relationships between the independent auditors and the Company and
should discuss with the independent auditors the disclosed relationships
or services that may impact the objectivity and independence of the
auditors, and take, or recommend that the Board of Directors take
appropriate action to ensure the independence of the auditors. Annually,
the Audit Committee shall ensure receipt of a formal written statement
from the independent auditors with respect to their independence
consistent with all applicable standards.
14. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management and internal audit and general audit
approach.
15. Discuss certain matters required to be communicated to audit committees
in accordance with the American Institute of Certified Public
Accountants: A Statement of Auditing Standards No. 61, including such
matters as (i) the consistency of application of the Company's
accounting policies; (ii) the completeness of information contained in
the financial statements and related disclosures; (iii) the selection of
new or changes to the Company's accounting policies; (iv) estimates,
judgments and uncertainties; (v) unusual transactions and (vi)
accounting policies relating to significant financial statements items,
including the timing of transactions and the period in which they are
recorded.
A-3
16. Obtain and consider the independent auditors' judgments about the
quality and appropriateness of the Company's accounting principles as
applied in its financial reporting; the discussion should include such
issues as the clarity of the Company's financial disclosures and degree
of aggressiveness or conservatism of the Company's accounting principles
and underlying estimates and other significant decisions made by the
management in preparing the financial disclosure.
17. Discuss and review with the internal audit department and the
independent auditors the effectiveness and coordination of the internal
audit effort to assure completeness of coverage and to avoid duplication
of resources. Review the annual internal audit plan and the processes
used to develop the plan; discuss the scope of the plan, staffing,
reliance upon management, status of activities, significant findings,
and any recommendations.
18. The internal auditors will be responsible to the Board of Directors
through the Audit Committee. The Audit Committee shall annually review
the performance, objectivity and independence of the internal auditors
and recommend to the Board of Directors the appointment of the internal
auditors and any discharge of internal auditors when circumstances
warrant.
19. Approve the fees and other significant compensation to be paid to the
internal auditors.
LEGAL COMPLIANCE
20. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
21. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
22. Establish and maintain appropriate procedures for the receipt and
handling of anonymous submissions from employees of the Company
regarding questionable accounting practices.
23. Maintain minutes of meetings and report Audit Committee actions to the
Board of Directors on a regular basis including any recommendations the
Audit Committee deems appropriate.
24. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Audit Committee or the Board of
Directors deems necessary or appropriate.
25. Periodically perform self-assessment of Audit Committee performance.
A-4
APPENDIX B
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
Paragraph 1 of the Certificate of Incorporation is hereby amended to
read as follows:
"1. The name of the Corporation is Amedia Networks, Inc. "
B-1
APPENDIX C
2000 TTR TECHNOLOGIES, INC.
EQUITY INCENTIVE PLAN
Section 1. Purpose of the Plan
The purpose of the TTR Technologies, Inc. Equity Incentive Plan (the "Plan") is
to further the interests of TTR Technologies, Inc. (the "Company") and its
shareholders by providing long-term performance incentives to those key
employees and consultants of the Company and its Subsidiaries who are largely
responsible for the management, growth and protection of the business of the
Company and its Subsidiaries.
Section 2. Definitions
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Award" means any Option, Performance Unit, SAR (including a Limited SAR),
Restricted Stock, Stock granted as a bonus or in lieu of other awards, other
Stock-Based Award, Tax Bonus or other cash payments granted to a Participant
under the Plan.
(b) "Award Agreement" shall mean the written agreement, instrument or document
evidencing an Award.
(c) "Change of Control" means and includes each of the following: (i) the
acquisition, in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) by any person or entity or any
group of persons or entities who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
Subsidiary, of any securities of the Company such that, as a result of such
acquisition, such person, entity or group either (A) beneficially owns (within
the meaning of Rule l3d-3 under the Exchange Act), directly or indirectly, more
than 50% of the Company's outstanding voting securities entitled to vote on a
regular basis for a majority of the members of the Board of Directors of the
Company or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Board; (ii) a change in the composition of the
Board of Directors of the Company such that a majority of the members of the
Board of Directors of the Company are not Continuing Directors; or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 50% of the
total voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of (in one or more
transactions) all or
C-1
substantially all of the Company's assets.
Notwithstanding the foregoing, the preceding events shall not be deemed to be a
Change of Control if, prior to any transaction or transactions causing such
change, a majority of the Continuing Directors shall have voted not to treat
such transaction or transactions as resulting in a Change of Control.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(e) A "Continuing Director" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board on
the effective date of the Plan or (ii) was nominated for election or elected to
such Board with the affirmative vote of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(g) "Fair Market Value" means, with respect to Stock, Awards, or other property,
the fair market value of such Stock, Awards, or other property determined by
such methods or procedures as shall be established from time to time by the
Committee in good faith and in accordance with applicable law. Unless otherwise
determined by the Committee, the Fair Market Value of Stock shall mean the mean
of the high and low sales prices of Stock on the relevant date as reported on
the stock exchange or market on which the Stock is primarily traded, or if no
sale is made on such date, then the Fair Market Value is the weighted average of
the mean of the high and low sales prices of the Stock on the next preceding day
and the next succeeding day on which such sales were made, as reported on the
stock exchange or market on which the Stock is primarily traded.
(h) "ISO" means any Option designated as an incentive stock option within the
meaning of Section 422 of the Code.
(i) "Limited SAR" means an SAR exercisable only for cash upon a Change of
Control or other event, as specified by the Committee.
(j) "Option" means a right granted to a Participant pursuant to Section
6(b) to purchase Stock at a specified price during specified time periods. An
Option may be either an ISO or a nonstatutory Option (an Option not designated
as an ISO).
(k) "Performance Unit" means a right granted to a Participant pursuant to
Section 6(c) to receive a payment in cash equal to the increase in the book
value of the Company during specified time periods if specified performance
goals are met.
(l) "Restricted Stock" means Stock awarded to a Participant pursuant to Section
6(d) that may be subject to certain restrictions and to a risk of forfeiture.
(m) "Stock-Based Award" means a right that may be denominated or payable in, or
valued in whole or in part by reference to the market value of, Stock,
including, but not limited to, any Option, SAR (including a Limited SAR),
Restricted Stock, Stock granted as a bonus or Awards in lieu of cash
obligations.
C-2
(n) "SAR" or "Stock Appreciation Right" means the right granted to a Participant
pursuant to Section 6(e) to be paid an amount measured by the appreciation in
the Fair Market Value of Stock from the date of grant to the date of exercise of
the right, with payment to be made in cash, Stock or as specified in the Award,
as determined by the Committee.
(o) "Subsidiary" shall mean any corporation, partnership, joint venture or other
business entity of which 50% or more of the outstanding voting power is
beneficially owned, directly or indirectly, by the Company.
(p) "Tax Bonus" means a payment in cash in the year in which an amount is
included in the gross income of a Participant in respect of an Award of an
amount equal to the federal, foreign, if any, and applicable state and local
income and employment tax liabilities payable by the Participant as a result of
(i) the amount included in gross income in respect of the Award and (ii) the
payment of the amount in clause (i) and the amount in this clause (ii). For
purposes of determining the amount to be paid to the Participant pursuant to the
preceding sentence, the Participant shall be deemed to pay federal, foreign, if
any, and state and local income taxes at the highest marginal rate of tax
imposed upon ordinary income for the year in which an amount in respect of the
Award is included in gross income, after giving effect to any deductions
therefrom or credits available with respect to the payment of any such taxes.
Section 3. Administration of the Plan
The Plan shall be administered by shall be administered by the Board of
Directors of the Company or, at the discretion of the Board, by a committee
composed of at least two members of the Board. Any such committee designated by
the Board, and the Board itself acting in its capacity as administrator of the
Equity Incentive Plan, is referred to herein as the "Committee." After any such
designation, no member of the Committee while serving as such shall be eligible
for participation in the Plan. Any action of the Committee in administering the
Plan shall be final, conclusive and binding on all persons, including the
Company, its Subsidiaries, employees, Participants, persons claiming rights from
or through Participants and stockholders of the Company.
Subject to the provisions of the Plan, the Committee shall have full and final
authority in its discretion (a) to select the key employees and consultants who
will receive Awards pursuant to the Plan ("Participants"), (b) to determine the
type or types of Awards to be granted to each Participant, (c) to determine the
number of shares of Stock to which an Award will relate, the terms and
conditions of any Award granted under the Plan (including, but not limited to,
restrictions as to transferability or forfeiture, exercisability or settlement
of an Award and waivers or accelerations thereof, and waivers of or
modifications to performance conditions relating to an Award, based in each case
on such considerations as the Committee shall determine) and all other matters
to be determined in connection with an Award; (d) to determine whether, to what
extent, and under what circumstances an Award may be settled, or the exercise
price of an Award may be paid, in cash, Stock, other Awards or other property,
or an Award may be canceled, forfeited, or surrendered; (e) to determine
whether, and to certify that, performance goals to which the settlement of an
Award is subject are satisfied; (f) to correct any defect or supply any omission
or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such
rules and regulations
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as, in its opinion, may be advisable in the administration of the Plan; and (g)
to make all other determinations as it may deem necessary or advisable for the
administration of the Plan. The Committee may delegate to officers or managers
of the Company or any Subsidiary or to unaffiliated service providers the
authority, subject to such terms as the Committee shall determine, to perform
administrative functions and to perform such other functions as the Committee
may determine, to the extent permitted under Rule 16b-3, Section 162(m) of the
Code and applicable law.
Section 4. Participation in the Plan
Participants in the Plan shall be selected by the Committee from among the key
employees and consultants of the Company and its Subsidiaries, provided,
however, that only key employees shall be eligible to receive ISOs under the
Plan.
Section 5. Plan Limitations; Shares Subject to the Plan
(a) Subject to the provisions of Section 8(a) hereof, the aggregate number of
shares of common stock, $1.00 par value, of the Company (the "Stock") available
for issuance as Awards under the Plan shall not exceed 5,000,000 shares.
(b) Subject to the provisions of Section 8(a) hereof, the aggregate number of
Performance Units which may be awarded under the Plan shall not exceed 350,000.
If any Performance Units awarded under the Plan shall be forfeited or canceled,
such Performance Units shall thereafter be available for award under the Plan.
No Award may be granted if the number of shares to which such Award relates,
when added to the number of shares previously issued under the Plan and the
number of shares which may then be acquired pursuant to other outstanding,
unexercised Awards, exceeds the number of shares available for issuance pursuant
to the Plan. If any shares subject to an Award are forfeited or such Award is
settled in cash or otherwise terminates for any reason whatsoever without an
actual distribution of shares to the Participant, any shares counted against the
number of shares available for issuance pursuant to the Plan with respect to
such Award shall, to the extent of any such forfeiture,
settlement, or termination, again be available for Awards under the Plan;
provided, however, that the Committee may adopt procedures for the counting of
shares relating to any Award to ensure appropriate counting, avoid double
counting, and provide for adjustments in any case in which the number of shares
actually distributed differs from the number of shares previously counted in
connection with such Award.
Section 6. Awards
(a) General. Awards may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Section 8(a)), such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant; provided,
however, that the Committee shall retain full power to accelerate or waive any
such additional term or condition as it may have previously imposed. All Awards
shall be evidenced by an Award Agreement.
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(b) Options. The Committee may grant Options to Participants on the following
terms and conditions:
(i) Exercise Price. The exercise price of each Option shall be determined by the
Committee at the time the Option is granted, but (except as provided in Section
7(a)) the exercise price of any ISO shall not be less than the Fair Market Value
(110% of the Fair Market Value in the case of a 10% shareholder, within the
meaning of Section 422(c)(5) of the Code) of the shares covered thereby at the
time the Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part, whether the
exercise price shall be paid in cash or by the surrender at Fair Market Value of
Stock, or by any combination of cash and shares of Stock, including, without
limitation, cash, Stock, other Awards, or other property (including notes or
other contractual obligations of Participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements, to the extent permitted
by applicable law), and the methods by which Stock will be delivered or deemed
to be delivered to Participants.
(iii) Incentive Stock Options. The terms of any Option granted under the Plan as
an ISO shall comply in all respects with the provisions of Section 422 of the
Code, including, but not limited to, the requirement that no ISO shall be
granted more than ten years after the effective date of the Plan.
(c) Performance Units. The Committee is authorized to grant Performance Units to
Participants on the following terms and conditions:
(i) Performance Criteria and Period. At the time it makes an award of
Performance Units, the Committee shall establish both the performance goal or
goals and the performance period or periods applicable to the Performance Units
so awarded. A
performance goal shall be a goal, expressed in terms of growth in book value,
earnings per share, return on equity or any other financial or other measurement
deemed appropriate by the Committee, or may relate to the results of operations
or other measurable progress of either the Company as a whole or the
Participant's Subsidiary, division or department. The performance period will be
the period of time over which one or more of the performance goals must be
achieved, which may be of such length as the Committee, in its discretion, shall
select. Neither the performance goals nor the performance periods need be
identical for all Performance Units awarded at any time or from time to time.
The Committee shall have the authority, in its discretion, to accelerate the
time at which any performance period will expire or waive or modify the
performance goals of any Participant or Participants. The Committee may also
make such adjustments, to the extent it deems appropriate, to the performance
goals for any Performance Units awarded to compensate for, or to reflect, any
material changes which may have occurred in accounting practices, tax laws,
other laws or regulations, the financial structure of the Company, acquisitions
or dispositions of business or Subsidiaries or any unusual circumstances outside
of management's control which, in the sole judgment of the Committee, alters or
affects the computation of such performance goals or the performance of the
Company or any relevant Subsidiary, division or department.
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(ii) Value of Performance Units. The value of each Performance Unit at any time
shall equal the book value per share of the Company's Stock, as such value
appears on the consolidated balance sheet of the Company as of the end of the
fiscal quarter immediately preceding the date of valuation.
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to
Participants on the following terms and conditions:
(i) Restricted Period. Restricted Stock awarded to a Participant shall be
subject to such restrictions on transferability and other restrictions for such
periods as shall be established by the Committee, in its discretion, at the time
of such Award, which restrictions may lapse separately or in combination at such
times, under such circumstances, or otherwise, as the Committee may determine.
(ii) Forfeiture. Restricted Stock shall be forfeitable to the Company upon
termination of employment during the applicable restricted periods. The
Committee, in its discretion, whether in an Award Agreement or anytime after an
Award is made, may accelerate the time at which restrictions or forfeiture
conditions will lapse or remove any such restrictions, including upon death,
disability or retirement, whenever the Committee determines that such action is
in the best interests of the Company.
(iii) Certificates for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Stock are registered in the name of the Participant,
such certificates may bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock.
(iv) Rights as a Shareholder. Subject to the terms and conditions of the Award
Agreement, the Participant shall have all the rights of a stockholder with
respect to shares of Restricted Stock awarded to him or her, including, without
limitation, the right to vote such shares and the right to receive all dividends
or other distributions made with respect to such shares. If any such dividends
or distributions are paid in Stock, the Stock shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which the Stock has been distributed.
(e) Stock Appreciation Rights. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the Fair
Market Value of one share of Stock on the date of exercise over (B) the grant
price of the SAR as determined by the Committee as of the date of grant of the
SAR, which grant price (except as provided in Section 7(a)) shall not be less
than the Fair Market Value of one share of Stock on the date of grant.
(ii) Other Terms. The Committee shall determine the time or times at which an
SAR may be exercised in whole or in part, the method of exercise, method of
settlement, form of consideration payable in settlement, method by which Stock
will be delivered or deemed to be delivered to Participants, whether or not an
SAR shall be in tandem
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with any other Award, and any other terms and conditions of any SAR. Limited
SARs may be granted on such terms, not inconsistent with this Section 6(e), as
the Committee may determine. Limited SARs may be either freestanding or in
tandem with other Awards.
(f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company or Subsidiary obligations to pay cash or deliver other property under
other plans or compensatory arrangements; provided that, in the case of
Participants subject to Section 16 of the Exchange Act, such cash amounts are
determined under such other plans in a manner that complies with applicable
requirements of Rule 16b-3 so that the acquisition of Stock or Awards hereunder
shall be exempt from Section 16(b) liability. Stock or Awards granted hereunder
shall be subject to such other terms as shall be determined by the Committee.
(g) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Stock-Based Awards in addition to those provided in Sections 6(b) and (d)
through (e) hereof, as deemed by the Committee to be consistent with the
purposes of the Plan. The Committee shall determine the terms and conditions of
such Awards. Stock delivered pursuant to an Award in the nature of a purchase
right granted under this Section 6(g) shall be purchased for such consideration
and paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, or other property, as
the Committee shall determine.
(h) Cash Payments. The Committee is authorized, subject to limitations under
applicable law, to grant to Participants Tax Bonuses and other cash payments,
whether awarded separately or as a supplement to any Stock-Based Award. The
Committee shall determine the terms and conditions of such Awards.
Section 7. Additional Provisions Applicable to Awards
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan or any award granted under any other plan of the Company or any
Subsidiary, or any business entity acquired by the Company or any Subsidiary, or
any other right of a Participant to receive payment from the Company or any
Subsidiary. If an Award is granted in substitution for another Award or award,
the Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. Awards granted in addition to, or
in tandem with other Awards or awards may be granted either as of the same time
as, or a different time from, the grant of such other Awards or awards. The per
share exercise price of any Option, grant price of any SAR, or purchase price of
any other Award conferring a right to purchase Stock:
(i) granted in substitution for an outstanding Award or award, shall be not less
than the lesser of (A) the Fair Market Value of a share of Stock at the date
such substitute Award is granted or (B) such Fair Market Value at that date,
reduced to reflect the Fair Market Value at that date of the Award or award
required to be surrendered by the Participant as a condition to receipt of the
substitute Award; or
(ii) retroactively granted in tandem with an outstanding Award or award, shall
not be less than the lesser of the Fair Market Value of a share of Stock at the
date of grant of
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the later Award or at the date of grant of the earlier Award or award.
(b) Exchange and Buy Out Provisions. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
other Awards (subject to Section 7(a)), or other property based on such terms
and conditions as the Committee shall determine and communicate to a Participant
at the time that such offer is made.
(c) Performance Conditions. The right of a Participant to exercise or receive a
grant or settlement of any Award, and the timing thereof, may be subject to such
performance conditions as may be specified by the Committee.
(d) Term of Awards. The term of each Award shall, except as provided herein, be
for such period as may be determined by the Committee; provided, however, that
in no event shall the term of any ISO, or any SAR granted in tandem therewith,
exceed a period of ten years from the date of its grant (or such shorter period
as may be applicable under Section 422 of the Code).
(e) Form of Payment. Subject to the terms of the Plan and any applicable Award
Agreement, payments or transfers to be made by the Company or a Subsidiary upon
the grant or exercise of an Award may be made in such forms as the Committee
shall determine, including, without limitation, cash, Stock, other Awards, or
other property (and may be made in a single payment or transfer, in
installments, or on a deferred basis), in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee. (Such payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installments or deferred payments.) The Committee, in its
discretion, may accelerate any payment or transfer upon a change in control as
defined by the Committee. The Committee may also authorize payment upon the
exercise of an Option by net issuance or other cashless exercise methods.
(f) Loan Provisions. With the consent of the Committee, and subject at all times
to laws and regulations and other binding obligations or provisions applicable
to the Company, the Company may make, guarantee, or arrange for a loan or loans
to a Participant with respect to the exercise of any Option or other payment in
connection with any Award, including the payment by a Participant of any or all
federal, state, or local income or other taxes due in connection with any Award.
Subject to such limitations, the Committee shall have full authority to decide
whether to make a loan or loans hereunder and to determine the amount, terms,
and provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan is
to be repaid and the conditions, if any, under which the loan or loans may be
forgiven.
(g) Awards to Comply with Section 162(m). The Committee may (but is not required
to) grant an Award pursuant to the Plan to a Participant who, in the year of
grant, may be a "covered employee," within the meaning of Section 162(m) of the
Code, which is intended to qualify as "performance-based compensation" under
Section 162(m) of the Code (a "Performance-Based Award"). The right to receive a
Performance-Based Award, other than Options and SARs granted at not less than
Fair Market Value, shall be conditional upon the achievement of performance
goals established by the
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Committee in writing at the time such Performance-Based Award is granted. Such
performance goals, which may vary from Participant to Participant and
Performance-Based Award to Performance-Based Award, shall be based upon the
attainment by the Company or any Subsidiary, division or department of specific
amounts of, or increases in, one or more of the following, any of which may be
measured either in absolute terms or as compared to another company or
companies: revenues, earnings, cash flow, net worth, book value, stockholders'
equity, financial return ratios, market performance or total stockholder return,
and/or the completion of certain business or capital transactions. Before any
compensation pursuant to a Performance-Based Award is paid, the Committee shall
certify in writing that the performance goals applicable to the
Performance-Based Award were in fact satisfied.
The maximum amount which may be granted as Performance-Based Awards to any
Participant in any calendar year shall not exceed (i) Stock-Based Awards for
100,000 shares of Stock (whether payable in cash or stock), subject to
adjustment as provided in Section 8(a) hereof, (ii) 100,000 Performance Units,
(iii) a Tax Bonus payable with respect to the Stock-Based Awards described in
clause (i) and Performance Units described in clause (ii), and (iv) cash
payments (other than Tax Bonuses) of $1,000,000.
(h) Change of Control. In the event of a Change of Control of the Company, all
Awards granted under the Plan (including Performance-Based Awards) that are
still outstanding and not yet vested or exercisable or which are subject to
restrictions shall become immediately 100% vested in each Participant or shall
be free of any restrictions, as of the first date that the definition of Change
of Control has been fulfilled, and shall be exercisable for the remaining
duration of the Award. All Awards that are exercisable as of the effective date
of the Change of Control will remain exercisable for the remaining duration of
the Award.
Section 8. Adjustments upon Changes in Capitalization; Acceleration in Certain
Events
(a) In the event that the Committee shall determine that any stock dividend,
recapitalization, forward split or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or share exchange, or other
similar corporate transaction or event, affects the Stock or the book value of
the Company such that an adjustment is appropriate in order to prevent dilution
or enlargement of the rights of Participants under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and kind of shares of Stock which may thereafter be issued in connection
with Awards, (ii) the number and kind of shares of Stock issuable in respect of
outstanding Awards, (iii) the aggregate number and kind of shares of Stock
available under the Plan, (iv) the number of Performance Units which may
thereafter be granted and the book value of the Company with respect to
outstanding Performance Units, and (v) the exercise price, grant price, or
purchase price relating to any Award or, if deemed appropriate, make provision
for a cash payment with respect to any outstanding Award; provided, however, in
each case, that no adjustment shall be made which would cause the Plan to
violate Section 422(b)(1) of the Code with respect to ISOs or would adversely
affect the status of a Performance-Based Award as "performance-based
compensation" under Section 162(m) of the Code.
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(b) In addition, the Committee is authorized to make adjustments in the terms
and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, events described
in the preceding paragraph) affecting the Company or any Subsidiary, or in
response to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, no
adjustment shall be made in any outstanding Performance-Based Awards to the
extent that such adjustment would adversely affect the status of that
Performance-Based Award as "performance-based compensation" under Section 162(m)
of the Code.
Section 9. General Provisions
(a) Changes to the Plan and Awards. The Board of Directors of the Company may
amend, alter, suspend, discontinue, or terminate the Plan or the Committee's
authority to grant Awards under the Plan without the consent of the Company's
stockholders or Participants, except that any such amendment, alteration,
suspension, discontinuation, or termination shall be subject to the approval of
the Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the Stock
may then be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to the stockholders for
approval; provided, however, that without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
Participant under any Award theretofore granted and any Award Agreement relating
thereto. The Committee may waive any conditions or rights under, or amend,
alter, suspend, discontinue, or terminate, any Award theretofore granted and any
Award Agreement relating thereto; provided, however, that without the consent of
an affected Participant, no such amendment, alteration, suspension,
discontinuation, or termination of any Award may materially and adversely affect
the rights of such Participant under such Award.
The foregoing notwithstanding, any performance condition specified in connection
with an Award shall not be deemed a fixed contractual term, but shall remain
subject to adjustment by the Committee, in its discretion at any time in view of
the Committee's assessment of the Company's strategy, performance of comparable
companies, and other circumstances, except to the extent that any such
adjustment to a performance condition would adversely affect the status of a
Performance-Based Award as "performance-based compensation" under Section 162(m)
of the Code.
Notwithstanding the foregoing, if the Plan is ratified by the stockholders of
the Company at the Company's 2000 Annual Meeting of Stockholders, then unless
approved by the stockholders of the Company, no amendment will: (i) change the
class of persons eligible to receive Awards; (ii) materially increase the
benefits accruing to Participants under the Plan, or (iii) increase the number
of shares of Stock or the number of Performance Units subject to the Plan.
(b) No Right to Award or Employment. No employee or other person shall have any
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claim or right to receive an Award under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any Subsidiary.
(c) Taxes. The Company or any Subsidiary is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a
distribution of Stock or any payroll or other payment to a Participant amounts
of withholding and other taxes due in connection with any transaction involving
an Award, and to take such other action as the Committee may deem advisable to
enable the Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of a Participant's
tax obligations.
(d) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, encumbered, or
hypothecated to, or in favor of, or subject to any lien, obligation, or
liability of such Participants to, any party, other than the Company or any
Subsidiary, or assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution, and such Awards and rights shall
be exercisable during the lifetime of the Participant only by the Participant or
his or her guardian or legal representative. Notwithstanding the foregoing, the
Committee may, in its discretion, provide that Awards or other rights or
interests of a Participant granted pursuant to the Plan (other than an ISO) be
transferable, without consideration, to immediate family members (i.e.,
children, grandchildren or spouse), to trusts for the benefit of such immediate
family members and to partnerships in which such family members are the only
partners. The Committee may attach to such transferability feature such terms
and conditions as it deems advisable. In addition, a Participant may, in the
manner established by the Committee, designate a beneficiary (which may be a
person or a trust) to exercise the rights of the Participant, and to receive any
distribution, with respect to any Award upon the death of the Participant. A
beneficiary, guardian, legal representative or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award Agreement applicable to such Participant,
except as otherwise determined by the Committee, and to any additional
restrictions deemed necessary or appropriate by the Committee.
(e) No Rights to Awards; No Stockholder Rights. No Participant shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants. No Award shall confer on any
Participant any of the rights of a stockholder of the Company unless and until
Stock is duly issued or transferred to the Participant in accordance with the
terms of the Award.
(f) Discretion. In exercising, or declining to exercise, any grant of authority
or discretion hereunder, the Committee may consider or ignore such factors or
circumstances and may accord such weight to such factors and circumstances as
the Committee alone and in its sole judgment deems appropriate and without
regard to the affect such exercise, or declining to exercise such grant of
authority or discretion, would have upon the affected Participant, any other
Participant, any employee, the Company, any Subsidiary, any stockholder or any
other person.
(g) Effective Date. The effective date of the Plan is May 30, 2000.
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(h) Shareholder Approval. Unless and until the Plan is approved by the
stockholders of the Company at the Company's 2000 Annual Meeting of
Stockholders, no Stock-Based Award may be granted to any officer of the Company.
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APPENDIX D
TTR TECHNOLOGIES, INC.
2002 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
1. Purpose. The TTR Technologies, Inc. 2002 Non-Employee Directors Stock
Option Plan (the "Plan") is designed to aid TTR Technologies, Inc., a Delaware
corporation (the "Company"), in retaining and attracting non-employee directors
(directors who are not employees of the Company or of any corporation,
partnership, joint venture or other business entity of which fifty percent (50%)
or more of the outstanding voting power is beneficially owned, directly or
indirectly, by the Company) of exceptional ability by enabling such non-employee
directors to purchase a proprietary interest in the Company, thereby stimulating
in such individuals an increased desire to render greater services that will
contribute to the continued growth and success of the Company.
2. Amount and Source of Stock. The total number of shares of the
Company's common stock, $.001 par value per share (the "Stock"), which may be
the subject of options granted pursuant to the Plan shall not exceed 275,000,
subject to adjustment as provided in paragraph 10. Such Stock may be reserved or
made available from the Company's authorized and unissued Stock or from Stock
reacquired and held in the Company's treasury. In the event that any option
granted hereunder shall terminate prior to its exercise in full for any reason,
then the Stock subject to such option shall be added to the Stock otherwise
available for issuance pursuant to the exercise of options under the Plan.
3. Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Company (the "Board") or, if determined by the Board,
a committee selected by the Board and comprised solely of two or more members of
the Board, who are "Non-Employee Directors" as that term is defined in Rule
16b-3(b)(3) (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended. The corporate body administering the Plan is
hereinafter referred to as the "Administrative Body." The Administrative Body
shall have all the powers vested in it by the terms of the Plan. Such powers
include the authority to select the participants who will receive options under
the Plan, to prescribe the form of the individual option agreements, to grant
options under the Plan, to fix the vesting and other terms of each option grant,
to construe the Plan, to determine all questions arising thereunder, and to
adopt and amend such rules and regulations for the administration of the Plan as
it may deem desirable. Any decisions of the Administrative Body in the
administration of the Plan shall be final and conclusive.
4. Option Grants.
(a) Each non-employee director shall be eligible to receive grants of
options at such time or times and for such number of shares of Stock as the
Administrative Body, in its discretion, shall determine. The date on which an
option is granted under this subparagraph to a specified individual shall
constitute the date of grant of such option (the "Date of Grant").
(b) The terms relating to the vesting of the option shall be fixed by
the Administrative Body at the time of the grant of the option.
D-1
5. Option Price. The exercise price of the Stock purchasable under any
option granted pursuant to the Plan shall be equal to the Fair Market Value of a
share of Stock on the Date of Grant. For purposes of the Plan, the "Fair Market
Value" of a share of Stock shall mean (i) if the Stock is traded on a national
securities exchange or on the NASDAQ National Market System ("NMS"), the per
share closing price of the Stock on the principal securities exchange on which
they are listed or on NMS, as the case may be, on the Date of Grant (or if there
is no closing price for such Date of Grant, then the last preceding business day
on which there was a closing price); or (ii) if the Stock is traded on the
over-the-counter market and quotations are published on the NASDAQ quotations
system (but not on NMS), the per share closing bid price of the Stock on the
Date of Grant as reported by NASDAQ (or if there is no closing bid price for
such Date of Grant, then the last preceding business day on which there was a
closing bid price); or (iii) if the Stock is traded on the over-the-counter
market but bid quotations are not published on NASDAQ, the closing bid price per
share for the Stock as furnished by a broker-dealer which regularly furnishes
price quotations for the Stock; or (iv) if the Stock is not traded on a
securities exchange or the over-the-counter market, the valuation accorded to
each share of Stock by the Administrative Body.
6. Term of Option.
(a) Unless earlier terminated pursuant to the other provisions herein,
the option hereby granted shall terminate at the close of business on the date
six (6) years from the Date of Grant (the "Expiration Date").
(b) If the non-employee director is removed as a director of the Company
for cause (as determined in accordance with applicable law) by the stockholders
of the Company, the unexercised portion of the option will terminate
simultaneously with the non-employee director's removal as a director.
(c) If a non-employee director ceases to be a director of the Company on
account of his or her death or disability, then the option may be exercised at
any time prior to the earlier of the Expiration Date and twelve (12) months
after the date that the non-employee director ceases to be a director of the
Company, and any part of the option which is not so exercised within such period
shall thereupon terminate.
(d) If a non-employee director ceases to be a director of the Company
for any reason (other than cause, death or disability), then the option may be
exercised at any time prior to the earlier of the Expiration Date and three (3)
months after the date that the non-employee director ceases to be a director of
the Company, and any part of the option which is not so exercised within such
period shall thereupon terminate.
(e) No option granted hereunder shall be exercisable unless and until
the non-employee director has entered into an individual option agreement with
the Company that shall set forth the terms and conditions of such option. Each
such agreement shall expressly incorporate by reference the provisions of this
Plan (a copy of which shall be made available for inspection by the optionee
during normal business hours at the principal office of the Company), and shall
state that in the event of any inconsistency between the provisions hereof and
the provisions of such agreement, the provisions of this Plan shall govern.
D-2
7. Exercise of Options. An option shall be exercised when written notice
of such exercise, signed by the person entitled to exercise the option, has been
delivered or transmitted by registered or certified mail to the Secretary (or
such other officer as is specified in the individual option agreement) of the
Company at its then principal office. Such notice shall specify the number of
shares of Stock for which the option is being exercised and shall be accompanied
by (i) such documentation, if any, as may be required by the Company as provided
in subparagraph 11(b), and (ii) payment of the aggregate option price. The
Administrative Body shall determine whether the exercise price for an option
shall be paid in cash, by the surrender at Fair Market Value of Stock (held for
at least six (6) months), by any combination of cash and shares of Stock,
including, without limitation, cash, Stock or other property (including notes or
other contractual obligations of non-employee directors to make payment on a
deferred basis), the means or methods of payment, including through "cashless
exercise" arrangements, to the extent permitted by applicable law, and the
methods by which, or the time or times at which, Stock will be delivered or
deemed to be delivered to non-employee directors upon the exercise of such
option. Delivery of such notice shall constitute an irrevocable election to
purchase the Stock specified in such notice, and the date on which the Company
receives the last of such notice, documentation and the aggregate option
exercise price for all of the Stock covered by the notice shall, subject to the
provisions of paragraph 11 hereof, be the date as of which the Stock so
purchased shall be deemed to have been issued. The person entitled to exercise
the option shall not have the right or status as a holder of the Stock to which
such exercise relates prior to receipt by the Company of the payment, notice and
documentation expressly referred to in this paragraph 7.
8. Right of the Company to Terminate Services of a Non-Employee
Director. Nothing contained herein or in any individual option agreement shall
be construed to confer on any non-employee director any right to continue as a
director of the Company or derogate from any right of the Company, the Board or
the stockholders of the Company to remove or not renominate such non-employee
director as a director of the Company, with or without cause.
9. Non-transferability of Options. No option granted under the Plan
shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to
any lien, obligation, or liability of such non-employee director to, any party,
other than the Company, or assigned or transferred by such non-employee director
otherwise than by will or the laws of descent and distribution, and such option
shall be exercisable during the lifetime of the non-employee director only by
the non-employee director or his or her guardian or legal representative.
Notwithstanding the foregoing, the Administrative Body may, in its discretion,
provide that an option of a non-employee director granted pursuant to the Plan
be transferable, without consideration, to immediate family members (i.e.,
children, grandchildren or spouse), to trusts for the benefit of such immediate
family members and to partnerships in which such family members are the only
partners. The Administrative Body may attach to such transferability feature
such terms and conditions as it deems advisable. In addition, a non-employee
director may, in the manner established by the Administrative Body, designate a
beneficiary (which may be a person or a trust) to exercise the rights of the
non-employee director, and to receive any distribution, with respect to any
option upon the death of the non-employee director. A beneficiary, guardian,
legal representative or other person claiming any rights under the Plan from or
through any non-employee director shall be subject to all terms and conditions
of the Plan and any individual option agreement applicable to such non-employee
director, except as
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otherwise determined by the Administrative Body, and to any additional
restrictions deemed necessary or appropriate by the Administrative Body.
10. Adjustments Upon Certain Events. In the event that the
Administrative Body shall determine that any stock dividend, recapitalization,
forward split or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase or share exchange, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of non-employee
directors under the Plan, then the Administrative Body shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock that may thereafter be issued in connection with options, (ii) the number
and kind of shares of Stock issuable in respect of outstanding options, (iii)
the aggregate number and kind of shares of Stock available under the Plan, and
(iv) the exercise price, grant price, or purchase price relating to any option
or, if deemed appropriate, make provision for a cash payment with respect to any
outstanding option.
11. General Restrictions.
(a) No option granted hereunder shall be exercisable if the Company
shall at any time determine that (i) the listing upon any securities exchange,
registration or qualification under any state or federal law of any Stock
otherwise deliverable upon such exercise, or (ii) the consent or approval of any
regulatory body or the satisfaction of withholding tax or other withholding
liabilities, is necessary or appropriate in connection with such exercise. In
any of the events referred to in clause (i) or clause (ii) above, the
exercisability of such options shall be suspended and shall not be effective
unless and until such withholding, listing, registration, qualifications or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company in its sole discretion, notwithstanding any
termination of any option or any portion of any option during the period when
exercisability has been suspended.
(b) The Administrative Body may require, as a condition to the right to
exercise an option, that the Company receive from the non-employee director
holding the option, at the time of any such exercise, representations,
warranties and agreements to the effect that the Stock is being purchased by the
non-employee director for investment only and without any present intention to
sell or otherwise distribute such Stock and that the non-employee director will
not dispose of such Stock in transactions which, in the opinion of counsel to
the Company, would violate the registration provisions of the Securities Act of
1933, as then amended, and the rules and regulations thereunder. The
certificates issued to evidence such Stock shall bear appropriate legends
summarizing such restrictions on the disposition thereof.
12. Changes to the Plan.
(a) The Board may amend, alter, suspend, discontinue, or terminate the
Plan or the Administrative Body's authority to grant options under the Plan
without the consent of the Company's stockholders or non-employee directors,
except that any such amendment, alteration, suspension, discontinuation, or
termination shall be subject to the approval of the Company's stockholders
within one year after such Board action if such stockholder approval is required
by any Federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion,
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determine to submit other such changes to the Plan to the stockholders for
approval; provided, however, that without the consent of an affected
non-employee director, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
non-employee director under any option theretofore granted and any individual
option agreement relating thereto. Subject to applicable law, the Administrative
Body may waive any conditions or rights under, or amend, alter, suspend,
discontinue, or terminate, any option theretofore granted and any individual
option agreement relating thereto; provided, however, that without the consent
of an affected non-employee director, no such amendment, alteration, suspension,
discontinuation, or termination of any option may materially and adversely
affect the rights of such non-employee director under such option.
(b) The Board may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any option in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
13. Termination. Unless the Plan shall theretofore have been terminated,
the Plan shall terminate on December 31, 2012, and no options under the Plan
shall thereafter be granted.
14. Fractional Shares. The Company will not be required to issue any
fractional shares of Stock pursuant to the Plan. The Administrative Body may
provide for the elimination of fractions and for the settlement of fractions in
cash.
15. Discretion. In exercising, or declining to exercise, any grant of
authority or discretion hereunder, the Administrative Body may consider or
ignore such factors or circumstances and may accord such weight to such factors
and circumstances as the Administrative Body alone and in its sole judgment
deems appropriate and without regard to the effect such exercise, or declining
to exercise such grant of authority or discretion, would have upon the affected
non-employee director, any other non-employee director, any employee, the
Company, any stockholder or any other person.
16. Adoption of the Plan and Effective Date. The Plan shall be adopted
by the requisite vote of the stockholders of the Company and shall be effective
as of such date.
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APPENDIX E
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION*
Every ______** outstanding share of Common Stock of the Corporation will
be combined into and automatically become one (1) outstanding share of Common
Stock of the Corporation and the authorized shares of the Corporation shall
remain as set forth in this Certificate of Incorporation. No fractional share
shall be issued in connection with the foregoing stock split; all shares of
Common Stock so split that are held by a stockholder will be aggregated
subsequent to the foregoing split and each fractional share resulting from such
aggregation of each series held by a stockholder shall be rounded up to the
nearest whole share.
* Prior to the effectiveness of the foregoing amendment, without further
action by the stockholders, the Board is authorized to abandon such amendment if
it determines that it is not in the best interest of the Company and its
stockholders.
** By approving this amendment, stockholders will approve the
effectuation of the reverse stock split in all possible combinations between 1:3
to 1:6 (i.e. 1:3, 1:4, 1:5 or 1:6). The certificate of amendment to be filed
with the Delaware Secretary of State will include only that ratio determined by
the Board to be in the best interest of the Company and its stockholders. The
Board will not implement any amendment providing for a different split ratio.
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