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As filed with the Securities and Exchange Commission on August 4, 1998
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACCENT SOFTWARE INTERNATIONAL LTD.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Israel 7372 N.A.
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification No.)
</TABLE>
28 Pierre Koenig Street
Jerusalem 91530, Israel
Telephone: 972-2-679-3723
(Address and telephone number of Registrant's principal executive offices)
Todd A. Oseth
Accent Worldwide, Inc.
Suite 340
2864 South Circle Drive
Colorado Springs, CO 80906
(719) 576-2610
(Name, address and telephone number of agent for service of process)
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Copies to:
Herbert H. Davis III, Esq. Barry P. Levenfeld, Esq.
Rothgerber, Johnson & Lyons LLP Yigal Arnon & Co.
1200 Seventeenth Street, Suite 3000 3 Daniel Frisch Street
Denver, CO 80202-5839 Tel Aviv 64731, Israel
Telephone: (303) 623-9000 Telephone: 972-3-692-6868
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER ORDINARY SHARE (1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Ordinary Shares,
NIS .01 nominal
value per share 5,000,000 $0.4375 $2,187,500 $645.21
</TABLE>
(1) Based upon the average of the high and low sales prices of the Company's
Ordinary Shares on The Nasdaq Small Cap Market on July 27, 1998, estimated
solely for the purpose of calculating the amount of the registration fee
pursuant to Rule 457 of the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
ACCENT SOFTWARE INTERNATIONAL LTD.
5,000,000 ORDINARY SHARES
___________
THIS PROSPECTUS RELATES TO THE PUBLIC OFFERING, WHICH IS NOT BEING
UNDERWRITTEN, OF UP TO 5,000,000 ORDINARY SHARES, NOMINAL VALUE NIS 0.01 PER
SHARE (THE "SHARES"), OF ACCENT SOFTWARE INTERNATIONAL LTD. ("ACCENT" OR THE
"COMPANY"), WHICH MAY BE OFFERED FROM TIME TO TIME BY SHAREHOLDERS OF THE
COMPANY OR BY AUTHORIZED TRANSFEREES.
THE SHARES ARE ISSUABLE TO {i) THE BANK FOR INDUSTRIAL DEVELOPMENT, LTD.
(THE "BANK") UPON CONVERSION OF APPROXIMATELY $1,600,000 OF LONG TERM DEBT,
INCLUSIVE OF ACCRUED INTEREST, HELD BY THE BANK (THE "BANK DEBT") , AND
GUARANTEED BY THE STATE OF ISRAEL (THE "GOVERNMENT"); AND TO (ii) FOUR TRADE
CREDITORS IN PAYMENT OF INDEBTEDNESS OWED BY THE COMPANY TO THEM IN THE
COLLECTIVE AMOUNT OF $441,619, (THE "TRADE DEBTS"). (THESE FIVE ISSUEES ARE
COLLECTIVELY REFERRED TO AS THE "SELLING SHAREHOLDERS.") THE COMPANY WILL
RECEIVE NO PART OF THE PROCEEDS OF SALES OF THE SHARES. THE SHARES HAVE BEEN
RESERVED BY THE COMPANY FOR ISSUANCE AND ARE BEING REGISTERED BY THE COMPANY
PURSUANT TO AGREEMENTS BETWEEN IT AND THE SELLING SHAREHOLDERS.
ONCE ISSUED AND REGISTERED, IT IS ANTICIPATED THAT THE SHARES SHALL BE
OFFERED ON BEHALF OF THE SELLING SHAREHOLDERS FROM TIME TO TIME IN ONE OR MORE
TRANSACTIONS IN THE OPEN MARKET AT PRICES PREVAILING THEREIN, IN NEGOTIATED
TRANSACTIONS AT SUCH PRICES AS MY BE AGREED UPON, OR IN A COMBINATION OF SUCH
METHODS OF SALE. SEE "PLAN OF DISTRIBUTION." THE PRICE AT WHICH ANY OF THE
SHARES MAY BE SOLD, AND THE COMMISSIONS, IF ANY, PAID IN CONNECTION WITH ANY
SUCH SALE, ARE UNKNOWN AND MAY VARY FROM TRANSACTION TO TRANSACTION. THE COMPANY
WILL PAY ALL EXPENSES INCIDENT TO THE REGISTRATION OF THE SHARES AND HAS AGREED
TO COVER ANY COMMISSIONS AND OTHER EXPENSES INCURRED DURING THE SALE OF THE
SHARES. SEE "SELLING SHAREHOLDERS" AND "PLAN OF DISTRIBUTION."
ON JULY 31, 1998, THE LAST REPORTED SALE OF THE ORDINARY SHARES ON THE
NASDAQ SMALL CAP MARKET WAS $0.4375. ORDINARY SHARES ARE CURRENTLY TRADED UNDER
THE NASDAQ SYMBOL ACNFC.
___________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 8.
___________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE COMPANY HAS RECEIVED FROM THE SECURITIES AUTHORITY OF THE STATE OF ISRAEL AN
EXEMPTION FROM THE OBLIGATION TO PUBLISH THIS PROSPECTUS IN THE MANNER REQUIRED
PURSUANT TO THE PREVAILING LAWS OF THE STATE OF ISRAEL. NOTHING IN SUCH
EXEMPTION SHALL BE CONSTRUED AS AUTHENTICATING THE MATTERS CONTAINED IN THIS
PROSPECTUS OR AS AN APPROVAL OF THEIR RELIABILITY OR ADEQUACY OR AS AN
EXPRESSION OF OPINION AS TO THE QUALITY OF THE SECURITIES HEREBY OFFERED.
The date of this Prospectus is August 4, 1998
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information can be
inspected and copied at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and the following regional offices: Northeast Regional Office, Suite 1300,
Seven World Trade Center, 13th Floor, New York, New York 10048, and Midwest
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and copies of such material may also be
obtained from the Public Reference Section of the Commission at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
reports, proxy, information statements and other information filed by the
Company with the Commission are also filed with The Nasdaq Small Cap Market
and can be inspected at its facility at 1735 K Street, N.W., Washington, D.C.
20006. The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as
the Company deems appropriate or as may be required by law.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus, which constitutes a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulation of the Commission. For further
information with respect to the Company and this offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may be
inspected without charge at the offices of the Commission at the addresses set
forth above. Copies of the Registration Statement may be obtained from the
Commission at its principal office upon payment of prescribed fees. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete and, where the contract or other document
has been filed as an exhibit to the Registration Statement, each statement is
qualified in all respects by reference to the applicable document filed with the
Commission.
The Company has received from the Securities Authority of the State of
Israel (the "Israel Securities Authority") an exemption from the reporting
obligations as specified in Chapter Six of the Israel Securities Law 5728-1968,
which include the obligation to submit periodic and immediate reports to the
Israel Securities Authority, provided that a copy of each report submitted in
accordance with applicable United States law shall be available for public
review at the Company's principal offices in Israel.
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FORWARD LOOKING STATEMENTS
Certain non-historical statements contained in this Prospectus are
forward-looking statements, which involve known and unknown risks and
uncertainties. The Company is including this statement for the express
purpose of availing itself of the protections of the safe harbor provided by
the Private Securities Litigation Reform Act of 1995 with respect to all such
forward-looking statements. Examples of forward looking statements include,
but are not limited to: (i) projections of capital expenditures, revenues,
growth, prospects, capital structure and other financial matters; (ii)
statements of plans or objectives of the Company; and (iii) statements using
the words "anticipate," "expect," "may," "project," "intend" or similar
expressions.
The Company's ability to predict projected results or the effects of
certain events on the Company's operating results is inherently uncertain.
Therefore, the Company wishes to caution readers of this Prospectus to carefully
consider the matters set forth under the caption "Risk Factors" and certain
other matters discussed herein and in other publicly available information.
Such factors and many other factors beyond the control of the Company's
management could cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward-looking
statements. See "Risk Factors."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-26394) pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended December 31,
1997;
(2) The Company's Registration Statement on Form S-3 dated February 17, 1998;
(3) The Company's Registration Statement on Form S-3 dated February 23, 1998;
(4) The Company's Amended Registration Statement on Form S-3
(Reg. No. 333-46461) dated February 27, 1998;
(5) The Company's Amended Registration Statement on Form S-3
(Reg. No. 333-46753) dated February 27, 1998;
(6) The Company's Quarterly Report on Form 10-Q for the quarter ending
March 31, 1998;
(7) The Company's Registration Statement on Form S-3 dated June 8, 1998;
(8) The Company's Report on Form 8-K dated June 22, 1998;
(9) The Company's Quarterly Report on Form 10-Q dated August 4, 1998; and
(10) The description of the Company's Ordinary Shares contained in its
Registration Statement on Form 8-A, filed with the Commission on July 11,
1995, as amended by the Company's Registration Statement filed on
Form 8-A/A filed on July 14, 1995.
All reports and other documents subsequently filed by the Company pursuant
to 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 this offering shall be deemed to be
incorporated by reference into this Prospectus, to the extent required, and to
be a part of this Prospectus from the date of filing of such reports and
documents.
Any statement contained in a document incorporated by reference into this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement
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contained herein or in any other subsequently filed document that also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not, except as so
modified or superseded, be deemed to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated by reference into this Prospectus (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be submitted to Corporate Secretary, Accent Software International Ltd.,
POB 53063, 28 Pierre Koenig Street, Jerusalem 91530 Israel, or by e-mail:
[email protected].
Unless the context otherwise requires, all references to Accent or the
Company include its wholly owned United States subsidiary, Accent Worldwide,
Inc. ("Accent Worldwide"), its wholly owned United Kingdom subsidiary, Accent
Software International (Europe) Ltd. ("Accent Europe"), and its majority-owned
subsidiary, AgentSoft Ltd. ("AgentSoft"). ACCENT is a registered trademark of
the Company in the United States, the United Kingdom, Germany, France and the
Benelux countries. The Company has applied to register LOC@LE, AGENTSOFT, GLOBAL
DEVELOPMENT KIT, LIVE AGENT and WORDPOINT as trademarks in the United States and
in certain other countries.
Windows is a registered trademark and Windows NT and Windows 95 are
trademarks of Microsoft Corporation ("Microsoft"). All other trademarks
appearing in this Prospectus are the property of their respective holders.
Unless otherwise indicated, all references to Microsoft Windows are to the 3.xx
versions of Windows or Windows 95.
THE COMPANY
Accent is a language solutions company, founded in Jerusalem, Israel in
1988. The Company designs, develops, markets and supports software products and
services for the rapidly emerging Language Information Technology ("LIT")
industry. Accent's products address the growing need for software publishers,
corporations and content providers to produce software applications, associated
documentation, and application specific content in any natural language. Through
its majority-owned subsidiary, AgentSoft, the Company also develops intelligent
agent-based software tools and products for process automation over the
Internet.
Since its inception, Accent has invested substantial funds on research and
development, established a sales and marketing force, introduced new products
and established the customer support services and administrative infrastructure
necessary to conduct its operations. As a result of the start-up nature of its
business and its efforts to expand into new markets, Accent has incurred net
losses each year since 1992, including losses of $13 million and $21 million for
the years ended December 31, 1997 and 1996, respectively.
In response to the large loss incurred in 1996, Accent initiated a
restructuring and refocusing effort which included a substantial reduction in
the number of employees, large reductions in sales and marketing expenses and
the elimination or reduction of various other costs. A new Chief Executive
Officer and a new Chief Financial Officer joined the Company during the first
quarter of 1997. In addition to furthering the restructuring efforts already
underway, the new management team shifted the Company's product mix and customer
orientation away from the retail market and in the direction of original
equipment manufacturers
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(OEMs) and business-to-business transactions. Also during the first quarter,
1997, the Company established a new office in Colorado Springs, Colorado.
This U.S. location has become the focal point of the Company's sales,
marketing and customer support efforts as well as certain general and
administrative functions.
Accent has used its LIT technology as a platform to launch several
multilingual development products addressing the needs of its target users. By
offering an expanded line of development tools, Accent seeks to secure a
position as the LIT solution of choice. Accent released the first version of
the ACCENT GLOBAL DEVELOPMENT KIT ("GDK") in June of 1997. GDK is a complete
development and programming environment that enables the globalization of any
Windows software application. Capitalizing on the experience gained from
developing and marketing GDK, Accent released LOC@LE during the first quarter
of 1998. LOC@LE answers the immediate need of software publishers to localize
their software into virtually any natural language. Later in 1998, Accent plans
to release L@PORT, another LIT product which answers the need of software users
who need to translate and localize the multimedia content they produce.
RECENT DEVELOPMENTS
During the months of June and July 1998, the Company reached agreement with
several of its largest creditors pursuant to which the creditors agreed to
accept shares of the Company in payment of all or a portion of the amounts due
them. First, the Company has agreed to issue to the Bank for Industrial
Development Bank (the "Bank"), at the Bank's request, a number of Ordinary
Shares sufficient to repay approximately $1.6 million of a Government-guaranteed
loan which the Company received pursuant to the Government's Approved Enterprise
Program. This amount represents the total loan outstanding as of the date of
this Prospectus. The shares so issued will be sold by the Bank so that the
proceeds from such sales shall be sufficient to repay the Bank Debt and any
other associated commissions and costs subsequent to the date this registration
statement is declared effective. In the event that the loan is repaid within 30
days from the date this registration statement is declared effective, whether
the loan is repaid through sale of the Ordinary Shares being issued to the Bank
or in cash, the Government has agreed to grant the Company a discount of
approximately 15% from the total loan amount. Second, the Company has agreed to
issue or has already issued a number of Ordinary Shares to four of its trade
creditors, possessing a market value on the date of issuance equal to
approximately $420,000.
On June 4, 1998, the Company executed a Preferred Share Purchase Agreement
with Lernout & Hauspie Speech Products, N.V. (the "Agreement") pursuant to which
the Company issued 4,000 Series C Preferred Shares (the "Preferred Shares") in
exchange for $4,000,000. In addition, the Company is obligated to issue, within
three months of the date of the Agreement, five year warrants to purchase
4,444,444 Ordinary Shares at an exercise price of $0.55 per share. (The exercise
price of the warrants is subject to adjustment in the event that the Company's
Ordinary Shares are delisted from the Nasdaq SmallCap Market within six months
from the date of the Agreement and the market price of the Ordinary Shares is
lower than $0.55. In such an event, the exercise price will be reset to equal
average closing price of the Company's Ordinary Shares for the 10 trading days
following the date of delisting.)
The Preferred Shares are convertible at any time hereafter into Ordinary
Shares of the Company based upon a per share price of $0.45, which represents a
10% premium over the average closing price of the Company's Ordinary Shares on
the ten trading days preceding the execution of the Agreement. The terms of
Preferred Shares provide that, subject to the lien then held by Bank Leumi
Le'yisrael Ltd. and the Government of the State of Israel as security for the
repayment of a loan received by the Company (the "Government Lien"), the
Preferred Shares shall rank prior to all other shares of the Company, and that,
in the future, the Company shall not grant rights to any third party to the
assets of the Company superior or
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equal to the preference rights of the Preferred Shares without the prior
approval of Lernout & Hauspie. Holders of the Preferred Shares shall be
entitled to receive dividends, when and if declared by the Company's Board of
Directors, equal in amount per share to the dividends paid on each Ordinary
Share. Each share of the Preferred Shares shall have the right to vote on all
Company matters the number of Ordinary Shares into which each share of the
Preferred Shares would be convertible and shall vote as a single class with
the other outstanding Ordinary Shares. As long as the holder(s) of the
Preferred Shares continue to hold any Preferred Shares or at least 25% of the
Ordinary Shares issued upon the conversion of the Preferred Shares, they
shall be entitled, voting as a separate class, to elect one member of the
Company's Board of Directors.
The Company signed several licenses and other agreements with Lernout &
Hauspie which provide for ongoing cooperation between the two companies.
On January 30, 1998, the Company and Investor Resource Services, Inc.
("IRSI") executed an amendment to their August 4, 1997 agreement. Pursuant to
this amendment, the Company agreed to issue an additional 550,000 Ordinary
Shares to IRSI for further compensation for the services to be provided under
the August 4, 1997 agreement. In addition, the Company agreed to immediately
file a registration statement covering these 550,000 Ordinary Shares and the
300,000 Ordinary Shares issued to IRSI pursuant to an earlier agreement,
executed on August 4, 1997, but not yet registered. This registration statement
was declared effective on March 2, 1998.
The 5,000,000 Ordinary Shares being registered pursuant to this
Registration Statement represent a reasonable estimate of the approximate number
of shares that will actually be needed to be sold to cover the Bank Debt,
without any discount being applied, and the Trade Debts assuming that the share
price on the date of this registration statement is declared effective is at
least $0.41 per share, and, in the case of the Bank Debt, remains at or above
that price throughout the period during which the Bank will sell its shares.
LITIGATION AND OTHER CLAIMS
In the course of its business, the Company is the subject of claims, some
or which may mature into litigation. Although the Company is aware of claims
asserted against it, the Company is not aware, except as discussed in its annual
report for the year ended December 31, 1997, filed on Form 10-K, of any claims
which have a reasonable possibility of adverse outcome in a material amount.
However, unforeseen circumstances may cause such claims, or other, currently
unknown claims, to result in adverse outcomes in material amounts.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS,
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PRIOR TO MAKING AN
INVESTMENT DECISION. CERTAIN STATEMENTS IN THIS PROSPECTUS THAT ARE NOT
HISTORICAL ARE FORWARD-LOOKING, INVOLVING KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. MANY FACTORS, INCLUDING THE RISK FACTORS IDENTIFIED BELOW, COULD
CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT
MAY BE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
GOING CONCERN
The report of the Company's independent public accountants attached as part
of the Company's 1997 Annual Report on Form 10-K contains an explanatory
paragraph as to the Company's ability to
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continue as a going concern. Among the factors cited by the accountants as
raising substantial doubt as to the Company's ability to continue as a going
concern is that the Company has incurred losses from operations of
approximately $13 million during the year ended December 31, 1997, and had an
accumulated deficit of approximately $46 million as of December 31, 1997.
REVENUE
Although the Company's products are receiving a favorable reception in the
marketplace, revenue has fallen short of management expectations, the Company
believes, due primarily to significant concerns of potential customers as to
Accent's ability to continue to support and expand its product offerings. Both
contributing to and a result of the revenue shortfall, the Company's recent
liquidity concerns forced it to reduce the size of its sales and marketing staff
and constrain its sales and marketing expenditures. Recent investments in Accent
have now permitted the Company to recruit additional sales and marketing
personnel, to develop additional sales and marketing channels and to begin to
more aggressively market its products. There can be no assurance that the
Company's sales and marketing efforts will be successful in achieving
management's expectations. If future revenue does not increase from its recent
level, this will have a material adverse impact on the Company and may cause the
Company to cease operations.
SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FINANCING
The Company's capital requirements in connection with its development and
marketing activities have been and will continue to be significant. The Company
has been dependent upon the proceeds of sales of its securities, as well as
various government guaranteed and private loans, to fund its development and
marketing activities. The Company is not yet generating sufficient revenues from
its operations to fund its activities and is, therefore, dependent on the
proceeds of the sale of equity and other financing devices to continue the
development of its technology and the marketing of its products. The Company
anticipates, based on its currently proposed assumptions relating to its
operations and financing plans, that it will have sufficient cash to satisfy its
contemplated needs through the end of 1998. In the event that financings and
cash flow prove to be insufficient to fund operations (due to a change in the
Company's plans or a change, or an inaccuracy, in its assumptions or as a result
of unanticipated expenses, technical difficulties, problems or otherwise), the
Company would be required to seek additional financing. There can be no
assurance that additional financing will be available to the Company on
commercially reasonable terms, or at all. The Company has no current arrangement
with respect to, or sources of, additional financing. The inability to obtain
additional financing, when needed, would have a material adverse effect on the
Company, including possibly requiring the Company to curtail or cease its
operations.
POSSIBLE DELISTING OF SHARES FROM THE NASDAQ SMALL CAP MARKET;
RISKS RELATING TO PENNY STOCKS
The Company's Ordinary Shares and Units are listed on the Nasdaq SmallCap
Market. The Company must meet certain requirements in order to maintain its
listing on the SmallCap Market and on April 1, 1998, the Company was notified by
The Nasdaq Stock Market that it is non-compliant in that its net tangible assets
of $1,023,000 (as of December 31, 1997) were below the Nasdaq minimum
requirements or $2,000,000. (The Company must meet either the minimum net
tangible asset requirement or a minimum market capitalization requirement or a
minimum income requirement.) After a hearing at which it the Company presented
its plan for regaining compliance with the minimum net tangible asset
requirement, Nasdaq determined to continue the Company's listing on the Nasdaq
SmallCap Market provided that on or before August 4, 1998, the Company shall
make a public filing with the SEC and Nasdaq containing a pro forma balance
sheet showing a minimum of $2,500,000 in net tangible assets. In the event
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that the Company fails to meet any of the terms of the exception granted by
Nasdaq, it shares will be immediately delisted from the Nasdaq SmallCap
Market. The Company believes that it can meet the conditions imposed on it by
Nasdaq. However, there can be no assurance that the Company will be
successful in executing the plan on the basis of which Nasdaq granted the
above exception and, therefore, the Company's shares may be delisted from the
Nasdaq SmallCap Market.
If the Company's securities were to become delisted from trading on The
Nasdaq Small Cap Market and the trading price of such securities were to remain
below $5.00 per share or per unit, trading in such securities would also be
subject to the requirements of certain rules promulgated under the Exchange Act,
which require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a penny stock (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stock to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchase and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers
by such requirements may discourage broker-dealers from effecting transactions
in the Ordinary Shares which could severely limit the market liquidity of the
Ordinary Shares and the ability of Selling Shareholder to sell their Shares in
the secondary market.
MANAGEMENT OF A RAPIDLY CHANGING BUSINESS
The Company's business is undergoing significant change as its focus shifts
from the retail market to the developer, corporate and OEM markets. This shift
has placed a significant strain on the Company's management, and its sales,
customer support, product development and administrative operations. The Company
anticipates that growth, if any, may require it to recruit and hire new
personnel, and there can be no assurance that the Company will be successful in
hiring and retaining such personnel. If the Company is unable to respond
effectively to the changing nature of its business, including the need to hire
additional personnel, a material adverse effect on the Company's business,
operating results and financial condition could occur.
DEPENDENCE ON COMPATIBLE THIRD-PARTY SOFTWARE MANUFACTURERS' PRODUCTS AND DESIGN
The Company's products are currently designed, and its proposed products
are being designed, to be utilized with the Windows operating system and with
the products and standards established by certain other software manufacturers.
Accordingly, the performance of certain of the Company's existing products
depends on the actions of other manufacturers, in particular Microsoft. Such
manufacturers may change their products or take actions that could make it more
difficult for the Company to develop its products or that could significantly
impair the performance of the Company's products. For example, if Microsoft were
to modify future versions of Windows in ways that required the redesign of the
Company's Windows-based products, such modification could be detrimental to the
Company. Although the Company anticipates that it will be able to adapt its
products if necessary, there can be no assurance that changes in existing
products or the introduction of new products by third parties will not have a
material adverse effect on the performance of the Company's products and
technology and on the Company's financial performance. In addition, the
Company's products may need to be adapted in the future in order to be
compatible with other or new operating systems so that the Company may maintain
and expand its product offerings. There can be no assurance that the Company
will be able to make any necessary adaptations on a timely basis.
10
<PAGE>
COMPETITION; TECHNOLOGICAL OBSOLESCENCE
The market for Language Information Technology ("LIT") products for the
software localization/globalization and translation service market is intensely
competitive, rapidly evolving and subject to rapid technological change. In
addition, there are relatively few barriers to entry in the software business in
general, including into those areas in which the Company offers and intends to
offer products. Currently, competition is experienced primarily from companies
which have large numbers of human translators who can perform localizations
manually. These companies number over 1,500 around the world, but are generally
small in size. Some of the Company's larger competitors are Berlitz, ALPNET and
ILE. However, while these companies are competition, they are also customers or
potential customers for the Company's software products. The Company's
competition for software tools that address localization and document management
comes mostly from Corel Corporation, IBM and Multiling.
The markets for the technology and products being developed by the Company
are characterized by rapid changes and evolving industry standards, often
resulting in product obsolescence or short product life cycles. Accordingly,
the ability of the Company to compete will depend upon, among other factors, its
ability to develop and introduce to the marketplace in a timely manner new
products and product enhancements. There can be no assurance that the Company
will be able to compete successfully, that its present or future competitors
will not develop technologies or products that render the Company's products and
technology obsolete or less marketable or that the Company will be able to
introduce new products and product enhancements that are competitive with other
products marketed by industry participants.
COLLECTION OF ACCOUNTS RECEIVABLE; PRODUCT RETURNS
The Company's sales are normally made on credit terms and it does not hold
collateral to secure payment. Therefore, default in payment by one or more of
the Company's customers could adversely affect the Company's business, operating
results or financial condition. In addition, consistent with industry practices,
the Company may accept product returns or provide other credits. There can be no
assurance that actual returns and uncollectible receivables will not exceed the
Company's reserves for such items and any significant increase in product
returns or uncollected accounts receivable beyond reserves could have a material
adverse effect on the Company's business, operating results or financial
condition.
PRODUCT DEFECTS AND PRODUCT LIABILITY
The Company's software products are highly complex and sophisticated and
could from time to time contain design defects or software errors that could be
difficult to detect and correct. Errors, bugs or viruses may result in the loss
of or the delay in market acceptance or the loss of customer data. Although the
Company has not experienced any material adverse effect resulting from any
software defects or errors, there can be no assurance that, despite testing by
the Company and its customers, errors will not be found in new products, which
could result in a delay in or inability to achieve market acceptance and thus
could have a material adverse impact upon the Company's business, operating
results or financial condition.
PROTECTION OF PROPRIETARY INFORMATION
The Company's success and ability to compete is dependent in part upon its
proprietary software technology. While the Company relies on a combination of
trade secret and copyright law, nondisclosure agreements and technical measures
to establish and protect its proprietary rights and has also filed patent
applications for certain aspects of its technology, there can be no assurance
that the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of the technology or
11
<PAGE>
independent development by others of software products with features based
upon, or otherwise similar to, those of the Company's products. To license
its retail products, the Company primarily relies on "shrink wrap" licenses
that are not signed by the end-user and, therefore, may be unenforceable
under the laws of certain jurisdictions. In addition, effective copyright
and trade secret protection may be unavailable or limited in certain foreign
countries, and the global nature of the Internet makes it virtually
impossible to control the ultimate destination of the Company's products.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain
and use information that the Company regards as proprietary. Litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results or financial condition.
IMPACT OF INFLATION AND CURRENCY FLUCTUATION
The vast majority of the Company's sales are made in dollars and most of
the Company's expenses are in dollars and New Israeli Shekels ("NIS"). The cost
of the Company's operations in Israel, as expressed in dollars, is influenced by
the extent to which any increase in the rate of inflation in Israel over the
rate of inflation in the U.S. is not offset by the devaluation of the NIS in
relation to the dollar. The change in the cost of the Company's operations in
Israel, as expressed in dollars, relates primarily to the cost of salaries in
Israel, a substantial portion of which are paid in NIS linked to the Consumer
Price Index in Israel (the "Israeli CPI"). While the Company may in the future,
to the extent it deems advisable, purchase currency options or other hedging
instruments to decrease the risk of the NIS devaluation against the dollar being
less than the rate of inflation in Israel, no assurance can be given that any
such financial strategy will be successful in limiting the Company's risk.
CONCENTRATION OF OWNERSHIP; POTENTIAL CONFLICTS OF INTEREST
The agreement with Lernout & Hauspie Speech Products, N.V., executed on
June 4, 1998, allows Lernout & Hauspie to designate and have elected one person
to serve on the Company's Board of Directors. The current designee is Robert
Kutnick. The agreement also grants Lernout & Hauspie the right to vote its
preferred shares as if they had been fully converted into Ordinary Shares. As of
the date of this Prospectus, Lernout & Hauspie will own, on a fully diluted
basis, approximately 24.1% of the Company. The Company has also agreed, pursuant
to an earlier Stock Purchase Agreement, that IMR Investments is entitled to
designate one person to serve on the Board of Directors of the Company. The
current designee of IMR Investments is Roger Cloutier. As of the date of this
Prospectus, IMR will beneficially own, on a fully diluted basis, approximately
6% of the Company. Such ownership will allow Lernout & Hauspie and IMR to have
significant influence over the outcome of any matters that come before the Board
of Directors or that require shareholder approval and thereby to potentially
control the affairs of the Company. Although Israeli law requires directors to
vote in a manner consistent with their fiduciary duty to the Company, there can
be no assurance that conflicts of interest will not arise with respect to the
foregoing or that such conflicts will be resolved in a manner favorable to the
Company.
12
<PAGE>
NO DIVIDENDS
The Company has never paid cash dividends on its Ordinary Shares. Payment
of dividends on the Ordinary Shares is within the discretion of the Board of
Directors of the Company and will depend upon the Company's earnings, its
capital requirements and financial condition and other relevant factors. It is
the Company's intention to retain earnings, if any, to finance the operation and
expansion of its business and, therefore, it does not expect to pay any cash
dividends on its Ordinary Shares in the foreseeable future.
MARKET PRICE VOLATILITY
The market price of the Company's Ordinary Shares has been highly volatile
and in the past 52 weeks the daily closing price has ranged from $0.31 to $3.81.
Factors such as the Company's financial results, introduction of new products by
the Company or its competitors, factors affecting the software industry
generally and factors relating to conditions in the State of Israel may have a
significant impact on the market price of the Company's Ordinary Shares.
Additionally, in recent years, the United States stock markets have experienced
a high level of price and volume volatility and market prices for the stock of
many companies (particularly of small and emerging growth companies, the common
stock of which trades in the over-the-counter-market) have experienced wide
price fluctuations that have not necessarily been related to the operating
performance of such companies.
SUBSTANTIAL DILUTION
The book value of the Company's Ordinary Shares was approximately $(0.06)
per share at December 31, 1997. Therefore, purchasers of Shares in this
Offering will experience immediate and substantial dilution.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
As of the date of this Prospectus, 28,336,211 Ordinary Shares are issued
and outstanding, of which 23,470,879 are freely tradable. There are 3,871,907
Ordinary Shares eligible for sale, without registration, under Rule 144 subject
to certain volume limitations and other conditions prescribed by such rule and
to the contractual restrictions described below. There are warrants outstanding
for the purchase of 5,869,913 Ordinary Shares. Most of the shares underlying
these warrants have been or are being registered and will be freely tradable.
There also are options outstanding for 2,119,500 shares, of which 1,769,500 will
be freely tradable upon exercise. The Company has also issued to Lernout &
Hauspie 4,000 Series C Preferred Shares convertible into 8,888,889 Ordinary
Shares and has agreed to issue warrants to Lernout & Hauspie to purchase an
additional 4,444,444 Ordinary Shares. The Shares being registered hereby will be
freely tradable when this Registration Statement is declared effective by the
Commission.
In addition, the Company has granted to certain of its security holders,
including certain of its executive officers, directors and IMR Investments,
certain registration rights. No prediction can be made as to the effect, if any,
that sales of such securities or the availability of such securities for sale
will have on the market prices prevailing from time to time.
13
<PAGE>
LOCATION IN ISRAEL
The Company is incorporated under the laws of, and has its offices and a
significant portion of its operations in, the State of Israel. Although most of
the Company's sales are currently made to customers outside Israel, the Company
is, nonetheless, directly influenced by the political, economic and security
conditions affecting Israel. Any major hostilities involving Israel, the
interruption or curtailment of trade between Israel and its trading partners or
a significant downturn in the economic or financial condition of Israel could
have a material adverse effect on the Company's business, financial condition or
results of operations. There can be no assurance that ongoing or revived
hostilities or other factors related to the political or economic status of
Israel will not have an adverse impact on the Company's business, operating
results or financial condition.
SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS
Service of process upon directors and officers of the Company and the
Israeli experts named herein, many of whom reside outside the United States, may
be difficult to effect within the United States. Furthermore, since the majority
of the Company's assets are located outside the United States, any judgment
obtained in the United States against the Company may not be enforceable within
the United States. The Company has been informed by its legal counsel in Israel,
Yigal Arnon & Co., that in such counsel's opinion there is doubt as to the
enforceability of civil liabilities under the Securities Act and the Exchange
Act, in original actions instituted in Israel. However, subject to certain time
limitations, Israeli courts are empowered to enforce foreign (including United
States) final executory judgments for liquidated amounts in civil matters
obtained after due trial before a court of competent jurisdiction (according to
the rules of private international law currently prevailing in Israel) which
enforces similar Israeli judgments. The enforcement of such judgments is
conditioned upon: (i) adequate service of process having been effected and the
defendant having had a reasonable opportunity to be heard; (ii) such judgments
or the enforcement thereof not being contrary to the law, public policy,
security or sovereignty of the State of Israel; (iii) such judgments not being
obtained by fraud and not conflicting with any other valid judgment in the same
matter between the same parties; and (iv) an action between the same parties in
the same matter not pending in any Israeli court at the time the lawsuit is
instituted in the foreign court. The Company has irrevocably appointed Accent
Worldwide as the Company's agent to receive service of process in any action
against the Company in any federal or state court sitting in New York County,
State of New York arising out of the Offering or any purchase or sale of
securities in connection therewith.
Foreign judgments enforced by Israeli courts generally will be payable in
Israeli currency, and a special permit of the Israeli Controller of Foreign
Currency will be required to convert the Israeli currency into dollars and to
transfer such dollars out of Israel. The usual practice in an action to recover
an amount in a non-Israeli currency is for the Israeli court to render judgment
for the equivalent in Israeli currency at the rate of exchange in force on the
date thereof. Under existing law, a foreign judgment payable in foreign currency
may be paid in Israeli currency at the rate of exchange on the date of payment,
but the judgment debtor may also make payment in foreign currency if the Israeli
exchange control regulations then in effect permit such foreign currency
payment. Pending collection, the amount of the judgment of an Israeli court
stated in Israeli currency will ordinarily be linked to the Israeli CPI plus
interest at the annual rate (set by Israeli regulations) prevailing at such
time. Judgment creditors must bear the risk that they will be unable to convert
their award into foreign currency that can be transferred out of Israel. All
judgment creditors must bear the risk of unfavorable exchange rates.
14
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All proceeds from the sale of the Shares will be for the account of the
Selling Shareholder, as described below. The Company will use the proceeds of
any warrant exercise for general corporate purposes and working capital. See
"Selling Shareholder" and "Plan of Distribution" described below.
SELLING SHAREHOLDERS
The following table sets forth the Selling Shareholders and the number of
Ordinary Shares beneficially owned by such Selling Shareholders as of July 30,
1998, and offered hereby. The Selling Shareholders have not held any position,
office or other material relationship with the Company or any of its affiliates
within the past three years, other than as a result of its ownership of the
shares. The Shares may be offered from time to time by the Selling Shareholders
named below. However, the Selling Shareholders are under no obligation to sell
all or any portion of the Shares under this Prospectus or otherwise. Because the
Selling Shareholders may sell all or part of its Shares, no estimate can be
given as the number of Shares that will be held by it upon termination of any
offering made hereby.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Shares Beneficially
Name of Selling Shareholder Offered Hereby Owned After Offering
Number Percent Number Percent
<S> <C> <C> <C> <C>
Industrial Development Bank
Asia House 3,938,462 12.2% 0 0%
2 Dafna Street
Tel Aviv
Merrill Corporation
One Merrill Circle 85,340 * 0 0%
St. Paul, Minnesota
Tech Data Product Management Inc.
5350 Tech Data Drive 110,350 * 0 0%
Clearwater, Florida
Weil Gotshal & Manges LLP
767 Fifth Avenue 392,735 1.2% 0 0%
New York, New York
Ingram Micro, Inc.
1600 E. St. Andrew Place 400,000 1.2% 0 0%
Santa Ana, California
</TABLE>
*Less than one percent
15
<PAGE>
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time
to time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Shareholders may sell the Shares
being offered hereby on the Nasdaq Small Cap Market, or otherwise, at prices
and under terms then prevailing or at prices related to the then current
market price or at negotiated prices. The Shares may be sold by on or more of
the following means of distribution: (a) a block or cross trade in which the
broker, dealer or agent so engaged will attempt to sell Shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker, dealer or agent as principal and
resale by such broker, dealer or agent for its own account pursuant to this
Prospectus; (c) an over-the-counter distribution in accordance with the rules
of the Nasdaq Small Cap Market; (d) ordinary brokerage transactions (which
may include long and short sales) and transactions in which the broker
solicits purchasers; (e) in privately negotiated transactions; (f) "at the
market" to or through market makers or into an existing market for the
Ordinary Shares; (g) in other ways not involving market makers or into an
existing market for the Ordinary Shares; (h) through transactions in options,
swaps or other derivatives (whether listed or not); or (i) any combination of
the foregoing or other legally available means. To the extent required, this
Prospectus may be amended and supplemented from time to time to describe a
specific plan of distribution. In connection with distributions of the
Shares or otherwise, the Selling Shareholders may enter into hedging
transactions with broker-dealers or other financial institutions. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the Company's Ordinary Shares in
the course of hedging the positions they assume with Selling Shareholder. The
Selling Shareholders may also sell the Company's Ordinary Shares short and
redeliver the shares to close out such short positions. The Selling
Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of Shares offered hereby,
which Shares such broker-dealer or other financial institution may resell
pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Shareholders may also pledge Shares to a
broker-dealer or other financial institution, and, upon a default, such
broker-dealer or other financial institution may effect sales of the pledged
Shares pursuant to this Prospectus (as supplemented or amended to reflect
such transaction). In addition, any Shares that qualify for sale pursuant to
Rule 144 may be sold under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Shareholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales, and
any such commissions, discounts or concessions may be deemed to be underwriting
discounts or commissions under the Act. The Company will pay all expenses
incident to the registration of the Shares with the SEC.
In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
There can be no assurance that the Selling Shareholders will sell all or
any of the Shares.
16
<PAGE>
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Robert Trachtenberg, Esq., the Company's Senior
Vice President for Administration and Legal Affairs.
EXPERTS
The audited consolidated financial statements referred to in this
Prospectus and/or included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, have been audited by Luboshitz, Kasierer & Co., a
Member Firm of Arthur Andersen, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
said reports, which include an explanatory fourth paragraph with respect to the
Company's ability to continue as a going concern.
Statements concerning Israeli law included in this Prospectus or in any
document incorporated by reference herein have been examined by Yigal Arnon &
Co., and have been included upon the authority of such counsel as an expert in
the laws of the State of Israel.
17
<PAGE>
No dealer, salesperson or any other individual has been authorized to give
any information or make any representations not contained in this Prospectus in
connection with the Offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company, any Selling Shareholder or any other person. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
Shares in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has not been any change in the facts set forth in this Prospectus or in
the affairs of the Company since the date hereof or that the information
contained herein is correct as of any time subsequent to the date hereof.
___________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION 2
FORWARD LOOKING STATEMENTS 3
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE 3
THE COMPANY 4
RECENT DEVELOPMENTS 5
RISK FACTORS 7
USE OF PROCEEDS 17
SELLING SHAREHOLDER 17
PLAN OF DISTRIBUTION 18
LEGAL MATTERS 20
EXPERTS 20
</TABLE>
5,000,000 ORDINARY SHARES
Accent Software
International Ltd.
___________
PROSPECTUS
___________
AUGUST 4, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities registered under this Registration Statement are estimated to be as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee. . . . . . . . . . . $ 645
Israeli Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Printing and Engraving Expenses. . . . . . . . . . . . . . . . . . . . . 500
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 500
Transfer Agent Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,145
------
------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Association of the Company provide that, to the fullest
extent permitted by the Israeli Companies' Ordinance (New Version), 1983, as
amended (the "Companies Ordinance"), the Company may indemnify its directors and
officers for (i) any financial liability imposed upon them for the benefit of a
third party by a judgment, including a settlement or arbitration decision
certified by a court, as a result of an act or omission of such person in his
capacity as a director or officer of the Company; and (ii) reasonable litigation
expenses, including legal fees, incurred by such director or officer or which he
is obligated to pay by a court order, in a proceeding brought against him by or
on behalf of the Company or by others, or in connection with a criminal
proceeding in which he was acquitted, in each case relating to acts or omissions
of such person in his capacity as a director or officer of the Company
("Indemnifiable Event").
The Company's Articles of Association provide that, to the fullest extent
permitted by the Companies Ordinance, the Company may procure directors' and
officers' liability insurance for (i) breach of the duty of care by any director
or officer owed to the Company or to any other person; (ii) breach of fiduciary
duty by any officer or director owed to the Company, provided such person acted
in good faith and had reasonable cause to assume that the action would not
prejudice the interests of the Company; and (iii) any financial liability
imposed upon any director or officer for the benefit of a third party by reason
of an act or omission of such person in his capacity as a director or officer of
the Company. The Company has a directors' and officers' liability insurance
policy that insures the Company's officers and directors against certain
liabilities.
II-1
<PAGE>
Under the Companies Ordinance, the Company may not indemnify or procure
insurance coverage for the liability of its Office Holders (as defined in the
Companies Ordinance) in respect of any monetary obligation imposed by reason of
(i) an act or omission which constitutes a breach of fiduciary duty, except to
the extent described above; (ii) a willful breach of the duty of care or
reckless disregard of the circumstances or consequences of such breach; (iii) an
act or omission done with the intent to unlawfully realize personal gain; or
(iv) a fine or penalty imposed for a criminal offense.
The Companies Ordinance defines an "Office Holder" to include a director,
general manager, chief executive officer, executive vice president, vice
president, other managers directly subordinate to the general manager, and any
person assuming the responsibilities of the foregoing positions without regard
to such person's title.
In addition, pursuant to the Companies Ordinance, indemnification of, and
procurement of insurance coverage for, an Office Holder of the Company is
permitted if it is approved by the Company's Audit Committee and Board of
Directors. In certain circumstances, the Companies Ordinance also requires
approval of such indemnification and insurance by the Company's shareholders.
ITEM 16. EXHIBITS
<TABLE>
<S> <C> <C>
4.1 -- Loan Agreement between Accent Software International and the Bank
for Industrial Development in Israel Ltd. (translation from the
original Hebrew).
5.1 -- Opinion of Robert Trachtenberg, Esq.
23.1 -- Consent of Luboshitz, Kasierer & Co., a Member Firm of Arthur
Andersen.
24.1 -- Power of Attorney (included on page II-4 to II-5).
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424(b) if, in the aggregate, with
II-2
<PAGE>
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
and (iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering; and
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Colorado Springs, State of Colorado, on this 8 of
September 1997.
ACCENT SOFTWARE INTERNATIONAL LTD.
By: /s/ Robert J. Behr
------------------------------
Name: Robert J. Behr
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Todd
A. Oseth, Robert J. Behr and Robert Trachtenberg and each of them, as
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign any amendment to this Registration Statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney-in-fact, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or any one of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated:
SIGNATURE TITLE DATE
/s/ Todd A. Oseth President, Chief Executive Officer August 4, 1998
- -------------------- and Director (principal executive
Todd A. Oseth officer)
/s/ Robert J. Behr Chief Financial Officer (principal August 4, 1998
- -------------------- financial and accounting officer)
Robert J. Behr
/s/ Roger Cloutier Chairman of the Board of Directors August 4, 1998
- --------------------
Roger Cloutier
/s/ Robert Rosenschein Director August 4, 1998
- --------------------
Robert Rosenschein
II-4
<PAGE>
/s/ Mark A. Tebbe Director August 4, 1998
- --------------------
Mark A. Tebbe
/s/ Esther Dyson Director August 4, 1998
- --------------------
Esther Dyson
/s/ Robert Kutnick Director August 4, 1998
- --------------------
Authorized Representative in the United States:
ACCENT WORLDWIDE, INC.
/s/ Todd A. Oseth August 4, 1998
- --------------------
Todd A. Oseth
By: /s/ Robert J. Behr August 4, 1998
- --------------------
Robert J. Behr
Attorney-in-fact
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
4.1 -- Loan Agreement between Accent Software International and the Bank
for Industrial Development in Israel Ltd. (translation from the
original Hebrew).
5.1 -- Opinion of Robert Trachtenberg, Esq.
23.1 -- Consent of Luboshitz, Kasierer & Co., a Member Firm of Arthur
Andersen.
24.1 -- Power of Attorney (included on page II-4 to II-5).
</TABLE>
II-5
<PAGE>
<PAGE>
August 4, 1998
Accent Software International Ltd.
Rehov Pierre Koenig 28
Jerusalem 93469
Att: Mr. Robert Trachtenberg, Adv.
Senior Vice President
Dear Sir,
WHEREAS Accent Software International Ltd., company number 52-0042714 ("Accent")
received, on various dates, Israeli government-guaranteed loans from Bank Leumi
Leyisrael Ltd. ("Bank Leumi") pursuant to the Law on the Encouragement of
Capital Investment (Revision 39) 1990 (the "Loans"), and the balance of the
Loans on July 5, 1998 was 5,775,367 shekels (inclusive of principal, interest,
fees and linkage differentials) (the "Loan Balances");
WHEREAS Accent has requested an unlinked, unindexed shekel loan in the amount of
the Loan Balances (the "Loan") from Bank for Industrial Development in Israel
Ltd. (the "Bank") for a period of 12 months, the purpose of the Loan being the
repayment in full of the Loan Balances to Bank Leumi and on the condition, among
other things, that the Loan and its interest will be guaranteed by the State of
Israel by a guarantee to be issued to the Bank as of August 1, 1998 in
accordance with the Law on Government Guarantees 1958 and in conformance with
the Law on the Encouragement of Capital Investment (Revision 39) 1990;
WHEREAS Accent and the Bank (the "Parties") desire to reflect in writing the
agreements reached between them in connection with the Loan and its conditions;
IT IS HEREBEY AGREED AND DECLARED BETWEEN THE PARTIES AS FOLLOWS:
1. The Preamble, as set forth above, represents an indivisible part of this
Agreement.
2. The Bank will grant Accent the Loan in shekels for the period and with the
interest as set forth in this Agreement. It is emphasized that the Loan and
its interest shall not be linked in any manner.
3. Accent will sign in the Bank's favor on the following documents and shall
establish in the Bank's favor the following liens and shall present to the
Bank the following documents, all to the Bank's satisfaction, prior to
Accent's receipt of the Loan or any part thereof.
A. Loan agreement in the form attached as Exhibit A (the "Loan
Agreement").
B. General Business Conditions Agreement promulgated by the Bank (the
"General Business Conditions Agreement").
C. A bond for an unlimited amount, in which Accent shall create fixed and
floating liens in favor of the Bank on all its assets and property, in
a form acceptable to the Bank.
D. A letter of approval from Bank Leumi in which Bank Leumi will confirm
to the Bank that Accent has repaid the Loans in their entirety
(including principal, interest, fees, linkage and expenses) and a
confirmation from Bank Leumi that it cancels all liens and mortgages
of any type that Accent created in Bank Leumi's favor.
4. It shall be a precondition to the grant of the Loan or part thereof by the
Bank to Accent that the Bank shall receive, to its satisfaction, the full
guarantee from the State of Israel for the full repayment of the Loan by
Accent to the Bank according to its terms, together with the appropriate
interest payments.
5. Accent commits to use the proceeds of the Loan for the full and final
repayment of the Loans (including principal, interest, fees, linkage and
expenses) to Bank Leumi, and for no other purpose.
6.
<PAGE>
A. It is agreed that the principal of the Loan shall accrue interest (to
be calculated on the unpaid principal balance of the Loan from time to
time) in an annual amount equal to Basic Interest Rate (as defined
below) plus 2.5% (the "Risk Addition" at a fixed rate). The interest
on the different components referred to above shall be referred to as
the "Interest on the Loan Principal". According to the official rate
for Basic Interest Rate on the date of this Agreement (12.8%
annually), the current rate of Interest on the Loan Principal is 15.3%
annually (or 16.42% adjusted).
B. The Interest on the Loan Principal at the rate described above shall
be calculated in connection with each "interest period" according to
the number of days actually included in such period, such that the
interest rate shall be divided on the basis of 365 days in a year.
C. Accent acknowledges that the Basic Interest Rate (and, accordingly,
the Interest on the Loan Principal) may change from time to time in
accordance with the provisions of this Agreement below.
D. For the purposes of this Agreement, the Basic Interest rate shall mean
the rate known to the Bank as "Basic Interest on Current Israeli
Currency Loan Accounts", at a rate as shall be set by the Bank from
time to time.
E. The Bank shall be entitled to raise or lower, from time to time, the
Basic Interest Rate. In the event that the Basic Interest Rate is
changed by the Bank, the changed Basic Interest Rate shall be used to
calculate the interest on the Loan principal from the date the new
Basic Interest Rate becomes effective. Each increase or decrease in
the Basic Interest Rate shall be communicated to Accent (in one of the
ways described below) and shall become effective on the date indicated
in such communication, or, if not so indicated, 3 days after the
communication is made to Accent. The announcement of a change in the
Basic Interest Rate shall be made by mail to Accent, or by indicating
the change on the back of a bank statement sent to Accent, and, if the
Bank so chooses, by publication in a daily newspaper.
F. Any reference in this paragraph to the "Present Rate" shall mean the
rate in effect on the date of this Agreement. The Bank shall be the
sole arbiter concerning any calculation of interest on the Loan
principal, and its decision shall bind Accent for all purposes.
7. The interest on the Loan principal (at rates from time to time as described
above and as calculated in accordance with the principles set forth above,
during the period that began from the date the Bank gave the Loan to
Accent) shall be paid by Accent to the Bank (separate from payments of
principal) each month on the first of the month beginning on October 1,
1998 and continuing. The term "month" shall be according to the Gregorian
calendar.
8. Accent shall repay to the Bank the Loan principal in four equal quarterly
payments, each quarterly payment being made on the following dates: October
1, 1998, January 1, 1999, April 1, 1999 and July 1, 1999.
9. Whereas the government guarantee is limited to guaranteeing the Basic
Interest Rate plus 1.3% per year, Accent agrees that it shall immediately
pay to the Bank upon the receipt of the Loan or a part thereof an amount in
shekels equal to 1.2% of the amount of the Loan, as shall be determined by
the Bank in its discretion. In the event that Accent shall make early
repayment of the Loan, the Bank shall calculate the appropriate amount of
the payment made pursuant to this paragraph that shall be refunded to
Accent.
10. Accent shall immediately pay to the Bank upon the receipt of the Loan or a
part thereof a special fee (the "Fee") in shekels equal to $50,000
according to the representative rate of exchange known on the morning of
the payment of the Fee to the Bank.
11. In addition, Accent shall pay to the Bank the Government Guarantee Fee as
mentioned in paragraph 2(B) of the Loan Agreement. Accent shall present to
the Bank an appropriate guarantee, as determined by the Bank, for the
payment of the Government Guarantee Fee.
<PAGE>
12. Notwithstanding the provisions of the Loan Agreement and/or the General
Business Conditions Agreement, Accent shall be entitled to make early
repayments on the Loan principal without any penalty whatsoever.
13. It is agreed between Accent and the Bank that the Bank shall be entitled,
from time to time, but not earlier than the date on which the registration
statement being filed by Accent with the United States SEC (the
"Registration Statement") is declared effective by the SEC, to notify
Accent in writing (the "Notice") that the Bank desires to convert the
unpaid portion of the Loan (including accrued interest) or a part thereof,
as indicated in the Notice provided by the Bank, into Ordinary Shares of
Accent (the "Issued Shares")' and Accent agrees to immediately effect such
conversion upon its receipt of a Notice of the Loan or a part thereof in
the manner indicated in the Notice. The portions of the Loan to be
converted from time to time shall be converted at a rate that shall be
equal to the price at which the Issued Shares are sold in the United States
at the time of conversion. In the event that there is a disagreement
concerning the appropriate conversion rate, the Bank shall be entitled in
its discretion to determine the conversion rate, which determination shall
be binding on Accent. It is also agreed and declared that Accent shall
cause the Issued Shares to be sold to a third party immediately prior to
the Issued Shares actual issuance to the Bank. The proceeds of such sales,
after the deduction of any commissions, shall be credited by the Bank
against the Loan balance at that time, and such credit shall be applied to
principal and interest as the Bank shall decide.
The sale of the Issued Shares shall be handled by a broker acceptable to
the Bank and Accent and all expenses and fees of such broker in connection
with the sale of the Issued Shares shall be borne and paid by Accent.
In the event that the Bank credits any amounts against the Loan principal,
the Loan balance shall be reduced accordingly. Accent shall ensure that the
Issued Shares shall be registered for sale in the United States by the
appropriate securities authorities.
It is agreed that upon request by the Bank, the Issued Shares shall be
issued in the name of Development and Trust Ltd., which shall hold the
Issued Shares on behalf of the Bank.
14. It is agreed between Accent and the Bank as follows:
A. If the entire Loan is repaid, whether by the conversion and sale of
Accent shares as set forth in paragraph 13, above, or some other
method of payment to the Bank, within 30 days from the date on which
the Registration Statement is declared effective, or within 40 days
of the date of this Agreement, whichever is earlier, the Loan balance
to be repaid shall be reduced by:
i. an amount (the "Above Amount") equal to 15% of the balance of the
Loans (as defined above) that had not yet been due and payable
according to the agreements between Accent and Bank Leumi in
connection with the Loans; and
i. an amount equal to the extraordinary interest (the "Extraordinary
Interest") paid by Accent to Bank Leumi on account of payments on
the Loans that were in arrears.
A payment within 7 days of the day such payment is due shall not be
considered as having been in arrears for the purpose of the
calculation of the discount as set forth above. The Controller General
in the Ministry of the Treasury shall be the sole arbiter of the Above
Amount and the amount of Extraordinary Interest to be credited to
Accent.
B. If the entire Loan is repaid, whether by the conversion and sale of
Accent shares as set forth in paragraph 13, above, or some other
method of payment to the Bank, after the earlier of the two periods
indicated in subparagraph (A), above, but within 90 days from
the date on which the Registration Statement is declared effective,
the Loan balance to be repaid shall be reduced by an amount equal to
5% (instead of 15% as set forth in subparagraph (A) of this paragraph)
and the provisions of subparagraph (A) of this paragraph, including
the provisions concerning the reduction of the Loan balance in an
amount equal to the Extraordinary
<PAGE>
Interest, shall apply to the provisions of this subparagraph (B),
with the necessary reconciliations in connection with percentages of
reductions and the determination of the Controller General as set
forth above.
C. It is clarified that the term "Loan balance" in the first line of
subparagraph (A), above, and in subparagraph (B), above, shall mean
the amount of the Loan after the reductions detailed in those two
subparagraphs, as appropriate, if such reductions have occurred
according to the above terms.
"Extraordinary Interest", as appears in this paragraph, means the
difference between the regular rate of interest set in the
agreement/agreements between Accent and Bank Leumi in connection
with the Loans and the rate of interest charged by Bank Leumi on
the amounts of the Loans that were not repaid by Accent at their
scheduled dates of repayment.
D. It is emphasized and agreed that the discount in the amount described
above, together with the Extraordinary Interest, in the event that
Accent is entitled to receive such discount and forgiveness of the
Extraordinary Interest, shall not be accorded to Accent by or on the
account of the Bank, but rather by the Controller General from funds
of the Controller General. It is emphasized and agreed that the Bank
shall receive the full amount of the Loan including the interest
thereon according to the this Agreement and the Loan Agreement that
will be executed in connection therewith between the Bank and Accent.
15. It is agreed and declared that all the provisions and terms of the
following documents - the Loan Agreement, the General Business Conditions
Agreement, the Bond mentioned in paragraph 3(C), above, and the Agreement
as defined in the preamble to this Agreement, shall govern the Loan and its
terms, in addition to what is set forth in this Agreement, with the changes
to those agreements made necessary by the terms of this Agreement.
It is emphasized that the Loan, as defined in the preamble to this
Agreement and the loan as defined in the Loan Agreement are identical.
It is clarified and agreed that the term "agreement" as defined in
paragraph 2(A) of the Loan Agreement refers to this Agreement.
16. In addition to all the provisions of this Agreement, the written approval
of the Controller General of the terms of this Agreement, together with the
granting of the government guarantee as described in paragraph 14(C),
above, shall be a precondition of the effectiveness of this Agreement.
We send this letter to you in three copies. Please confirm your acceptance and
agreement to its terms by signing all three copies and returning two copies
validly executed by you.
Sincerely,
/s/
The Bank for Industrial Development in Israel, Ltd.
We, Accent Software International, Ltd., accept, agree and obligate ourselves to
all the terms and conditions of this Agreement.
/s/
- ----------------------------------
Accent Software International Ltd.
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
ROBERT TRACHTENBERG
Senior Vice President
Administration & Legal Affairs
August 4, 1998
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530
Israel
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
I have examined the Registration Statement on Form S-3 to be filed by you with
the Securities and Exchange Commission on or about August 4, 1998 (the
"Registration Statement") in connection with the registration of under the
Securities Act of 1933, as amended, of up to 5,000,000 Ordinary Shares (the
"Shares"). The Shares either have been or are to be issued by the Company upon
the conversion of various debts of the Company, and once issued and registered
may be offered for sale for the benefit of the selling shareholder named in the
Registration Statement. I understand that the Shares are to be sold from time to
time in the over-the-counter market at prevailing prices or as otherwise
described in the Registration Statement. As your legal counsel, I have also
examined the proceedings taken by you in connection with the issuance of the
Shares.
It is my opinion that, subject to the fulfillment of the terms and conditions of
the agreements underlying the conversion of the debts into the Company's shares,
the Shares will be validly issued, fully paid and non-assessable.
I consent to the use of this opinion as an exhibit to the Registration Statement
and further consent to the use of my name wherever appearing in the Registration
Statement, including the Prospectus constituting a part thereof, and any
amendments thereto.
Very truly yours,
/s/ Robert Trachtenberg
- -------------------------------------------------------------------------------
ACCENT SOFTWARE INTERNATIONAL LTD.
PO Box 53063 Jerusalem 91530 Israel Phone 972 (2) 6793723 Ext 242
Fax 972 (2) 6796188
Internet: [email protected]
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this form S-3 of our report dated March 15, 1998 included in Accent
Software International Ltd. Form 10-K for the year ended December 31, 1997. It
should be noted that we have not audited any financial statements of the
company, subsequent to December 31, 1997 or performed any audit procedures
subsequent to the date of our report.
/s/ LUBOSHITZ, KASIERER & CO.
------------------------------------
LUBOSHITZ, KASIERER & CO.
Member Firm of Andersen Worldwide SC
Tel aviv, Israel
August 4, 1998
