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As filed with the Securities and Exchange Commission on June 9, 1998
Registration No. 333-
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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)
Israel 7372 N.A.
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Numbers) Identification No.)
organization)
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, Appel, Powers & Johnson 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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<PAGE>
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>
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 13,333,333 $0.46875 $6,250,000 $1843.75
</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 June 4, 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
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ACCENT SOFTWARE INTERNATIONAL LTD.
13,333,333 ORDINARY SHARES
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THIS PROSPECTUS RELATES TO THE PUBLIC OFFERING, WHICH IS NOT BEING
UNDERWRITTEN, OF UP TO 13,333,333 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 LERNOUT & HAUSPIE SPEECH
PRODUCTS, N.V., OR BY AUTHORIZED TRANSFEREES (THE "SELLING SHAREHOLDER").
THE SHARES ARE ISSUABLE TO THE SELLING SHAREHOLDER (i) UPON THE
CONVERSION OF PREFERRED SHARES PURCHASED FROM THE COMPANY FOR THE SUM OF
$4,000,000; AND (ii) UPON THE EXERCISE OF WARRANTS TO PURCHASE AN AGGREGATE
OF 4,444,444 ORDINARY SHARES TO BE ISSUED IN CONNECTION WITH THE SALE OF THE
PREFERRED SHARES. THE COMPANY WILL RECEIVE NO PART OF THE PROCEEDS OF SALES
OF THE SHARES. HOWEVER, THE COMPANY WILL RECEIVE PROCEEDS FROM THE EXERCISE
OF THE WARRANTS, IF THE WARRANTS ARE EXERCISED. THE INITIAL AGGREGATE
EXERCISE PRICE OF THE WARRANTS IS $2,444,444. THE SHARES HAVE BEEN RESERVED
BY THE COMPANY FOR ISSUANCE UPON CONVERSION OF THE PREFERRED SHARES AND THE
EXERCISE OF THE WARRANTS, AND ARE BEING REGISTERED BY THE COMPANY PURSUANT TO
AN AGREEMENT BETWEEN IT AND THE SELLING SHAREHOLDER.
ONCE ISSUED, THE SHARES MAY BE OFFERED BY THE SELLING SHAREHOLDER 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. SEE "SELLING SHAREHOLDER" AND
"PLAN OF DISTRIBUTION."
ON JUNE 8, 1998, THE LAST REPORTED SALE OF THE ORDINARY SHARES ON THE
NASDAQ SMALL CAP MARKET WAS $0.719. ORDINARY SHARES ARE TRADED UNDER THE
NASDAQ SYMBOL ACNTF.
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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.
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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.
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
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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 June 9, 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; and
(6) 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 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.
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<PAGE>
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 AGENTSOFT, GLOBAL DEVELOPMENT KIT, LIVE AGENT, WEBTAMER 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 (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.
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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
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 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 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 February 12, 1998, the Company executed an agreement with MGZ
International Corporation ("MGZ") pursuant to which it agreed to pay MGZ
$225,000 in the form of freely tradable Ordinary Shares of the Company. This
payment will be made in recognition of the assistance being given by MGZ in the
negotiation of a three year distribution agreement between Accent Worldwide and
the GI Group, a Russian distributor of software products which intends to
purchase the Company's software products for distribution in Russia (the
"Distribution Agreement"), and is contingent upon the execution and a certain
minimum performance of the Distribution Agreement.
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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 13,333,333 Ordinary Shares being registered pursuant to this
Registration Statement are being registered pursuant to the Agreement with the
Selling Shareholder, which requires the Company to have registered a number of
Ordinary Shares sufficient for issuance upon the conversion of the Preferred
Shares and the exercise of the warrants.
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 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.
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REVENUE
The Company's products, particularly GDK, WORDPOINT, and Accent's
newest product, LOC@LE, are receiving a favorable reception in the
marketplace. Revenue during the latter half of 1997 and the first quarter of
1998, however, has fallen short of management expectations, the Company
believes, due primarily to significant concerns of potential customers as to
the Company's ability to continue to support and expand its product
offerings. The Company is continuing to work on significant new sales
opportunities which it had expected to conclude during the fourth quarter of
1997, and is also continuing to place significant emphasis on the development
of new and enhanced products which can be introduced in the near term. There
can be no assurance that the concerns of potential customers can be
alleviated and that future revenue will meet management's expectations. If
future revenue does not increase from its 1997 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 sooner than currently anticipated. 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.
LONG TERM DEBT AND OTHER LIABILITIES
As of March 31, 1998, the outstanding balances of the Company's
long-term debt and other liablilites were approximately $5.1 million. All of
the Company's assets are pledged as collateral to secure the Company's debt.
The Company has entered into negotiations with its major lender and other
creditors to restructure its long term debt and other liabilities, possibly
by issuing equity in exchange for all or a portion of the liabilities,
obtaining discounts, deferring or stretching payment terms, or some
combination of these alternatives. There can be no assurance that the Company
will be successful in its efforts to restructure its outstanding debts and
any failure on the part of the Company to do so will have a material adverse
impact on the Company. Moreover, should such attempts to restructure its
outstanding debts fail and the Company is unable to generate sufficient cash
flow from operations or external sources to meet scheduled debt payments or
otherwise to comply with the terms of such indebtedness, it may be forced to
default on its debt obligations which would have a material adverse effect on
the Company, including the possibility of receivership or liquidation of the
Company.
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RESTRUCTURING
As a result of its difficulties in meeting its revenue projections and
the need to reduce its working capital requirements, the Company implemented
additional cost reduction initiatives in April 1998. The initiatives
included significant personnel reductions, the consolidation of facilities
and a freeze on capital spending. The restructuring reduced the Company's
monthly cash expenses by more than 50%. The restructuring also triggered a
requirement to pay various employee obligations, which the Company may not be
able to pay in a timely manner. There can be no assurance that former
employees will defer potential legal remedies while the Company completes its
restructuring efforts, collects amounts due from customers and pursues new
sales opportunities. If former employees seek and are granted legal remedies
against the Company, this will have a material adverse impact on the Company
and may cause the Company to cease 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) are below the
Nasdaq minimum requirements of $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.) The Company has been granted a
hearing at which it will present its plan for regaining compliance with the
minimum net tangible asset requirement. The Company believes that the
investment transaction which is the subject of this Registration Statement,
together with additional actions identified in its written response to
Nasdaq, will restore the Company to compliance with Nasdaq SmallCap Market
requirements. However, there can be no assurance that the Company will be
successful in executing its plan or that the Company will be granted
sufficient time to execute its plan 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 suppport, 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.
10
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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.
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
11
<PAGE>
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 in the event
that a distributor or a retailer holds excess inventory of the Company's
products. Although the Company has moved away from the retail market toward the
OEM and business-to-business market where product returns are less likely, the
risk of product returns and customer defaults from prior period activities could
have an adverse impact on the Company's future operating results. 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 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.
12
<PAGE>
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 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 27.5% 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.
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.
13
<PAGE>
SUBSTANTIAL DILUTION
The book value of the Company's Ordinary Shares was approximately $(0.03)
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, 27,313,911 Ordinary Shares are issued
and outstanding, of which 23,442,004 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 1,879,579 shares, of which 1,529,579 will
be freely tradable upon exercise. 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.
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
14
<PAGE>
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.
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 SHAREHOLDER
The following table sets forth the Selling Shareholder and the number of
Ordinary Shares beneficially owned by such Selling Shareholder as of June 4,
1998, and offered hereby. The Selling Shareholder has 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 Shareholder
named below. However, the Selling Shareholder is under no obligation to sell all
or any portion of the Shares under this Prospectus or otherwise. Because the
Selling Shareholder 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.
15
<PAGE>
<TABLE>
Shares Beneficially
Owned After Offering(1)
Number of Shares Beneficially -----------------------
Owned Prior to the Offering and Percent
Name of Selling Shareholder Offered Hereby Number Outstanding
--------------------------- -------------- ------ -----------
<S> <C> <C> <C>
Lernout & Hauspie Speech Products, N.V. 8,888,889 Ordinary Shares from 0 0%
Sint-Krispijnstraat 7 the Conversion of the Preferred
8900 Ieper - Belgium Shares and 4,444,444 from the
Exercise of the Warrants 0
</TABLE>
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time
to time by the Selling Shareholder. The Selling Shareholder will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Shareholder 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 Shareholder 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 Shareholder may also sell the Company's Ordinary Shares short and
redeliver the shares to close out such short positions. The Selling
Shareholder 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 Shareholder 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.
- -------------------
(1) Assuming that all Ordinary Shares owned by the Selling Shareholder
registered pursuant to this Registration Statement will have been sold pursuant
to such registration statement prior to or simultaneously with the termination
of the Offering hereunder.
16
<PAGE>
In effecting sales, brokers, dealers or agents engaged by the Selling
Shareholder may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Shareholder 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 Shareholder will sell all or
any of the Shares.
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 Andersen Worldwide, SC, 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>
Page
----
<S> <C>
AVAILABLE INFORMATION 4
FORWARD LOOKING STATEMENTS 5
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE 5
THE COMPANY 6
RECENT DEVELOPMENTS 7
RISK FACTORS 8
USE OF PROCEEDS 15
SELLING SHAREHOLDER 15
PLAN OF DISTRIBUTION 16
LEGAL MATTERS 17
EXPERTS 17
</TABLE>
13,333,333 ORDINARY SHARES
Accent Software
International Ltd.
----------
PROSPECTUS
----------
JUNE 9, 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. . . . $1,843
Israeli Taxes. . . . . . . . . . . . . . . . . . . . . . . 0
Printing and Engraving Expenses. . . . . . . . . . . . . . 500
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . 1,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . 500
Transfer Agent Fees. . . . . . . . . . . . . . . . . . . . 500
Total . . . . . . . . . . . . . . . . . . . . . . . . $4,343
------
------
</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
4.1 - Preferred Share Purchase Agreement dated June 4, 1998, between Accent
Software International Ltd. and Lernout & Hauspie Speech Products,
N.V., which includes the Certificate of Designations as an exhibit
thereto.
5.1 - Opinion of Robert Trachtenberg, Esq.
23.1 - Consent of Luboshitz, Kasierer & Co., a Member Firm of Andersen
Worldwide, SC.
24.1 - Power of Attorney (included on page II-4 to II-5).
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
II-2
<PAGE>
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 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 June 8, 1998
- ----------------------- Officer and Director
Todd A. Oseth (principal executive officer)
/s/ Robert J. Behr Chief Financial Officer June 8, 1998
- ----------------------- (principal financial and
Robert J. Behr accounting officer)
/s/ Roger Cloutier Co-Chairman of the Board June 8, 1998
- ----------------------- of Directors
Roger Cloutier
/s/ Jeffrey Rosenschein Director June 8, 1998
- -----------------------
Jeffrey Rosenschein
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/s/ Robert Rosenschein Chief Technology Officer, June 8, 1998
- ----------------------- Languages, and Co-Chairman of
Robert Rosenschein the Board of Directors
/s/ Mark A. Tebbe Director June 8, 1998
- -----------------------
Mark A. Tebbe
/s/ Esther Dyson Director June 8, 1998
- -----------------------
Esther Dyson
Authorized Representative in the United States:
ACCENT WORLDWIDE, INC.
/s/ Todd A. Oseth June 8, 1998
- -----------------------
Todd A. Oseth
By: /s/ Robert J. Behr June 8, 1998
- -----------------------
Robert J. Behr
Attorney-in-fact
EXHIBIT INDEX
4.1 - Preferred Share Purchase Agreement dated June 4, 1998, between Accent
Software International Ltd. and Lernout & Hauspie Speech Products,
N.V., which includes the Certificate of Designations as an exhibit
thereto.
5.1 - Opinion of Robert Trachtenberg, Esq.
23.1 - Consent of Luboshitz, Kasierer & Co., a Member Firm of Andersen
Worldwide, SC.
24.1 - Power of Attorney (included on page II-4 to II-5).
II-5
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EXHIBIT 4.1
PREFERRED STOCK PURCHASE AGREEMENT
PURCHASE AGREEMENT entered into as of the 4th day of June, 1998 by and
between Accent Software International, Ltd, an Israeli company with its
registered offices at 28 Pierre Koenig Street, P.O. Box 53063 Jerusalem,
91530 Israel (the "Company") and Lernout & Hauspie Speech Products N.V., a
Belgian corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is desirous of raising additional capital for the
Company; and
WHEREAS, Purchaser is interested in investing in the Company;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
DEFINITIONS
For purposes of this Agreement the following terms shall have the indicated
respective meanings:
"CLOSING" shall have the meaning provided in Section 1.4.
"COMMON STOCK" means the Company's Ordinary Shares, nominal value NIS
0.01 per share.
"SERIES C PREFERRED SHARES" means the shares of Preferred Stock of the
Company being purchased pursuant to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
ARTICLE 1. PURCHASE AND SALE OF SERIES C PREFERRED SHARES
1.1. AUTHORIZATION OF SERIES C PREFERRED SHARES. Within three (3) business
days after the Closing, the Company shall file a Certificate of Designations,
Preferences and Rights in substantially the form of Exhibit A hereto defining
the rights and preferences of the Series C Preferred Shares as set forth
therein. The Company has authorized, or prior to the Closing will authorize,
the issuance of the Series C Preferred Shares for a total amount of
$4,000,000 to the Purchaser.
1.2. PURCHASE AND SALE OF SECURITIES. Subject to the terms and conditions of
this Agreement and in reliance upon the
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representations and warranties of the Company contained herein, the Purchaser
agrees to purchase from the Company, and the Company agrees to sell 4,000
Series C Preferred Shares with a face amount of $1,000 for each Series C
Preferred Share, representing a total investment of $4,000,000 and 4,444,444
warrants at the terms and conditions described hereinafter:
a) SUBJECT OF THE WARRANTS
Each warrant entitles Purchaser to subscribe to one share of Common
Stock without designation of any class and having the same rights as the
existing shares of Common Stock.
b) EXERCISE PRICE
The exercise price of each warrant will be 0.55USD, provided however
that in the event the Company is delisted within six months from the date of
this Agreement and the stock price of the Common Stock of the Company is
lower than 0.55USD, the exercise price shall be adjusted to the average
closing price of the Company's common shares for the ten (10) trading days
following to the day of delisting.
c) TERM OF THE WARRANTS
Each warrant shall have a term of five (5) years from the date of
issuance by the Company, which shall occur no later than three (3) months
from the date of this Agreement.
d) COSTS
All costs with respect to the issuance and the conversion of the
warrants will be borne by the Company.
e) SECURITY
The warrants shall be registered and will be inscribed in the register
of warrantholders that is held by the Company at its registered office.
f) PROCEDURE FOR THE EXERCISE OF THE WARRANTS
The request for exercise of the warrants must be notified through
registered letter addressed at the Company's registered office. A warrant
holder who is registered in the register of warrant holders at the date of
exercise of the warrants will automatically be deemed to be the holder of the
Shares that are issued pursuant to the exercise of the warrants. New shares
must be fully paid up.
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g) MERGER OF THE COMPANY
In the event of a merger of the Company with another company through
absorption of the Company by an existing or newly incorporated company, the
subscription rights attached to the warrants that are still outstanding at
the date of the decision of merger as well as the exercise price of the
warrants will be modified in accordance with the exchange ratio applied in
the merger for the shares of the Company.
h) RIGHTS TO DIVIDENDS OF NEW SHARES
With respect to the financial year of exercise of the warrants, the new
shares will benefit from a proportional dividend right as from the date of
exercise of the warrants.
i) NOTIFICATION
Each notification to the warrant holder should be addressed to the address
mentioned in the register of warrant holders. Each notification to the
Company should be addressed to the Company's registered seat. Changes of
address should be notified in accordance with this section.
1.3. PAYMENT OF THE PURCHASE PRICE. The Company acknowledges that the amount
of $250K paid by Purchaser to the Company under the Loan Agreement of May 29,
1998 shall constitute partly payment of the purchase price. The balance of
$3,750,000 shall be paid upon the filing of S-3 registration statement under
the Securities Act covering the registration of the shares of Common Stock to
be allocated to Purchaser upon conversion of the Preferred A Shares.
1.4. CLOSING. The Closing of the purchase and sale of the Preferred C Shares
contemplated by this Agreement (herein the "Closing") shall take place via
the exchange of executed documents by facsimile transmission on the day of
the S-3 registration statement or at such other time, date and place as shall
be mutually agreed by the Purchaser and the Company. At the Closing, the
Company shall deliver to the Purchaser certificates for the number of Series
C Preferred Shares.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that:
2.1. ORGANIZATION AND QUALIFICATION. The Company is duly organized and
validly existing under the laws of the jurisdiction of its incorporation and
has all required corporate power and authority to own its property, to carry
on its business as presently conducted and as it presently intends to conduct
it and to carry out the transactions contemplated hereby. The copies of the
Articles of Association of the Company, as amended to date, which have been
furnished to counsel for the Purchaser
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by the Company are correct and complete. The Company is in good standing in
each jurisdiction where such qualification is required.
2.2 CAPITALIZATION. As of the Closing, the authorized capital stock of the
Company consists of 60,000,000 shares of Common Stock with a nominal value of
0.01 New Israeli Shekels each, of which 27,323,911 shares are validly issued
and outstanding, fully paid and nonassessable and 9,993,750 shares of
Preferred Stock, none of which is issued and outstanding. The Company has
duly authorized and reserved 4,000 shares of Series C Preferred Shares and
will have duly authorized and reserved for issuance upon conversion of the
Series C Preferred Shares and the warrants a total of 13,333,332 shares of
Common Stock, and the shares of Common Stock so reserved, upon conversion,
will be validly issued and outstanding, fully paid and nonassessable. Except
as set forth on schedule 2.2 hereto, there are no (i) outstanding warrants,
options or other rights to purchase or acquire, or preemptive rights with
respect to the issuance or sale of, the capital stock of the Company or any
Subsidiary; (ii) other securities of the Company directly or indirectly
convertible into or exchangeable for shares of capital stock of the Company;
or (iii) restrictions on the transfer of the Company's capital stock.
2.3 AUTHORIZATION OF TRANSACTION; ISSUANCE OF SHARES. All corporate action
on the part of the Company, its officers, directors and shareholders
necessary for the authorization, execution and delivery of this Agreement has
been taken or will be taken prior to the Closing and this Agreement when
executed and delivered by the Company shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with its terms.
The issuance of the Series C Preferred Shares pursuant to the terms of this
Agreement shall be, at the Closing, duly and validly authorized, and no
further approval or authority of the stockholders or the directors of the
Company will be required for the issuance and sale of the Shares as
contemplated by this Agreement. When issued and sold to the Purchaser at the
Closing, the Series C Preferred Shares will be validly issued, and upon the
full payment of the purchase price of $4,000,000, such Series C Preferred
Shares will be fully paid and non-assessable.
2.4 APPROVALS; COMPLIANCE WITH LAWS. The Company is not in violation of
its Articles of Association as of the date hereof. The execution, delivery
and performance of this Agreement and the transactions contemplated hereby
(i) do not require any approval or consent of, or filing with, any
governmental agency or authority in the United States of America or Israel or
otherwise which has not been obtained, or which will not have been obtained
within ten (10) business days of the Closing, and which is not in full force
and effect as of the date such approval or consent is obtained, (ii) will not
conflict with or constitute a breach or
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<PAGE>
violation of the Articles of Association of the Company, and (iii) will not
result in a violation of any law or regulation to which it is subject.
2.5 SUBSIDIARIES. As of the date of this agreement the Company holds a
participation of 84% in Agentsoft, which it intends to sell within nine months
and a participation of 100% in Accent Worldwide and in Accent Software
International (Europe) Ltd. (the last being an inactive shell United Kingdom
corporation with no assets). As of the date of this Agreement, these companies
are the only three subsidiaries of the Company. Notwithstanding the Company's
intention to sell its interest in AgentSoft, there can be no assurance that such
sale will occur or what the conditions of such sale will be.
2.6. FINANCIAL STATEMENTS. The Company has made available to the Purchaser
its audited financial statements for the fiscal year ended December 31, 1997
("Base Balance Sheet") and its unaudited financial statements as of March 31,
1998 (collectively "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the period indicated. The Financial Statements
fairly represent the financial condition and operating results of the Company as
of the dates and for the periods indicated herein, subject to normal yearend
audit adjustments. Except as set forth in the Financial Statements, the Company
has no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to March 31, 1998, and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
2.7 TITLE TO PROPERTIES. The Company has good and marketable title to all of
its real and tangible properties and assets as shown on the Base Balance Sheet,
free and clear of all liens, charges, restrictions or encumbrances except as
disclosed in a schedule hereto. All machinery and equipment included in such
properties which is necessary to the business of the Company is in good
condition and repair, and all leases of real or personal property to which the
Company is a party are fully effective and afford the Company peaceful and
undisturbed possession of the subject matter of the lease. The Company is not
in violation of any zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of owned or leased properties, nor has it received any notice of violation with
which it has not complied.
2.8 TAX RETURNS AND PAYMENTS The Company has filed all tax returns and
reports required by law. These returns and reports are, to the best knowledge of
the Company, true and correct in
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<PAGE>
all material respects. The Company has paid all taxes and other assessments
due.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
material accrued or contingent liability arising out of any transaction or
state of facts existing prior to the date hereof other than (i) as reflected
or reserved against in the Financial Statements, (ii) liabilities not in
excess of $10,000 arising in the ordinary course of its business since the
date of the Financial Statements, and (iii) material liabilities disclosed on
a schedule hereto.
2.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Form 10-Q filed
by the Company on May 14, 1998, its Definitive Proxy Statement on Form 14A
filed by the Company on April 29, 1998, or on a schedule hereto, since the
date of the Base Balance Sheet, there has not been any material:
(a) change in the financial condition, properties, assets,
liabilities, business or operations of the Company which change by itself or
in conjunction with all other such changes, whether or not arising in the
ordinary course of business, has had or will have a material adverse effect
with respect to the Company;
(b) contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others;
(c) mortgage, encumbrance or lien placed on any of the properties of
the Company which remains in existence on the date hereof or at the time of
Closing;
(d) obligation or liability incurred by the Company other than
obligations and liabilities not in excess of $50,000 and obligations and
liabilities incurred in the ordinary course of business;
(e) purchase or sale or other disposition, or agreement or other
arrangement for such purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, assets or business of the
Company;
(g) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock of the
Company, or direct or indirect redemption, purchase or other acquisition by
the Company of its own capital stock;
(h) labor dispute or claim of unfair labor practices involving the
Company; any change in the compensation payable or
-6-
<PAGE>
to become payable by the Company to any of its officers, employees or agents,
other than normal merit increases in accordance with its usual practices, or
bonus payment or arrangement made to or with any of such officers, employees
or agents;
(i) change with respect to the management, supervisory or other key
personnel of the Company;
(j) payment or discharge of a material lien or liability of the
Company which lien was not either shown on the Base Balance Sheet or incurred
in the ordinary course of business thereafter; or
(k) obligation or liability incurred by the Company to any of its
officers, directors or shareholders or loans or advances made by the Company
to any of its officers, directors or shareholders except normal compensation
and expense allowances payable to officers.
2.11 CONTRACTS AND COMMITMENTS. Except as disclosed in the Company's
recent filings with the Securities and Exchange Commission or in a schedule
hereto, the Company is not in default under any contract, obligation or
commitment. The Company is not a party to any contract or arrangement which
has had or will have a material adverse effect on its business or prospects.
2.12 INTELLECTUAL PROPERTY. Set forth on schedule 2.12 hereto is a true and
complete list of all patents, patent applications, trademarks, service marks,
trademark and service mark applications, trade names, and copyrights and a
general description of all trade secrets (all of the foregoing collectively
referred to as "Intellectual Property") presently owned or held by the
Company and any material license of or right to any Intellectual Property.
The Company owns or possesses all of the Intellectual Property reasonably
necessary to the conduct of the business of the Company as presently
conducted or proposed to be conducted. The Company has adopted measures
adequate to protect any Intellectual Property. Copies of all forms of
non-disclosure or confidentiality agreements utilized by the Company to
protect trade secrets have been provided to the Purchaser. To the best of
its knowledge, the business as presently conducted or as proposed to be
conducted does not and will not cause the Company to infringe or violate any
Intellectual Property rights of any other person. The Company has the right
to use, free and clear of claims or rights of others, all trade secrets,
customer lists and manufacturing processes required for or incident to its
products, and it is not using any confidential information or trade secrets
of any former employer of any of its past or present employees.
2.13 COMPLIANCE WITH OTHER INSTRUMENTS. Except as disclosed in the Company's
recent filings with the Securities and Exchange Commission or in Schedule
2.11, the Company is not in default in
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<PAGE>
the performance of any material obligation, agreement or condition contained
in any bond or debenture or any other evidence of indebtedness or any
indenture or loan agreement of the Company which default affords to any
person the unconditional right to accelerate any material indebtedness or
terminate any material right or agreement of the Company. Neither the
execution and delivery of this Agreement, nor the fulfillment of the terms
herein set forth, nor the consummation of the transactions contemplated
hereby, will (i) conflict with or constitute a breach of, default under or
violation of any agreement, indenture, mortgage, deed of trust or other
material instrument or undertaking by which the Company is bound or to which
it or any of its properties are subject, or (ii) result in a violation of any
court decree binding upon the Company, or (iii) result in the creation or
imposition of any material lien, charge or encumbrance upon any property or
assets of the Company.
2.14 LITIGATION. Except for matters described in schedule 2.14 hereto, (i)
there is no litigation pending or, to the knowledge of the Company,
threatened against the Company or any key employee, and (ii) there are no
outstanding court orders, court decrees, or court stipulations to which the
Company is a party which affect this Agreement or the transactions
contemplated hereby, which will or could result in any materially adverse
change in the business, properties, operations, prospects, assets or in the
condition, financial or otherwise, of the Company. The Company has no reason
to believe that any such action, suit, proceeding or investigation may be
brought against the Company or that there is any basis for any such action,
suit, proceeding or investigation.
2.15 PERMITS AND LICENSES; COMPLIANCE WITH LAW. The Company has all
necessary franchises, permits, licenses and other rights and privileges
necessary to permit it to own its properties and to conduct its business as
presently conducted or as proposed to be conducted. The Company is not in
violation of any law, regulation, authorization or order of any public
authority relevant to the ownership of its properties or the carrying on of
its business as presently conducted or as proposed to be conducted.
2.16 BROKERAGE. There are no valid claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
or on behalf of the Company, except for an agreement with AxcessNet Ltd., a
copy of which is annexed hereto as Schedule 2.16 and the Company will
indemnify and hold Purchaser harmless against any liability or expense to
them arising out of such a claim.
2.17 BUSINESS PLAN. The business plan dated May 22, 1998, prepared by the
Company and furnished to Purchaser prior to the date hereof describes all
material aspects of the business of the Company, contains no untrue or
misleading statement of a material
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<PAGE>
fact or any omission to state a fact material to the business of the Company
or necessary to make the statements contained therein not misleading. The
factual information contained therein is correct, the assumptions are
reasonable, and the projections are, to the best knowledge of the Company
reasonably attainable within the periods indicated.
2.18 DISCLOSURE. Neither this Agreement, nor any financial statement,
certificate, list, exhibit, schedule, letter or other written statement
pertaining to the Company, made or delivered to the Purchaser by the Company
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which they were made.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company with respect to
his, her or itself that:
3.1 ACCREDITED INVESTOR; INVESTMENT PURPOSE; LEGENDS. Purchaser is an
"ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
and is purchasing the Series C Preferred Shares Purchaser's own account for
investment only and not with a present view towards the public sale or
distribution thereof or of the Common Stock issuable upon conversion thereof,
except pursuant to sales that are exempt from the registration requirements
of the Securities Act and/or sales registered under the Securities Act.
Purchaser understands that the Company intends to register such Securities as
set forth in this Agreement. Purchaser understands that neither the Series C
Preferred Shares nor the underlying Common Stock may be transferred except
pursuant to a valid registration under the Securities Act or any state
securities laws, or to any affiliate of the Purchaser, or in accordance with
Rule 144 promulgated under the Securities Act. Purchaser further understands
in the absence of a valid registration under the Securities Act or any state
securities laws, or a valid Rule 144 exception, the certificates for such
securities may bear a restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended or the
securities laws of any state of the United States. The securities
represented hereby may not be offered or sold, in the absence of an
effective registration statement for the securities under
applicable securities laws or unless offered, sold or transferred
pursuant to an available exemption from the registration
requirements of those laws.
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<PAGE>
Such legend shall be removed by the Company upon registration of such
securities or upon qualification of such securities for transfer or sale
pursuant to Rule 144.
3.2 RELIANCE ON EXEMPTIONS. Purchaser understands that the Series C
Preferred Shares are being offered and sold to Purchaser in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the availability of such exemptions and
the eligibility of Purchaser to acquire the Series C Preferred Shares.
3.3 INFORMATION. Purchaser and its counsel have had the opportunity to
review the Company's recent Securities and Exchange Commission filings,
including, but not limited to, its Form 10-K filed on March 31, 1998, and
Form 10-Q filed on May 14, 1998. Purchaser and its counsel have been
afforded the opportunity to ask questions of the Company and have received
what Purchaser believes to be satisfactory answers to any such inquiries.
3.4 GOVERNMENTAL REVIEW. Purchaser understands that no United States
federal or state or Israeli agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Series C Preferred Shares or the underlying Common Stock.
3.5 AUTHORIZATION. Purchaser has the power and authority to enter into
this Agreement and to perform all of its, his or her obligations hereunder.
3.6 BROKERAGE. There are no valid claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based upon any arrangement or agreement made
by or on behalf of the Purchaser and the Purchaser agrees to indemnify and
hold harmless the Company against any liability or expense to it arising out
of such a claim to the extent that such claim arises out of actions or
alleged actions of Purchaser.
3.7 RESTRICTIONS ON TRADING. As a result of the receipt of the information
being required in sections 5.4 and 5.5, Purchaser acknowledges and agrees
that it shall be subject to the applicable rules and regulations of the
United States Securities and Exchange Commission, and any and all other rules
and regulations of any other authority governing the permissible trading in
securities while in possession of material, non-public information.
ARTICLE 4. CONDITIONS OF PURCHASER'S OBLIGATIONS
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The obligation of Purchaser to purchase and pay for the Shares of the Company
subscribed for by Purchaser at the Closing shall be subject to the satisfaction
of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained herein or in the exhibits annexed hereto or otherwise
made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall be true and correct as of the Closing
with the same effect as though made on and as of that date.
4.2 PERFORMANCE; NO BREACH. The Company shall have performed and complied
with all of the agreements and conditions contained herein and required to be
performed or complied with by the Company at or prior to the Closing and
shall not be in breach of any provision of this Agreement.
4.3 CONSENTS AND WAIVERS. All necessary consents, waivers, approvals,
amendments and other action on the part of any person necessary to have been
obtained or effected in order to carry out the transactions contemplated by
this Agreement shall have been duly obtained or effected and shall be in full
force and effect and adequate within ten (10) business days of the Closing.
4.4 CORPORATE PROCEEDINGS. All corporate and other proceedings to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to Purchaser and
its counsel, and Purchaser and its counsel shall have received all certified
or other copies of documents which they may have reasonably requested.
4.5 LEGAL ACTION.
(a) There shall not have been instituted or threatened any material
legal proceeding seeking to prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain damages from any Purchaser with
respect thereto.
(b) None of the parties hereto shall be prohibited by any order, writ,
injunction or decree of any governmental body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no action
or proceeding shall then be pending which questions the validity of this
Agreement, any of the transactions contemplated hereby or any action which
has been taken by any of the parties in connection herewith or in connection
with any of the transactions contemplated hereby.
4.6 COMPLIANCE CERTIFICATE. Purchaser shall have received at the Closing a
certificate signed by the President and Treasurer of the Company certifying
that the conditions specified in Sections 4.1 through 4.5 have been fulfilled.
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ARTICLE 5. AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants with Purchaser that:
5.1 CORPORATE EXISTENCE. The Company will maintain its corporate existence
and comply with all applicable laws and regulations of Israel, any political
subdivision thereof and of any governmental authority.
5.2 AMENDMENT OF ARTICLES OF ASSOCIATION. Subsequent to the Purchaser's
representative taking a seat on the Company's Board of Directors pursuant to
the terms of this Agreement, the Company will propose an amendment to its
Articles of Association at its next duly convened shareholders meeting
subsequent to the Annual General and Extraordinary Shareholders Meeting to be
held on May 28, 1988, in order to reflect the right of Purchaser to nominate
a list of candidates for one director's seat as long as Purchaser holds all
or part of the Series C Preferred Shares or at least 25% of the shares of
Common Stock resulting from the conversion of the Series C Preferred Shares.
5.3 BOOKS OF ACCOUNT AND RESERVES. The Company will:
(a) maintain a system of accounting established and administered in
accordance with generally accepted accounting principles consistently
applied, and will set aside on its books all such proper reserves as shall be
required by generally accepted accounting principles consistently applied;
(b) employ certified public accountants reasonably acceptable to
Purchaser who are "independent" within the meaning of the accounting
regulations of the Securities and Exchange Commission; and
(c) have annual audits and tax returns prepared by such independent
public accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as
will enable them to give reports and opinions with respect to the financial
statements of the Company.
5.4 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The Company will
deliver to Purchaser:
(a) within five days of their availability, but in any event within
[30] days after the close of each month, balance sheets of the Company as of
the end of each such month, together with the related statement of
operations, retained earnings and changes in financial position for such
month, setting forth the budgeted figures for such month prepared and
submitted in connection with the Company's annual plan as required under
Section 5.4 hereof and in comparative form figures for the
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corresponding month of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of the Company, subject to year-end
adjustments;
(b) within five days of their availability, but in any event within 90
days after the end of each fiscal year, a consolidated balance sheet of the
Company and its subsidiaries, as of the end of such fiscal year, together
with the related statements of consolidated operations, retained earnings and
changes in financial position for such fiscal year, setting forth in
comparative form figures for the previous fiscal year, all in reasonable
detail and duly certified by independent public accountants acceptable to
Purchaser, which accountants shall have given the Company an opinion,
unqualified as to the scope of the audit due to any restrictions placed upon
the auditors by the Company, regarding such statements; and
(c) with reasonable promptness, such other financial data related to
the business, affairs and financial condition of the Company and any
Subsidiaries as is available to the Company and as from time to time
Purchaser may reasonably request.
5.5 PREPARATION AND APPROVAL OF BUDGETS. At least one month prior to the
beginning of each fiscal year of the Company, the Company shall prepare and
submit to its Board of Directors for discussion purposes a first draft of an
annual plan for such year (which shall include monthly capital and operating
expense budgets, cash flow statements and profit and loss projections
itemized in such detail as Purchaser may reasonably request). The final
draft of such annual plan shall be presented to the Board of Directors for
approval no later than one month after the beginning of each fiscal year of
the Company. Each annual plan shall be modified as often as is necessary to
reflect changes required as a result of operating results and other events
that occur, or may be reasonably expected to occur, during the year covered
by the annual plan, and copies of each modification shall be submitted to the
Board of Directors. Copies of each of the documents referred to in this
Section shall be provided to Purchaser, or its representative, at the time of
submission to the Board of Directors if Purchaser does not then have a
designated representative on the Board of Directors.
5.6 PAYMENT OF TAXES AND MAINTENANCE OF PROPERTIES. The Company will:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or upon any of its
property, real, personal or mixed, or upon any part thereof, as well as all
material claims of any kind (including claims for labor, material and
supplies) which, if unpaid, might by law become a lien or charge upon its
property; provided, however, that the Company shall not be required to pay
any such tax, assessment, charge, levy or claim if the amount,
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applicability or validity thereof shall currently be contested in good faith
by appropriate proceedings and if the Company, as the case may be, shall have
set aside on its books reserves (segregated to the extent required by
generally accepted accounting principles) deemed adequate by it with respect
thereto; and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to time
make, or cause to be made, all repairs and renewals and replacements which in
the opinion of the Company are necessary and proper so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times.
5.7 INSURANCE. The Company will maintain workers' compensation insurance
and insurance with respect to its business and properties, including without
limitation insurance against loss, damage, fire, theft, public liability and
other risks, of the kinds and in the amounts that are adequate based on the
size of the Company and on the business in which the Company is engaged. All
insurance shall be effected and maintained in force under policies issued by
reputable insurers.
5.8 ADVERSE CHANGE; LITIGATION. The Company will promptly advise Purchaser
of any event which represents a material adverse change in the condition or
business, financial or otherwise, of the Company, and of each suit or
proceeding commenced or threatened against the Company which, if adversely
determined, would result in such a material adverse change. The Company will
also promptly advise Purchaser of any facts which cast any doubt upon the
accuracy or completeness of the representations and warranties contained
herein.
5.9 RIGHTS AND FRANCHISES. The Company will keep in full force and effect
all patents, copyrights, trademarks, service marks, tradenames and all
franchises, rights and licenses, with respect to the foregoing or otherwise,
now held by it or any of them and that are useful in or valuable to the
business of Company.
5.10 PROPRIETARY INFORMATION AGREEMENTS. The Company will require all
persons now or hereafter employed by the Company who will be in a position to
create information or property rights which may be of value to the Company or
who will have access to confidential or proprietary information to enter into
agreements in form and substance satisfactory to Purchaser requiring the
assignment by such employees to the Company of all inventions and
discoveries, including but not limited to patents, service marks, trademarks,
copyrights or trade names, and requiring that such employees maintain in
confidence all proprietary information of the Company and return to the
Company, upon termination of
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employment or engagement, all written proprietary information of the Company
then in their possession or under their control.
5.11 USE OF PROCEEDS. The Company will apply the proceeds of the sale of
the Series C Preferred Shares to pay back 50% of the outstanding loan or
(exact amount) on the date of this Agreement to the bank Leumi Leyisrael or
loan representative bank within thirty (30) days from the date of this
Agreement. The balance of the purchase price will be entirely applied to
increase its working capital. Furthermore the Company shall undertake to have
the remaining 50% of the outstanding loan converted into equity within ninety
(90) days from the date of this Agreement.
ARTICLE 6. NEGATIVE COVENANTS OF THE COMPANY
For the purpose of this article 6, the Company shall mean Accent Software
International, LTD with its three current subsidiaries as set forth in
Section 2.5.
The Company hereby covenants with Purchaser that without the consent of
Purchaser:
6.1 AMENDMENT OF ARTICLES OF ASSOCIATION. The Company will not make any
amendment to its Articles of Association which shall adversely affect the
rights of Purchaser.
6.2 LOANS AND INVESTMENTS. The Company will not purchase or otherwise
acquire, or hold any stock or obligations of, or make or permit to exist any
loans or advances to, or investments in, any person or organization, except
that the Company may (a) invest in direct obligations of the United States of
America, or in tax-exempt municipal bonds, (b) purchase commercial paper
rated prime by any national rating organization, (c) extend normal credit in
the ordinary course of business in connection with the sale of its products
or services, (d) make loans or advances to its employees in amounts less than
$15,000, and (e) make loans to any subsidiary in which it owns more than 80%
of the equity or voting stock.
6.3 LIMITATIONS ON CONSOLIDATIONS, MERGERS AND SALE OF ASSETS. The Company
will not consolidate with, or merge into or have merged into it, or acquire
the stock, business or assets of, any other corporation or association, or
sell, license, lease or otherwise dispose of any of its assets except (a)
sales of assets or products for fair value in the ordinary course of
business, (b) the sale of its ownership interest in AgentSoft as contemplated
in section 2.5, above, or (c) the acquisition by the Company of substantially
all of the assets or stock of another corporation or the merger of another
corporation into the Company, provided that such acquisition or merger is
approved by the Purchaser.
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6.4 LIMITATION ON LIABILITY FOR OBLIGATIONS OF OTHERS. The Company will
not assume, guarantee, endorse or otherwise become liable for the obligations
of any person or organization, except (a) the endorsement of negotiable
instruments for deposit or collection and similar transactions in the normal
course of business and (b) obligations assumed by the Company in connection
with an acquisition or merger permitted by Section 6.3, or (c) the
assumption, guarantee or endorsement by the Company of obligations of any of
its subsidiaries and the assumption, guarantee or endorsement by any
Subsidiary of obligations of the Company or any other Subsidiary.
6.5 LIMITATION OF INDEBTEDNESS. The Company will not become indebted or
create, incur, assume, or be liable in any manner in respect of, or suffer to
exist, any indebtedness (whether for money borrowed or for the purchase price
of any asset or otherwise) except:
(a) Current liabilities and accounts payable (other than Indebtedness
for Borrowed Money) incurred in the ordinary course of business;
(b) Indebtedness secured by, or incurred in connection with, purchases
or leases of equipment or other personal property acquired or leased in
accordance with the limitations contained in Section 6.7;
(c) Indebtedness of any Subsidiary to the Company or any other
Subsidiary or Indebtedness of the Company to any Subsidiary;
6.6 LIMITATION ON LIENS. The Company will not create, incur, assume or
suffer to be created, incurred or assumed, or to exist, any pledge, mortgage,
lien, charge, security interest or encumbrance of any kind upon any of its
properties or assets, or own or acquire or agree to acquire any property of
any character subject to or upon any mortgage, conditional sale agreement or
other title retention agreement, or sell, assign, pledge or otherwise dispose
of any accounts or notes receivable or contract rights except (i) liens or
security interests with respect to presently outstanding indebtedness for
borrowed money shown in the Financial Statements excluding, however, any
renewal or refunding of such indebtedness, where such exclusion shall not
apply to a renewal of the indebtedness incurred as a result of the transfer
of the Government-guaranteed loan from Bank Leumi Ltd. to another bank as
part of the Company's plan to exchange such debt for the issuance and sale of
its Common Stock, and (ii) liens for taxes, assessments, governmental
charges, levies or claims suffered by the Company or any Subsidiary and
described in Section 5.5 hereof to the extent that payment thereof is not
required by such Section.
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6.7 AUTHORITY FOR FUTURE ISSUANCE OF STOCK.
(a) The Company shall not offer any class or classes or series of stock
or any rights, options, warrants or convertible debt that provide any right
to subscribe for purchase or otherwise acquire such stock ranking prior to,
or on a parity with the Series C Preferred Shares, either as to dividends or
upon liquidation without the prior written consent of Purchaser.
(b) Except for the 1998 Non-Employee Share Option Plan, the Company
shall not establish any stock option, stock bonus, stock purchase or other
employee benefit plan contemplating the issuance of the Company's securities
to employees, reserve securities for issuance to employees pursuant to any
such plan or authorize the issuance of the Company's securities to employees
without the Purchaser's approval. At such time as a plan is established and
approved in accordance with the preceding sentence, the Company may issue
securities to its employees in accordance with the terms of such plan without
obtaining further approval.
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ARTICLE 7 REGISTRATION
7.1 DEFINITIONS.
For purposes of this Section 7, the following terms shall have the following
meanings :
(a) The terms "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the United States Securities Act of 1933, as amended
("Securities Act"), and the declaration or ordering of effectiveness of such
registration statement by the SEC.
(b) Registrable Securities. The term "Registrable Securities" means: (1)
all Shares issued or issuable under this Agreement; and (2) all Shares issuable
upon the conversion or exercise of any security which is issued as a dividend or
other distribution with respect to, or in exchange for, in replacement of or in
connection with a share split of, all such Shares described in clause (1) of
this subsection (b), excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which rights under this Section 7 are not
assigned in accordance with this Agreement or sold to the public or sold
pursuant to Rule 144 promulgated under the Securities Act.
(c) Registrable Securities Then Outstanding. The number of shares of
"Registrable Securities then Outstanding" shall mean the number of shares of
Shares which are Registrable Securities and (1) are then issued and
outstanding, or (2) are then issuable pursuant to the exercise or conversion
of then outstanding and then exercisable convertible securities.
7.2 REGISTRATION.
The Company covenants that it shall file a registration statement under the
Securities Act covering the registration of all Registrable Securities and
effect as soon as practicable the registration under the Securities Act of
all Registrable Securities.
7.3 PIGGYBACK REGISTRATIONS.
The Company shall notify the Purchaser in writing at least thirty (30) days
prior to filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company
(including, but not limited to, registration statement relating to secondary
offerings of securities of the Company, but excluding registration statement
relating to any employee benefit plan or a corporate reorganization) and will
afford the Purchaser an opportunity to include in such registration statement
all or any part of the Registrable Securities then held by the Purchaser to
the extent
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and in the same degree as other existing Shareholders are allowed to do so.
If the Purchaser desires to include in any such registration statement all or
any part of the Registrable Securities held by the Purchaser, the Purchaser
shall, within twenty (20) days after receipt of the above-described notice
from the Company, so notify the company in writing, and in such notice shall
inform the Company of the number of Registrable Securities the Purchaser
wishes to include in such registration statement. If the Purchaser decides
not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, the Purchaser shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statement as may be filed
by the Company with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
7.4 UNDERWRITTEN OFFERINGS.
If a registration statement under which the Company gives notice under
Section 7.3 is for an underwritten offering, then the Company shall so notify
the Purchaser. In such event, the right of any of the Purchaser's Registrable
Securities to be included in a registration pursuant to this Section 6 shall
be conditioned upon the Purchaser's participation in such underwriting and
the inclusion of the Purchaser's Registrable Securities in the underwriting
to the extent provided herein. If the Purchaser is entitled to distribute
its Registrable Securities through such underwriting, the Purchaser shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriter(s) selected for such underwriting. Notwithstanding
any other provision of this Agreement, if the managing underwriter determines
in good faith that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may exclude
shares (including Registrable Securities) from the registration and the
underwriting, and the number of shares that may be included in the
registration and the underwriting shall be allocated, first, to the Company,
and second, to the Purchaser, and the other selling shareholders each in
proportion to their number of Shares they respectively propose to include in
the Offering, provide however, that the right of the underwriters to exclude
shares (including Registrable Securities) from the registration and
underwriting as described above shall be restricted so that the number of
Registrable Securities included in any such registration is not reduced below
twenty five (25%) of the Shares initially proposed to be included in the
registration. If the Purchaser disapproves of the terms of any such
underwriting, the Purchaser may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
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ARTICLE 8 MISCELLANEOUS
8.1 TERMINATION.
(a) This Agreement may be terminated (i) by mutual consent of the
parties, (ii) by either side if there has been a material misrepresentation,
breach of warranty or breach of covenant by the other side in its
representations, warranties and covenants set forth herein, (ii) by Purchaser
if the conditions stated in Article 4 have not been satisfied at or prior to
payment of the second tranche of the purchase price.
(b) If this Agreement shall be terminated in accordance with paragraph
(a), all obligations of the parties hereunder shall terminate without
liability of any party to the others except as provided in Section 8.5. In
the event that this Agreement is so terminated, each party will return all
papers, documents, financial statements and other data furnished to it by or
with respect to each other party to such other party.
8.2 SURVIVAL OF REPRESENTATIONS AND COVENANTS. All representations,
warranties, covenants, agreements and obligations made herein or in any
schedule, exhibit, notice, certificate or other document executed in
connection herewith or delivered by any party to another party incident
hereto shall be deemed to have been relied upon by the other party hereto and
survive the execution and/or delivery thereof, and all statements contained
in any such schedules, exhibit, notice, certificate or other document
delivered by the Company hereunder or in connection herewith shall be deemed
to constitute representations and warranties made by the Company herein as of
the date of this Agreement.
8.3 BREACH; DEFAULT. In the event that there shall be a breach of any
representation, warranty, covenant, agreement or obligation of the Company,
the Subsidiaries after the Closing, which breach shall remain uncured for a
period of 45 days after notice of such breach is given by Purchaser to the
Company, Purchaser shall have the option to designate additional
representatives to the Board of Directors and/or to require the resignation
of non-Purchaser directors so that after such actions, Purchaser's
representatives on the Board of Directors shall constitute a majority.
8.4 NOTICES. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram) addressed as provided below and if either (a) actually delivered at
said address, or (b) in the case of a letter, five business days shall have
elapsed after the same shall have been deposited in the United States mails,
postage prepaid and registered or certified, return receipt requested:
If to the Company, to:
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Todd A. Oseth
President/Chief Executive Officer
Accent Software International Ltd.
2864 South Circle Drive, Suite 340
Colorado Springs, CO 80906
with a copy to:
Robert Trachtenberg
Senior Vice President, Administration & Legal Affairs
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530 Israel
If to Purchaser, to:
Patrick De Schrijver
Senior Vice President Legal
Lernout & Hauspie Speech Products N.V.
Sint- Krispijnstraat 7
8900 Ieper Belgium
and in any case at such other address as the addressee shall have specified
by written notice. All periods of notice shall be measured from the date of
delivery thereof.
8.5 COSTS AND EXPENSES. The Company agrees to pay the reasonable
out-of-pocket costs and expenses of Purchaser in connection with the
negotiation, execution, performance and enforcement of this Agreement and any
amendments, waivers or consents with respect thereto, including without
limitation the reasonable fees and out-of-pocket expenses of counsel for
Purchaser, whether or not the Closing occurs. Purchaser represents that it
expects any such costs and expenses to be minimal.
8.6 CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
not disclose or divulge any confidential, proprietary or secret information
which it may obtain from the Company in connection with the transactions
contemplated herein, or pursuant to inspection rights granted hereunder
unless such information is or hereafter becomes public information.
8.7 ASSIGNMENT; RIGHTS OF SUCCESSORS AND ASSIGNS. This Agreement shall be
assignable by Purchaser. All representations, warranties, covenants,
agreements and obligations hereunder made by or on behalf of the parties
hereto shall be binding upon and shall inure to the benefit of the respective
successors and assigns of the parties hereto, whether so expressed or not.
Each owner of any Shares, whether becoming such by transfer, assignment,
operation of law or otherwise, shall have all of the
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rights of Purchaser hereunder, and shall be entitled to exercise such rights
in full, without the consent of other owners, and no transfer shall divest
any owners of any rights hereunder unless all such Purchaser's shares are
transferred or assigned.
8.8 ENTIRE AGREEMENT. This Agreement (including all exhibits or schedules
appended to this Agreement and all documents delivered pursuant to or
referred to in this Agreement, all of which are hereby incorporated herein by
reference) constitutes the entire agreement between the parties , and all
promises, representations, understandings, warranties and agreements with
reference to the subject matter hereof and inducements to the making of this
Agreement relied upon by any party hereto, have been expressed herein or in
the documents incorporated herein by reference. This Agreement shall
supersede any and all prior agreements, included the Loan Agreement dated May
29, 1998 between both parties, understandings, promises and representations
made by one party to the other concerning the subject matter herein and the
terms and conditions applicable thereto.
8.9 AMENDMENTS AND WAIVERS. This Agreement, or any term, covenant,
agreement, condition or provision hereof, may be amended, terminated or
waived (either generally or in a particular instance and either retroactively
or prospectively), upon written consent of the Company and Purchaser;
provided however, that no waiver or consent on any one instance shall be
deemed to be or be construed as a further or continuing waiver of any such
term or condition unless it expressly so provides.
8.10 GOVERNING LAW; SEVERABILITY. This Agreement shall be deemed a contract
made under the laws of Israel and, together with the rights and obligations
of the parties hereunder, shall be construed under and governed by the laws
of Israel. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision hereof.
8.11 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed in original but all of which together shall
constitute one and the same instrument, subject to the provisions of Section
8.8 hereof.
8.12 EFFECT OF HEADINGS. Any heading herein contained is for convenience of
reference only and shall not affect the meaning of
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construction of any of the provisions hereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the parties hereto or their duly authorized representatives,
effective as of the date first above written.
COMPANY
Accent Software International LTD
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
PURCHASER
Lernout & Hauspie Speech Products N.V.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES C PREFERRED SHARES
The Series C Preferred Shares of the Company shall have the preferences,
voting rights, qualifications, and special or relative rights or privileges
as set forth in this Certificate.
SECTION 1. DEFINITIONS.
For the purposes of this Certificate, the following definitions shall apply:
"Additional Shares of Common Stock" means all shares of Common Stock
issued by the Company after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(A) upon conversion of Series C Preferred Shares;
(B) as a dividend or distribution on Series C Preferred Shares;
(C) by way of a dividend or other distribution on shares of Common
Stock excluded from the definition of Additional Shares of Common Stock by
the foregoing clauses (A), (B) or this clause (C); or
(D) pursuant to an employee stock option plan;
"Board of Directors" shall mean the Board of Directors of this Company.
"Common Stock" shall mean the Company's Ordinary Shares, nominal value
New Israel Shekel 0.01 per share.
"Company" shall mean Accent Software International Ltd., an Israeli
company.
"Conversion Price" means the amount set forth in Section 4(a).
"Convertible Securities" means any evidences of indebtedness, shares
(other than Common Stock or the Series C Preferred Shares) or other
securities convertible into or exchangeable for Common Stock.
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"Junior Shares" means all shares of Common Stock of the Company or
any other stock ranking junior to the Series C Preferred Shares in dividends
or liquidation rights.
"L&H" means Lernout & Hauspie Speech Products N.V., a Belgian Company
"Options" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Common Stock or Convertible Securities.
"Original Issue Date" means the date on which a share of Series C
Preferred Shares was first issued.
"Subsidiary" means any Company at least 50% of whose outstanding
voting shares shall at the time be owned directly or indirectly by the
Company or by one or more subsidiaries, or by the Company and one or more
subsidiaries.
SECTION 2. DIVIDEND RIGHTS.
The holders of the Series C Preferred Shares shall be entitled to receive
dividends, when as and if declared by the Board of Directors out of any funds
legally available therefor, equal in amount per share to the dividends paid
on the Common Stock. Unless dividends have been paid on the Series C
Preferred Shares, dividends may not be paid or declared and set aside for
payment and other distributions may not be made upon the Common Stock or on
any other stock.
Dividends on the Series C Preferred Shares shall be cumulative; i.e., such
dividends shall be deemed to accrue from day to day whether or not earned or
declared.
SECTION 3. LIQUIDATION PREFERENCE.
EXISTING PLEDGE. The Company's assets are currently pledged in favor of the
Israeli government in return for a bank loan guaranteed by the Israeli
government (hereafter the Government Loan). The Company represents that it
entered into the final stages of negotiations with the government and a bank
to convert the Government Loan into Common Stock, whereby all preferences
granted to the Israeli government would be cancelled upon the sale of the
Common Stock so issued and the application of the proceeds to the redemption
of the Government Loan. Following the completion of such transaction, the
Series C Preferred Shares shall rank prior to all other shares of the
Company.
The Company will not create, incur, assume or suffer to be created, incurred
or assumed, or to exist, any pledge, mortgage, lien, charge, security
interest or encumbrance of any kind upon any of its properties or assets or
own or acquire or agree to
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acquire any property of any character subject to or upon any mortgage,
conditional sale agreement or other retention agreement, ranking equal or
prior to the preference rights set forth hereunder without the prior approval
of L&H.
PREFERENCE. Subject to and to the extent that the Government Loan has not
been redeemed and the relevant lien removed from the Company's assets, in the
event of any liquidation, dissolution or winding up of the affairs of the
Company, voluntarily or involuntarily, the holders of each share of Series C
Preferred Shares, prior to any distribution to the holders of Common Shares,
shall be entitled to receive a preferential amount equal to the face value
per share at the moment of subscription, adjusted to reflect any stock split,
stock dividend, combination, recapitalization or reorganization (the "Series C
Preferred Shares Liquidation Preference"), plus an amount equal to all
dividends declared and unpaid on the Preferred Shares to the date of final
distribution. After payment or setting apart for payment of the Series C
Preferred Shares Liquidation Preference, the remaining assets of the
Company, if any, shall be distributed among the holders of the Common Shares.
If upon such liquidation, dissolution or winding up, the assets of the
Company are insufficient to provide for the payment of the Series C
Preferred Shares Liquidation Preference for each share of Series C Preferred
Shares outstanding, such assets as are available shall be paid out pro rata
among the shares of Series C Preferred Shares.
MERGER OR ACQUISITION. A merger or consolidation of the Company with or into
another corporation or entity (whether or not the Company is the surviving
entity if, after the merger or consolidation, more than 50% of the voting
stock of the surviving corporation is owned by persons who were not holders
of voting stock of the Company prior to the merger or consolidation), or
the sale of all or substantially all the assets of the Company, shall be
deemed to be a liquidation, dissolution or winding up the Company for
purposes of this Section 3 if the holders of at least 75% of the then
outstanding shares of Series C Preferred Shares, so elect by giving written
notice thereof to the Company at least three days before the effective date
of such event. If no such notice is given, the provisions of section 4(b)
shall apply. The amount deemed distributed to the holders of Series C
Preferred Shares upon any such merger or consolidation shall be the cash or
the value of the property, rights or other securities received in the merger
or consolidation which shall be determined in good faith by the Board of
Directors of the Company.
SECTION 4. CONVERSION OF SERIES C PREFERRED SHARES.
The holders of the Series C Preferred Shares shall have conversion
rights in accordance with the following provisions:
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(a) RIGHT TO CONVERT AND CONVERSION PRICE. Each share of Series C
Preferred Shares shall be convertible, at the option of the holder thereof,
at any time after the date of issuance of such share, at the office of the
Company or any transfer agent for the Series C Preferred Shares. The number
of shares of Common Stock to be issued upon conversion of one Series C
Preferred Share shall be obtained by dividing the principal amount ($1,000)
of any such Preferred Share by the average closing price of the Company's
Common Stock on the Nasdaq Small Cap Market for the ten (10) trading days
prior to the closing, increased with a premium of ten percent (10%) or
0.45USD.
(b) EFFECT OF ACQUISITION ON SERIES C PREFERRED SHARES. In the event
of a merger or consolidation of the Company with or into another Company or
entity or a sale by the Company of all or substantially all of its assets,
and in the case of successive such mergers, consolidations or sales, subject
to the provisions of section 4, the shares of Series C Preferred Shares then
outstanding shall be convertible into the number and kind of securities of
the acquiring or surviving corporation (or such other entity whose securities
are delivered in exchange for the Common Stock of the Company) to which the
holders of the Series C Preferred Shares would have been entitled if such
holders had converted their Series C Preferred Shares into Common Stock or
the common stock of any successor to the Company upon the consummation of
such sale, merger or consolidation; and, in such case, appropriate adjustment
(as determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 with respect to the rights
and interest thereafter of the holders of the Series C Preferred Shares, to
the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation
to any shares of stock or other property thereafter deliverable upon the
conversion of the Series C Preferred Shares.
(c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series C Preferred Shares. In lieu of any
fractional share to which a holder of Series C Preferred Shares would
otherwise be entitled, the Company shall pay cash equal to such fraction
multiplied by the then effective Conversion Price. Before any holder of
Series C Preferred Shares shall be entitled to convert the same into full
shares of Common Stock, the holder shall surrender the certificate or
certificates therefor, duly endorsed for transfer, at the office of the
Company or of any transfer agent for the Series C Preferred Shares, and shall
give written notice to the Company at such office that he elects to convert
the same. The Company shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series C Preferred Shares a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid and a check payable to the holder in the
amount of any
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cash amounts payable in order to avoid a conversion into fractional shares of
Common Stock. Except as provided in paragraph (b), such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series C Preferred Shares to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(d) NO IMPAIRMENT. The Company will not, by amendment of its Articles
of Association or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series C Preferred Shares against impairment.
(f) NOTICES OF RECORD DATE, ETC. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class of its stock any additional shares of stock of any class;
(iii) to subdivide or combine its outstanding Common Stock;
(iv) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(v) to merge or consolidate with or into any other Company, or
sell, lease or convey all or substantially all its property or business, or
to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall send to the
holders of the Series C Preferred Shares:
(1) at least 20 days' prior written notice of the
date on which a record shall be taken for such
dividend, distribution, subscription rights,
subdivision or combination (and specifying the date
on which the holders of Common Stock shall be
entitled thereto) or for
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determining rights to vote in respect of the matters
referred to in clauses (iv) and (v) above; and
(2) in the case of the matters referred to in
clauses (iv) and (v) above, at least 20 days' prior
written notice of the date when the same shall take
place (specifying the date on which the holders of
Common Stock shall be entitled to exchange their
Common Stock for securities or other property
deliverable upon the occurrence of such event).
Each such written notice shall be given by certified mail, postage
prepaid, addressed to the holders of Series C Preferred Shares at the address
for each such holder as shown on the books of the Company.
(g) RESERVATION OF COMMON STOCK. The Company shall, at all times
when the Series C Preferred Shares shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series C Preferred Shares, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series C Preferred
Shares. Before taking any action which would cause an adjustment reducing the
Conversion Price below the then nominal value of the shares of Common Stock
issuable upon conversion of the Series C Preferred Shares, the Company will
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and non assessable shares of such Common Stock at such adjusted Conversion
Price.
(h) CANCELLATION OF SERIES C PREFERRED SHARES. All shares of Series C
Preferred Shares which shall have been surrendered for conversion as herein
provided shall no longer be deemed to be outstanding and all rights with
respect to such shares, including the rights, if any, to receive notices and
to vote, shall forthwith cease and terminate except only the right of the
holders thereof to receive shares of Common Stock in exchange therefor and
payment of any accrued and unpaid dividends thereon. Any shares of Series C
Preferred Shares so converted shall be retired and cancelled, and shall not
be reissued, and the Company may from time to time take such appropriate
action as may be necessary to reduce the authorized Series C Preferred
Shares accordingly.
(i) RESTRICTIONS ON THE COMMON STOCK. The Common Stock issuable upon
conversion of Series C Preferred Shares may not be sold or transferred unless
(a) they first shall have been registered under the Securities Act or
applicable state securities laws, (ii) the Company shall have been furnished
with an appropriate opinion of legal counsel to the effect that such
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sale or transfer is exempt from the registration requirements of the
Securities Act or (iii) they are sold pursuant to Rule 144 under the Act.
Except as otherwise provided in the Securities Purchase Agreement, each
certificate for Common Stock issuable upon conversion of Series C Preferred
Shares that have not been so registered and that have not been sold pursuant
to an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL IN
FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
Upon the request of a holder of a certificate representing any Common Stock
issuable upon conversion of this Series C Preferred Shares, the Company shall
remove the foregoing legend from the certificate or issue to such holder a
new certificate therefor free of any transfer legend, if (a) with such
request, the Company shall have received either (A) an appropriate opinion of
counsel to the effect that any such legend may be removed from such
certificate, or (B) satisfactory representations from the holder that the
holder is eligible to sell such security pursuant to Rule 144 or (ii) a
registration statement under the Securities Act covering such securities is
in effect. Nothing in this Certificate of Designation shall (i) limit the
Company's obligation under the Share Purchase Agreement, or (ii) affect in
any way the holder's obligations to comply with applicable securities laws
upon the resale of the securities referred to herein.
SECTION 5. VOTING RIGHTS OF SERIES C PREFERRED SHARES.
(a) GENERAL. Except as expressly set forth in this Section 5 and
except as otherwise required by law, each share of Series C Preferred Shares
issued and outstanding shall have the right to vote on all matters the number
of votes equal at any time to the number of shares of Common Stock into which
the Series C Preferred Shares would be convertible at the then applicable
Conversion Price, and the holders of the Series C Preferred Shares shall vote
with the Common Stock as a single class.
(b) ELECTION OF DIRECTORS. At the moment of executing this Agreement,
the authorized number of directors on the Board of Directors of the Company
is be nine (9). The holders of the Series C Preferred Shares, voting as a
separate class, shall be entitled to elect one (1) director and the holders
of Common Stock, voting as a separate class, shall be entitled to elect eight
(8) directors. Vacancies in the director positions elected by any class may
be filled only by the holders of capital stock of the class originally
electing the director whose position is vacant. The Company shall propose an
amendment to its Articles of Association at its next duly convened
shareholders meeting
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subsequent to the Annual General and Extraordinary Shareholders Meeting to be
held on May 28, 1988, in order to reflect the right of holders of the Series
C Preferred Shares to nominate a list of candidates for one director's seat
as long as those holders hold all or part of the Series C Preferred Shares or
at least 25% of the shares of Common Stock resulting from the conversion of
the Series C Preferred Shares.
(c) MATTERS AFFECTING SERIES C PREFERRED SHARES. So long as any Series
C Preferred Shares shall be outstanding, the Company shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series C Preferred Shares, take
any of the following actions:
(i) amend or repeal any provision of, or add any provision to,
the Company's Articles of Association if such action would alter or change
the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, such Series C Preferred Shares; or
(ii) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series C Preferred Shares; or
(iii) reclassify any Junior Shares into shares having any
preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series C Preferred Shares.
(d) SPECIAL VOTE FOR LIQUIDATIONS. The Company may not liquidate,
dissolve or wind up if the assets of the Company then available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series C Preferred Shares the full amount to which they shall be
entitled upon such liquidation, dissolution or winding up under section 3(a),
without the prior written approval of the holders of a majority of the then
outstanding shares of Series C Preferred Shares. In the event such approval
has been obtained, and the amount distributed to holders of Series C
Preferred Shares shall be less than the full amount provided under section
3(a), the holders of Series C Preferred Shares shall share ratably in any
distribution of assets according to the respective amounts which would be
payable with respect to the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
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The Company shall duly convene its Board of Directors who shall vote in favor
of all provisions set out here above.
IN WITNESS WHEREOF, THIS CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
IS EXECUTED ON BEHALF OF THE COMPANY THIS 4TH DAY OF JUNE, 1998.
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
------------------------------
Name: Todd Oseth
Title: President/Chief Executive Officer
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[LETTERHEAD]
June 5, 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 June 8, 1998 (the
"Registration Statement") in connection with the registration of under the
Securities Act of 1933, as amended, of up to 13,333,333 Ordinary Shares (the
"Shares"). All of the Shares are to be issued by the Company upon the (a)
conversion of Preferred Shares; and (b) exercise of warrants; both or which
were issued by the Company in connection with an investment by Lernout &
Hauspie Speech Products, N.V., and once issued 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 both the conversion of the preferred shares and the exercise of the
warrants, 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,
Robert Trachtenberg
<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
June 8, 1998
