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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-81427
2,342,946 SHARES
TSI INTERNATIONAL SOFTWARE LTD.
COMMON STOCK
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The shares of common stock of TSI International Software Ltd. may be
offered from time to time by the stockholders of TSI Software listed under "The
Braid and SCP Stockholders." Of the 2,342,946 shares of common stock covered by
this prospectus, 1,171,473 may be offered by the Braid and SCP stockholders as
of the date of this prospectus. An additional 1,103,629 shares are eligible for
sale on or after March 18, 2000 by the Braid stockholders. The remaining 67,844
shares are not eligible to be sold by the SCP stockholders unless and until they
are released from escrow, which will not occur until we release our results of
operations for our fiscal year ended December 31, 1999. TSI Software will not
receive any proceeds from the sale of shares offered by the Braid stockholders.
See "The Braid and SCP Stockholders" and "Plan of Distribution."
The common stock is listed on the Nasdaq National Market under the symbol
"TSFW." The shares of common stock will be offered as described under "Plan of
Distribution."
On July 15, 1999, the closing price per share of the common stock on the
Nasdaq National market was $23.50.
________________
The common stock involves a high degree of risk. See "Risk Factors" on page
2.
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The Securities and Exchange Commission and state regulators have not approved
or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is July 16, 1999.
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No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this prospectus and,
if given or made, that information or representation must not be relied upon as
having been authorized by us or any Braid stockholder. Neither the delivery
of this prospectus nor any sale made under this prospectus, under any
circumstances, shall create any implication that the information contained in
this prospectus is correct as of any time subsequent to the date of this
prospectus or that there has been no change in our affairs since that date.
FORWARD LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference,
contains forward-looking statements regarding our plans, expectations, estimates
and beliefs. These statements involve risks and uncertainties, and actual
results could differ materially from those reflected in the forward-looking
statements. Forward-looking statements in this prospectus are typically
identified by words such as "believes," "anticipates," "expects," "intends,"
"will" and "may" and other similar expressions. In addition, any statements that
refer to expectations, projections or other characterizations of future events
or circumstances are forward-looking statements. We will not necessarily update
the information in this prospectus if and when any forward-looking statement
later turns out to be inaccurate. Some of the important risks and uncertainties
that may affect our future results and performance are described in "Risk
Factors" below. Additional information about factors that could affect our
future results and events is included in our reports filed with the Securities
and Exchange Commission and incorporated by reference in this prospectus.
TSI SOFTWARE
TSI International Software Ltd. is a leading provider of software and
related services that enable organizations to integrate their enterprise
applications both internally and with external business partners. Our flagship
product, Mercator, is an applications integration solution which permits
enterprises to exchange information between internal systems, to implement and
integrate advanced client/server applications and to integrate electronic data
interchange data and Web-based applications with their core business systems. In
addition to Mercator, our Trading Partner products permit businesses to exchange
information with business partners and to integrate electronic data interchange
data with back office applications. We incorporated in Connecticut 1985 and
reincorporated in Delaware in 1993. Our principal executive offices are located
at 45 Danbury Road, Wilton, Connecticut 06897, and our telephone number is (203)
761-8600.
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RISK FACTORS
You should carefully consider the risks described below before making any
investment decision. The risks described below are not the only ones we face.
Additional risks that we are unaware of or that we currently believe are
immaterial may become important factors that affect our business. If any of the
following risks actually occur, our business, results of operations and
financial condition would be harmed. In that case, the trading price of our
common stock could decline, and you may lose all or a part of your investment.
Our quarterly and annual operating results are volatile and difficult to predict
and may cause our stock price to fluctuate
Our quarterly and annual operating results have varied significantly in the
past and are expected to do so in the future. We believe that you should not
rely on period to period comparisons of our results of operations as indications
of our future performance. In some future periods, our results of operations
are likely to be below the expectation of public market analysts and investors.
In this case, the price of our common stock would likely decline. Our revenues
and results of operations are difficult to forecast and depend on a variety of
factors. These factors include the following:
. the size, timing and terms of individual license transactions;
. the sales cycle for our products;
. demand for and market acceptance of our products and related services,
particularly our Mercator products;
. the number of businesses implementing the SAP R/3 system and other
enterprise resource planning, or ERP, applications, as well as the
number of these businesses which require third party enterprise
application integration software and related services;
. our ability to expand, and market acceptance of, our professional
services business;
. the timing of our expenditures in anticipation of product releases or
increased revenue;
. the timing of product enhancements and product introductions by us and
our competitors;
. market acceptance of enhanced versions of our existing products and of
new products;
. changes in pricing policies by us and our competitors;
. variations in the mix of products and services sold us;
. the mix of channels through which products and services are sold;
. our success in penetrating international markets;
. the buying patterns and budgeting cycles of customers;
. personnel changes, our ability to attract and retain qualified sales,
professional services and research and development personnel and the
rate at which this personnel becomes productive; and
. general economic conditions.
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We have historically derived a substantial portion of our revenues from the
licensing of our software products, and we anticipate that this trend will
continue for the foreseeable future. Software license revenues are difficult to
forecast for a number of reasons, including the following:
. we typically do not have a material backlog of unfilled orders, and
revenues in any quarter substantially depend on orders booked and
shipped in that quarter;
. the length of the sales cycles for our products can vary significantly
from customer to customer and from product to product and can be as long
as nine months or more;
. the terms and conditions of individual license transactions, including
prices and discounts, are often negotiated based on volumes and
commitments, and may vary considerably from customer to customer;
. we have generally recognized a substantial portion of our quarterly
software licensing revenues in the last month of each quarter.
Accordingly, the cancellation or deferral of even a small number of purchases of
our products has in the past and could in the future harm our business.
It would be difficult for us to adjust our spending if we experience any revenue
shortfalls
Our future revenues will also be difficult to predict and we have, in the
past, failed to achieve our revenue expectations. Our expense levels are based,
in part, on our expectation of future revenues, and expense levels are, to a
large extent, fixed in the short term. We may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. If revenue
levels are below expectations for any reason, our operating results are likely
to be harmed. Net income may be disproportionately affected by a reduction in
revenue because a large portion of our expenses is related to headcount that
cannot be easily reduced without harming our business. In addition, we
currently intend to increase our operating expenses by expanding our research
and product development staff, particularly research and development personnel
to be devoted to our Mercator product line, increasing our sales and marketing
and professional services operations, expanding distribution channels and hiring
personnel in other operating areas. We expect to experience a significant time
lag between the date professional services, sales and technical personnel are
hired and the date these employees become fully productive. The timing of
expansion and the rate at which new technical, professional services and sales
personnel become productive as well as the timing of the introduction and
success of new distribution channels could cause material fluctuations in our
quarterly results of operations. Furthermore, to the extent increased operating
expenses precede or are not subsequently followed by increased revenues, our
business could be harmed.
We may experience seasonal fluctuations in our revenues or results of operations
While we have not historically experienced any significant seasonal
fluctuations in our revenues or results of operations, it is not uncommon for
software companies to experience strong fourth quarters followed by weaker first
quarters, in some cases with sequential declines in revenues or operating
profit. We believe that many software companies exhibit this pattern in their
sales cycles primarily due to customers' buying patterns and budget cycles. We
may display this pattern in future years.
We depend on the sales of our Mercator products and related services
We introduced our Mercator products in 1993. In recent years, a
significant portion of our revenue has been attributable to licenses of our
Mercator products and related services, and we expect
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that revenue attributable to our Mercator products and related services will
continue to represent a significant portion of our total revenue for the
foreseeable future. The development and marketing of our Mercator product line
has required us to, among other things, focus our attention and resources away
from some of our traditional products, market our products to a different
customer base and shift a large portion of our development efforts to the
Mercator product line. Accordingly, our future operating results significantly
depend on the market acceptance and growth of our Mercator product line and
enhancements of these products and services. Market acceptance of our Mercator
product line may not increase or remain at current levels, and we may not be
able to successfully market our Mercator product line or develop extensions and
enhancements to this product line on a long-term basis. In the event that our
current or future competitors release new products that provide, or are
perceived as providing, more advanced features, greater functionality, better
performance, better compatibility with other systems or lower prices than our
Mercator product line, demand for our products and services would likely
decline. A decline in demand for, or market acceptance of, our Mercator product
line would harm our business.
We depend on companies implementing enterprise resource planning systems
A substantial portion of the historical sales of our Mercator products and
related services has been attributable to sales of Mercator for R/3 and related
services. We believe that our future revenue growth will also depend upon
continued sales of Mercator for use with enterprise resource planning software
systems. We have devoted, and must continue to devote, substantial resources to
identifying potential customers in the ERP market, developing and marketing
versions of Mercator targeted for various systems, building relationships with
strategic partners and attracting and retaining skilled technical, sales and
professional services personnel with expertise in ERP systems. Demand for and
market acceptance of Mercator and related services will depend on the continued
market acceptance of the enterprise resource planning systems we target.
Regardless of the investments that we make in pursuing these markets, we may not
be successful in implementing a sales and marketing strategy appropriate for
this market or in attracting and retaining the necessary skilled personnel. Any
factor that reduces demand for or use of enterprise resource planning systems
could harm our business.
Implementation of the SAP R/3 and other ERP systems is a costly and time-
consuming process and businesses may choose not to purchase these systems. Even
if businesses do implement these systems, they may not wish to commit the
additional resources required to implement Mercator. In addition, SAP could, in
the future, introduce enterprise application integration solutions competitive
with Mercator or other providers of software systems and related services. Any
changes in or new versions of these software systems could harm our business if
we are not able to successfully develop or implement any related changes to
Mercator in a timely fashion.
We may face difficulties in complying with SAP's technical specifications
We are required to maintain Mercator for R/3's certification for interfaces
with SAP's R/3 system which include ALE, DMI and EDI. In order to maintain these
certifications, our products must adhere to SAP's technical specifications which
are updated by SAP from time to time, and we have no control over whether and
when these specifications will be changed. Any material change by SAP in these
specifications could require us to devote significant development resources to
updating this product to comply with the new specifications. In this event, we
may not be able to successfully modify Mercator on a timely basis, if at all,
and any failure to do so could harm our business.
We may experience difficulties in developing and introducing new or enhanced
products necessitated by technological changes
Our future success will depend, in part, upon our ability to anticipate
changes, to enhance our current products and to develop and introduce new
products that keep pace with technological
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advancements and address the increasingly sophisticated needs of our customers.
Our products may be rendered obsolete if we fail to anticipate or react to
change.
Development of enhancements to existing products and new products depends,
in part, on a number of factors, including the following:
. the timing of releases of new versions of applications systems by
vendors;
. the introduction of new applications, systems or computing platforms;
. the timing of changes in platforms;
. the release of new standards or changes to existing standards; and
. changing customer requirements.
Our product enhancements or new products may not adequately meet the
requirements of the marketplace or achieve any significant degree of market
acceptance. In addition, our introduction or announcement, or by one or more of
our current or future competitors, of products embodying new technologies or
features could render our existing products obsolete or unmarketable. Our
introduction or announcement of enhanced or new product offerings or by our
current or future competitors may cause customers to defer or cancel purchases
of our existing products. Any deferment or cancellation of purchases could harm
our business.
We could experience delays in developing and releasing new products or product
enhancements
We may experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products or product enhancements.
We have in the past experienced delays in the introduction of product
enhancements and new products and we may experience delays in the future.
Furthermore, as the number of applications, systems and platforms supported by
our products increases, we could experience difficulties in developing, on a
timely basis, product enhancements which address the increased number of new
versions of applications, systems or platforms served by our existing products.
If we fail, for technological or other reasons, to develop and introduce product
enhancements or new products in a timely and cost-effective manner or if we
experience any significant delay in product development or introduction, our
customers may delay or decide against purchases of our products, which could
harm our business.
The success of our products will also depend upon the success of the platforms
we target
We may, in the future, seek to develop and market enhancements to existing
products or new products which are targeted for applications, systems or
platforms which we believe will achieve commercial acceptance. This could
require us to devote significant development, sales and marketing personnel, as
well as other resources, to these efforts which would otherwise be available for
other purposes. We may not be able to successfully identify these applications,
systems or platforms, and even if we do so, they may not achieve commercial
acceptance or we may not realize a sufficient return on our investment. Failure
of these targeted applications, systems or platforms to achieve commercial
acceptance or our failure to achieve a sufficient return on our investment could
harm our business.
We may not successfully expand our sales and distribution channels
An integral part of our strategy is to expand our indirect sales channels,
including value-added resellers, or VARs, independent software vendors, or ISVs,
systems integrators and distributors.
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Although VARs, ISVs, system integrators and distributors have not accounted for
a substantial percentage of our total revenues historically, we are increasing
resources dedicated to developing and expanding these indirect distribution
channels. We may not be successful in expanding the number of indirect
distribution channels for our products. If we are successful in increasing our
sales through indirect sales channels, we expect that those sales will be at
lower per unit prices than sales through direct channels, and revenue we receive
for each sale will be less than if we had licensed the same product to the
customer directly.
Selling through indirect channels may also limit our contact with our
customers. As a result, our ability to accurately forecast sales, evaluate
customer satisfaction and recognize emerging customer requirements may be
hindered.
Even if we successfully expand our indirect distribution channels, any new
VARs, ISVs, system integrators or distributors may offer competing products, or
have no minimum purchase requirements of our products. These third parties may
also not have the technical expertise required to market and support our
products successfully. If the third parties do not provide adequate levels of
services and technical support, our customers could become dissatisfied, or we
would have to devote additional resources for customer support. Our brand name
and reputation could be harmed.
Selling products through indirect sales channels could cause conflicts with the
selling efforts of our direct sales force.
Our strategy of marketing products directly to end-users and indirectly
through VARs, ISVs, systems integrators and distributors may result in
distribution channel conflicts. Our direct sales efforts may compete with those
of our indirect channels and, to the extent different resellers target the same
customers, resellers may also come into conflict with each other. Although we
have attempted to manage our distribution channels to avoid potential conflicts,
channel conflicts may harm our relationships with existing VARs, ISVs, systems
integrators or distributors or impair our ability to attract new VARs, ISVs,
systems integrators and distributors.
Our future success depends on retaining our key personnel and attracting and
retaining additional highly qualified employees
Our future success depends in large part on the continued service of our
key sales, professional services and research and development personnel, as well
as senior management. All employees are employed at-will and we have no fixed-
term employment agreements with our employees which prevents them from
terminating their employment at any time. The loss of the services of any of
one or more of our key employees could harm our business.
Our future success also depends on our ability to attract, train and retain
highly qualified sales, research and development, professional services and
managerial personnel, particularly sales, professional services and research and
development personnel with expertise in enterprise resource planning systems.
Competition for these personnel is intense. We may not be able to attract,
assimilate or retain qualified personnel. We have at times experienced, and we
continue to experience, difficulty in recruiting qualified sales and research
and development personnel, and we anticipate these difficulties will continue in
the future. Furthermore, we have in the past experienced, and in the future we
expect to continue to experience, a significant time lag between the date sales,
research and development and professional services personnel are hired and the
date these employees become fully productive.
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We may encounter difficulties in managing our growth
Our business has grown in recent periods, with total revenues increasing from
approximately $16.1 million in 1995 to $45.3 million in 1998 and increasing from
approximately $8.2 million for the first quarter of 1998 to $17.2 million for
the comparable period of 1999. We have also acquired the assets of one company,
Software Consulting Partners, in November 1998, and we acquired Braid in March
1999. The growth of our business has placed, and is expected to continue to
place, a strain on our administrative, financial, sales and operational
resources and increased demands on our systems and controls. For example, we
noted an increase in quarterly days sales outstanding from March 31, 1998 to
March 31, 1999 from approximately 99 days to approximately 109 days, and an
increase in total accounts receivable from $18.0 million to $20.8 million.
To deal with these concerns, we have recently implemented, or are in the
process of implementing and will be required to implement in the future, a
variety of new and upgraded operational and financial systems, procedures and
controls. In addition, we intend to hire additional administrative personnel.
We may not be able to successfully complete the implementation and integration
of these systems, procedures and controls, or hire additional personnel, in a
timely manner. The failure of our management to respond to, and manage, our
growth and changing business conditions, or to adapt our operational, management
and financial control systems to accommodate our growth could harm our business.
We may face significant risks in expanding our international operations
Although international revenues currently account for only 11.8% and 14.5%
of our total revenues for 1998 and the three months ended March 31, 1999, we
have recently acquired Braid and we intend to continue to expand our sales and
marketing resources outside of the United States. Expansion of our international
sales and marketing efforts will require significant management attention and
financial resources. We also expect to commit additional time and development
resources to customizing our products for selected international markets and to
developing international sales and support channels.
International operations involve a number of additional risks, including
the following:
. impact of possible recessionary environments in economies outside the
United States;
. longer receivables collection periods and greater difficulty in accounts
receivable collection;
. unexpected changes in regulatory requirements;
. dependence on independent resellers;
. reduced protection for intellectual property rights in some countries,
tariffs and other trade barriers;
. foreign currency exchange rate fluctuations;
. difficulties in staffing and managing foreign operations;
. the burdens of complying with a variety of foreign laws;
. potentially adverse tax consequences; and
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. political and economic instability.
To the extent that our international operations expand, we expect that an
increasing portion of our international license and service and other revenues
will be denominated in foreign currencies, subjecting us to fluctuations in
foreign currency exchange rates. We do not currently engage in foreign currency
hedging transactions. However, as we continue to expand our international
operations, exposures to gains and losses on foreign currency transactions may
increase. We may choose to limit our exposure by the purchase of forward
foreign exchange contracts or similar hedging strategies. The currency exchange
strategy that we adopt may not be successful in avoiding exchange-related
losses. In addition, the above-listed factors may cause a decline in our future
international revenue and, consequently, may harm our business. We may not be
able to sustain or increase revenue that we derive from international sources.
Our success depends upon the widespread use and adoption of the Internet and
intranets
We believe that demand for enterprise application integration solutions,
such as those that we offer, will depend, in part, upon the adoption by
businesses and end-users of the Internet and intranets as platforms for
electronic commerce and communications. The Internet and intranets are new and
evolving, and they may not be widely adopted, particularly for electronic
commerce and communications among businesses. Critical issues concerning the
Internet and intranets, including security, reliability, cost, ease of use and
access and quality of service, remain unresolved at this time, inhibiting
adoption by many enterprises and end-users. If the Internet and intranets are
not widely used by businesses and end-users, particularly for electronic
commerce, this could harm our business.
We face significant competition in the market for enterprise applications
integration software
The market for our products and services is extremely competitive and
subject to rapid change. Because there are relatively low barriers to entry in
the software market, we expect additional competition from other established and
emerging companies.
In the enterprise application integration market, our Mercator products and
related services compete primarily against solutions developed internally by
individual businesses to meet their specific enterprise application integration
needs. In addition, we are facing increasing competition in the enterprise
application integration market from other third-party software vendors. In the
EDI market, our Trading Partner products compete with products offered by
companies offering proprietary value-added network services as part of their EDI
solution and our PC-based Trading Partner products also compete with PC-based
products offered by a number of other EDI software vendors.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, product development and
marketing resources, greater name recognition and larger customer bases than we
do. Our present or future competitors may be able to develop products that are
comparable or superior to those we offer, adapt more quickly than we do to new
technologies, evolving industry trends or customer requirements, or devote
greater resources than we do to the development, promotion and sale of their
products. Accordingly, we may not be able to compete effectively in our target
markets against these competitors.
We expect that we will face increasing pricing pressures from our current
competitors and new market entrants. Our competitors may engage in pricing
practices that reduce the average selling prices of our products and related
services. To offset declining average selling prices, we believe that we must
successfully introduce and sell enhancements to existing products and
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new products on a timely basis. We must also develop enhancements to existing
products and new products that incorporate features that can be sold at higher
average selling prices. To the extent that enhancements to existing products and
new products are not developed in a timely manner, do not achieve customer
acceptance or do not generate higher average selling prices, our operating
margins may decline.
We have only limited protection for our proprietary technology
Our success is dependent upon our proprietary software technology. We do
not currently have any patents and we rely principally on trade secret,
copyright and trademark laws, nondisclosure and other contractual agreements and
technical measures to protect our technology. We also believe that factors such
as the technological and creative skills of our personnel, product enhancements
and new product developments are essential to establishing and maintaining a
technology leadership position. We enter into confidentiality and/or license
agreements with our employees, distributors and customers, and we limit access
to and distribution of our software, documentation and other proprietary
information. The steps that we have taken may not be sufficient to prevent
misappropriation of our technology, and these protections do not preclude
competitors from developing products with functionality or features similar to
our products. Third parties could also independently develop competing
technologies that are substantially equivalent or superior to our technologies.
Furthermore, effective copyright and trade secret protection may be unavailable
or limited outside of the United States. Any failure by or inability of us to
protect our proprietary technology could harm our business.
We may become subject to infringement claims
Although we do not believe that our products infringe the proprietary
rights of any third parties, third parties might assert infringement claims
against us or our customers in the future. Furthermore, we may initiate claims
or litigation against third parties for infringement of our proprietary rights
or to establish the validity of our proprietary rights. Litigation, either as
plaintiff or defendant, would cause us to incur substantial costs and divert
management resources from productive tasks. Any litigation, regardless of the
outcome, could harm our business. Furthermore, parties making claims against us
could secure substantial damages, as well as injunctive or other equitable
relief, which could effectively block our ability to license our products in the
United States or abroad. A large monetary judgment could harm our business.
If it appears necessary or desirable, we may seek licenses to intellectual
property that we are allegedly infringing. We may not be able to obtain
licenses on commercially reasonable terms, if at all, or the terms of any
offered licensed may not be acceptable to us. The failure to obtain the
necessary licenses or other rights could harm our business. As the number of
software products in the industry increases and the functionality of these
products further overlaps, we believe that software developers may become
increasingly subject to infringement claims. Any claims, with or without merit,
can be time consuming and expensive to defend and could harm our business.
There are currently no pending claims that our products, trademarks or other
proprietary rights infringe upon the proprietary rights of third parties.
Software defects could diminish demand for our products
Software products as complex as those that we offer may contain defects or
failures when introduced or when new versions are released. We have, in the
past, discovered software defects in certain of our products and we may
experience delays or lost revenue to correct these defects in the future.
Despite our testing of our products, we may find errors in new products or
releases after commencement of commercial shipments, resulting in our loss of
market share or failure to achieve market acceptance.
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We may become subject to product liability claims
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in our
license agreements, especially unsigned "shrink-wrap" licenses, may not be
effective under the laws of certain jurisdictions. Consequently, the sale and
support of our software entails the risk of product liability claims in the
future. We currently have a standard business owner's insurance policy, but we
do not have insurance specifically for software product liability risks or
software errors and omissions.
We may face difficulties in successfully integrating any businesses, products or
technologies that we have or may acquire
In November 1998, we acquired all of the assets of Software Consulting
Partners, a professional services organization. In March 1999, we acquired all
of the outstanding share capital of Braid, a provider of enterprise application
integration software products to financial services institutions. If other
appropriate opportunities present themselves, we intend to acquire businesses,
products or technologies that we believe are strategic. We may not be able to
identify, negotiate or finance acquisitions successfully, or integrate these
acquisitions with our current business. The process of integrating an acquired
business, product or technology may result in unforeseen operating difficulties
and expenditures and may absorb significant management attention that would
otherwise be available for ongoing development of our business. For example,
with the acquisition of Braid, we have had to manage a larger and more
geographically dispersed operations.
Moreover, we may not realize the anticipated benefits of any acquisition.
Acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or amortization
expenses related to goodwill and other intangible assets, which could harm our
business. Any future acquisitions of other technologies, products or companies
may require us to obtain additional equity or debt financing, which may not be
available or may be dilutive.
Potential year 2000 risks may harm our business
Many currently installed computer systems and software products are unable
to distinguish 21st century dates from 20th century dates. Beginning in the year
2000, these date code fields will need to distinguish 21st century dates from
20th century dates, and, as a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with year 2000
requirements.
The purchasing patterns of potential customers may be affected by year 2000
issues, as companies expend significant resources to correct their current
systems for year 2000 compliance. We have, on occasion, warranted, and we
generally represent to our customers, that our products are free from year 2000
defects. Our products, however, may not be year 2000 compliant, and our
products may be integrated with, or otherwise interact with, non-compliant
software. This could expose us to claims from our customers which may result in
us being required to pay compensatory or other damages. We may also face loss of
or delay in market acceptance of our products and increased service and warranty
costs. Any of these events could harm our business.
Although we believe that our internal systems are year 2000 compliant, the
failure of any third-party systems to operate properly with regard to the year
2000 and afterwards could harm our business.
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Our stock price has been volatile and could continue to remain volatile
The market price of our common stock has risen significantly since our
initial public offering in July 1997. The trading price of our common stock has
fluctuated in the past and may be significantly affected by a number of factors,
including the following:
. actual or anticipated fluctuations in our operating results;
. announcements of technological innovations or new products by us or our
competitors;
. developments with respect to patents, copyrights or proprietary rights;
. conditions and trends in the software or other industries; and
. general market conditions.
In addition, the stock market has, from time to time, experienced significant
price and volume fluctuations that have particularly affected the market prices
for the common stocks of technology companies. These broad market fluctuations
may cause the market price of our common stock to decline.
We could face securities litigation if our stock price remains highly volatile
In the past, securities class action litigation has often followed periods
of volatility in the market price of a company's securities. We may face
securities class action litigation in the future. Any litigation could result
in substantial costs and a diversion of management's attention and resources,
which could harm our business.
Our stockholder rights plan, corporate governance structure and governing law
may delay or prevent our acquisition by another company
Our governing documents as well as Delaware law contain provisions that
could make it more difficult for a third party to attempt to acquire or gain
control of our company. These provisions include:
. our board of directors can issue shares of preferred stock without any
vote or action by the stockholders and this stock could have voting,
liquidation and dividend rights superior to that of existing
stockholders and could impede the success of any acquisition attempt by
another company;
. we adopted a stockholders rights plan which permits existing
stockholders to purchase a substantial number of shares at a substantial
discount to the market price if a third party attempts to gain control
on a large equity position in our company;
. a stockholder must give our board of directors prior notice of a
proposal to take action by written consent;
. a stockholder must give advance notice to the board of directors before
stockholder-sponsored proposals may receive consideration at annual
meetings and before a stockholder may make nominations for the election
of directors;
. vacancies on the board of directors may be filled until the next annual
meeting of stockholders only by majority vote of the directors then in
office; and
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. stockholders cannot call special meetings of stockholders
We are also governed by Section 203 of the Delaware General Corporation
Law, which restricts certain business combinations with any "interested
stockholder," as defined by that statute. Our stockholder rights plan, our
charter bylaws and the provisions of Section 203 could make it more difficult
for a third party to acquire control of our outstanding voting stock and could
delay or prevent a change in our control.
Future sales of our common stock by our stockholders could cause our stock price
to decline
If our stockholders sell substantial amounts of our common stock, including
shares issued upon exercise of options and warrants, in the public market, the
market price of our common stock could fall. These sales could also impair our
ability to raise capital through the sale of equity securities in the future at
a price we deem appropriate. All of our outstanding shares of common stock may
be sold in the public market except those held by our affiliates. Shares held
by affiliates may be sold by them in the public market, subject of shares that
may be sold in any three month period and the other provisions of Rule 144 under
the Securities Act.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by the
Braid and SCP stockholders.
THE BRAID AND SCP STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of June 22, 1999 by each Braid and
SCP stockholder named below. Each of the stockholders named below was either
(i)formerly a stockholder of Braid Group Limited, who acquired shares of our
common stock in the transaction under which we acquired all of the issued and
outstanding share capital of Braid or (ii) formerly a stockholder of Software
Consulting Partners, Inc., who acquired shares of capital stock in the
transaction in which we acquired substantially all of the assets of, and assumed
certain liabilities of, SCP. No Braid or SCP stockholder has had any position,
office or other material relationship with us, other than in connection with the
acquisition of Braid or SCP, within the past three years. Richard Little,
formerly the group chairman and founder of Braid, is currently one of our
directors and Ulrich K. Newbert, formerly the president and founder of SCP, is
our Vice President, Consulting.
The following table assumes that each Braid and SCP stockholder sells all
of the shares held by this stockholder in this offering. However, we are
unable to determine the exact number of shares that will actually be sold or
when or if these sales will occur. In addition, certain of the Braid and SCP
stockholders are trusts which may, in the future, distribute their shares to
their trust beneficiaries, which distributees may likewise distribute the
shares to their trust beneficiaries. In addition, certain stockholders could
gift or pledge their shares and those shares could then be resold under this
Prospectus by their donees or pledgees. Those shares may later be sold by
those trust beneficiaries, or any of their respective distributees. The Braid
and SCP stockholders have advised us that each of them is the beneficial owner
of their shares being offered.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Offering Owned After Offering
Name Number Percent Number Percent
<S> <C> <C> <C> <C>
Fiscal Services International,
as nominee for Richard Little 867,296 3.4% -- --
Fiscal Services International,
as trustee of the Little
No. 1 Trust 790,172 3.1% -- --
Peter Little 257,558 1.0% -- --
Patrick Ronayne 233,706 0.9% -- --
Ulrich K. Neubert,
trustee of the SCP
shareholder's trust 65,844 0.3% -- --
George Malcolm Roger Graham 22,066 0.1% -- --
Susan Finn 9,278 * -- --
Wayne Meikle 9,028 * -- --
Jonathan Cheetham 4,012 * -- --
Jayesh Patel 3,662 * -- --
Mark Rutland 3,510 * -- --
Stuart Haddow 3,510 * -- --
Karl Briers 3,460 * -- --
Helga Neubert, trustee under the
trust agreement for the benefit
of Danial Neubert dated
December 16, 1998 1,000 * -- --
Helga Neubert, trustee under the
trust agreement for the benefit
of Salme Neubert, dated
December 16, 1998 1,000 * -- --
</TABLE>
* Less than 0.1%
PLAN OF DISTRIBUTION
In connection with our acquisition of all of the issued and outstanding
share capital of Braid, each of the Braid stockholders entered into a
registration rights agreement with us. In addition, in connection with our
acquisition of substantially all of the assets of and certain liabilities of
SCP, each of the SCP stockholders who was formerly a stockholder of SCP entered
into a separate registration rights agreement with us. The registration
statement of which this prospectus forms a part has been filed under the terms
of those agreements. To our knowledge, no Braid or SCP stockholder has entered
into any agreement, arrangement or understanding with any particular broker or
market maker with respect to the
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shares offered, nor do we know the identity of the brokers or market makers that
will participate in the offering.
The shares of common stock covered by this prospectus may be offered and
sold from time to time by the Braid and SCP stockholders or by pledgees, donees,
transferees and other successors in interest. The Braid and SCP stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale.
Of the 2,342,946 shares of common stock covered by this prospectus,
1,171,473 shares will be available for immediate sale in the public market as of
the date of this prospectus. With regard to an additional 1,103,629 shares,
the Braid stockholders have agreed that they will not, without prior written
consent, sell or otherwise transfer the economic ownership of these shares
before March 18, 2000. The remaining 67,844 shares are not eligible to be sold
by the SCP stockholders unless and until they are released from escrow, which
will not occur until we release our results of operations for our fiscal year
ended December 31, 1999. Subsequent to March 18, 2000, all of the 2,342,946
shares covered by this prospectus will be freely tradable.
These sales may be made over the Nasdaq National Market or otherwise, at
then prevailing market prices, at prices related to prevailing market prices or
at negotiated prices. The shares may be sold by one or more of the following:
. a block trade in which the broker-dealer engaged by the Braid or SCP
stockholder will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction;
. purchases by the broker-dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus; and
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
We have been advised by the selling stockholders that they have not, as of
the date of this prospectus, entered into any arrangement with a broker-dealer
for the sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales, broker-
dealers engaged by the Braid and SCP stockholders may arrange for other broker-
dealers to participate. Broker-dealers will receive commissions or discounts
from the Braid and SCP stockholders in amounts to be negotiated immediately
prior to the sale. In addition, certain of the Braid and SCP stockholders are
trusts which may, in the future, distribute their shares to their trust
beneficiaries or to pledges, which distributees may likewise distribute shares
to their trust beneficiaries or to pledges. Those shares may later be sold by
those trust beneficiaries or to pledges, or any of their respective
distributees.
In connection with distributions of the shares or otherwise, the Braid and
SCP stockholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares registered under this registration statement in the course of hedging
the positions they assume with selling stockholders. The Braid and SCP
stockholders may also sell shares short and redeliver the shares to close out
their short positions. The Braid and SCP stockholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the shares registered under this registration statement,
which the broker-dealer may resell or otherwise transfer pursuant to this
prospectus. A Braid or SCP stockholder may also loan or pledge the shares
registered under this registration statement to a broker-dealer and the broker-
dealer may sell the shares so loaned or, upon a default, the broker-dealer may
effect sales of the pledged shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Braid and SCP stockholders in
amounts to be negotiated in connection with the sale. These broker-dealers and
any other participating broker-dealers may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with these sales, and
any commission, discount or concession may be deemed to be underwriting
discounts or commissions under the Securities Act. The Braid and SCP
stockholders have agreed in the registration rights agreement not to sell any
of the shares of common stock pursuant to this prospectus in an underwritten
offering without providing us with prior written notice. In addition, any
securities covered by this prospectus which qualify for sale pursuant to
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Rule 144 or Rule 145 under the Securities Act may be sold under Rule 144 or Rule
145 rather than pursuant to this prospectus.
We will bear all costs, expenses and fees in connection with the
registration of the shares. Commissions and discounts, if any, attributable to
the sales of the shares will be borne by the Braid and SCP stockholders. The
Braid and SCP stockholders may agree to indemnify any broker-dealer or agent
that participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. Under the
registration rights agreements, TSI Software and the Braid and SCP stockholders
have agreed to indemnify each other and certain other persons against certain
liabilities in connection with the offering of the shares, including liabilities
arising under the Securities Act.
We have advised the Braid and SCP stockholders that the anti-manipulation
rules under the Exchange Act may apply to sales of shares in the market and to
the activities of the Braid and SCP stockholders and their affiliates. The Braid
and SCP stockholders have advised us that during the time as they may be engaged
in the attempt to sell shares registered under this registration statement, they
will:
. not engage in any stabilization activity in connection with any of our
securities;
. not bid for or purchase any of our securities or any rights to acquire
our securities, or attempt to induce any person to purchase any of our
securities or rights to acquire our securities other than as permitted
under the Exchange Act;
. not effect any sale or distribution of the shares until after the
prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and
. effect all sales of shares in broker's transactions through broker-
dealers acting as agents, in transactions directly with market makers or
in privately negotiated transactions where no broker or other third
party (other than the purchaser) is involved.
Under certain circumstances, we have the ability to suspend the use of this
prospectus if, in the good faith judgment of our board of directors, it would be
seriously detrimental to TSI Software and its stockholders for resales of shares
to be made due to
. the existence of a material development or potential material
development with respect to or involving TSI Software which we would be
obligated to disclose in the prospectus, which disclosure would in the
good faith judgment of our board of directors be premature or otherwise
inadvisable at that time and would have a material adverse affect upon
TSI Software and its stockholders, or
. the occurrence of any event that makes any statement made in the
prospectus or any document incorporated or deemed to be incorporated by
reference to the prospectus untrue in any material respect or which
requires the making of any changes in the prospectus so that it will not
contain any untrue statement of a material fact required to be stated in
the prospectus or necessary to make the statements in the prospectus not
misleading or omit to state any material fact required to be stated in
the prospectus or necessary to make the statements in the prospectus, in
the light of the circumstances under which they were made, not
misleading.
This offering will terminate as to each Braid and SCP stockholder on the
earlier of
. March 18, 2001, or
. the date on which all shares offered have been sold by the Braid
stockholders.
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The Braid and SCP stockholders may elect not to sell any or all of the
shares of common stock offered.
Upon the occurrence of any of the following events, this prospectus will be
amended to include additional disclosure before offers and sales of the
securities in question are made:
. to the extent the securities are sold at a fixed price or at a price
other than the prevailing market price, the price would be set forth in
the prospectus;
. if the securities are sold in block transactions and the purchaser
acting in the capacity of an underwriter wishes to resell, these
arrangements would be described in the prospectus;
. if a Braid or SCP stockholder sells to a broker-dealer acting in the
capacity as an underwriter, the broker-dealer will be identified in the
prospectus; and
. if the compensation paid to broker-dealers is other than usual and
customary discounts, concessions or commissions, disclosure of the terms
of the transaction would be included in the prospectus.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered will be
passed upon for TSI by Fenwick & West LLP, Two Palo Alto Square, Palo Alto,
California, 94306.
EXPERTS
Our consolidated financial statements and schedule as of December 31, 1998
and 1997 and for each of the years in the three-year period ended December 31,
1998 incorporated by reference in this prospectus and in the registration
statement from our annual report on Form 10-K for the year ended December 31,
1998, have been audited by KPMG LLP, independent certified public accountants,
as set forth in their reports included in the annual report and incorporated to
this prospectus by reference and in the registration statement. The consolidated
financial statements referred to above are incorporated by reference to this
prospectus and in the registration statement in reliance upon the reports of
KPMG LLP, and upon the authority of KPMG LLP as experts in accounting and
auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we previously filed with the Commission are
incorporated by reference to this prospectus:
. Our Annual Report on Form 10-K for the year ended December 31, 1998
and our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
. Our Current Reports on Form 8-K filed on September 4, 1998, November 30,
1998, and April 1, 1999 and our Current Reports on Form 8-K/A filed
January 29, 1999 and June 1, 1999.
. Our definitive Proxy Statement dated March 15, 1999, filed in connection
with our 1999 annual meeting of stockholders.
. All documents subsequently filed by us under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of this offering.
. The description of our common stock contained in our registration
statement on Form 8-A filed with the Commission under Section 12 of the
Exchange Act, including any amendments or reports filed for the purpose
of updating that description.
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All documents subsequently filed by us under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and prior to the
termination of the offering covered by this prospectus shall be deemed to be
incorporated by reference to this prospectus and to be a part of this prospectus
from the date of filing of those documents.
Any statement incorporated by reference to this prospectus shall be deemed
to be modified or superseded for purposes of this prospectus to the extent that
a statement contained in this prospectus (solely with respect to statements
incorporated by reference to this prospectus from a document that was filed
prior to the date of this prospectus), or in any other subsequently filed
document which also is or is deemed to be incorporated by reference, modifies or
supersedes that statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this prospectus are available
from us upon request. We will provide a copy of any and all of the information
that is incorporated by reference in this prospectus, not including exhibits to
the information unless those exhibits are specifically incorporated by reference
into this prospectus, to any person, without charge, upon written or oral
request.
Requests for copies of this information should be directed to Investor
Relations, TSI International Software Ltd., 45 Danbury Road, Wilton, Connecticut
06897; telephone number (203) 761-8600.
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 5000 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a Website that contains reports, proxy statements and other
information regarding each of us. The address of the SEC Website is
http://www.sec.gov.
We have filed a registration statement under the Securities Act with the
Securities and Exchange Commission with respect to the shares to be sold by the
selling stockholders. This prospectus has been filed as part of the
registration statement. This prospectus does not contain all of the information
set forth in the registration statement because certain parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement is available for inspection and copying
as set forth above.
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this prospectus or the
solicitation of a proxy, in any jurisdiction to or from any person to whom or
from whom it is unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this prospectus nor
any distribution of securities pursuant to this prospectus shall, under any
circumstances, create any implication
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that there has been no change in the information set forth or incorporated
herein by reference or in our affairs since the date of this prospectus.
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TSI INTERNATIONAL SOFTWARE LTD.
2,342,946 Shares of
Common Stock
____________________
PROSPECTUS
____________________
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