<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
_________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended June 30, 1999.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from __________ to
__________.
Commission file number: 0-26394
ACCENT SOFTWARE INTERNATIONAL LTD.
________________________________________________________________
(Exact Name of Registrant in its Charter)
Israel N/A
____________________________________ ______________________________________
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
C/O Yigal Arnon & Co., 22 Rivlin Street, Jerusalem 91000, Israel
011-972-2-623-9200
___________________________________________________________________________
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices.)
N/A
________________________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
On August 10, 1999, the registrant had outstanding 29,291,504 Ordinary Shares
(including 2,000 Ordinary Shares included in the registrant's outstanding
Units)
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ------------
Assets (Unaudited) (Audited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 7 $ 141
Trade receivables, net of allowance of
$102 in 1999 and $219 in 1998 190 265
Other receivables 107 91
Prepaid expenses - 5
Inventories - 7
------------- ------------
Total current assets 304 509
Equipment
Cost 111 238
Less - Accumulated depreciation 106 198
------------- ------------
Equipment, net 5 40
Other Long Term Assets - 50
------------- ------------
Total assets $ 309 $ 599
============= ============
Liabilities and Shareholders' Equity
Current Liabilities
Short-term and current maturities of long-term debt $ - $ 1,180
Accounts payable and accrued expenses 683 785
------------- ------------
Total current liabilities 683 1,965
Accrued severance liability - 15
------------- ------------
Total liabilities 683 1,980
------------- ------------
Shareholders' Equity (Deficit)
Preferred Shares, par value NIS 0.01, authorized
10,000 shares, issued and outstanding 2,889 at
June 30, 1999 and 4 at December 31, 1998 7 -
Ordinary Shares, par value NIS 0.01, authorized 130,000
shares, issued and outstanding 29,292 at
June 30, 1999 and 29,223 at December 31, 1998 77 77
Share premium 52,674 52,082
Warrants 73 -
Accumulated deficit (53,205) (53,540)
------------- ------------
Total shareholders' equity (deficit) (374) (1,381)
------------- ------------
Total liabilities and shareholders' equity $ 309 $ 599
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars and shares in thousands (except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
----------- ------------ ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 540 $ 490 $ 1,011 $ 1,195
Operating costs and expenses
Cost of sales 305 170 548 375
Product development costs 33 718 54 1,843
Marketing expenses 148 331 278 789
General and administrative expenses 384 689 889 1,403
----------- ------------ ----------- -----------
Total operating costs and expenses 870 1,908 1,769 4,410
----------- ------------ ----------- -----------
Operating loss (330) (1,418) (758) (3,215)
Other Income (Expense) 3 (46) (24) (91)
----------- ------------ ----------- -----------
Net loss before extraordinary item (327) (1,464) (782) (3,306)
Extraordinary gain from debt extinguishment
(less income taxes of $0) - - 1,117 -
----------- ------------ ----------- -----------
Net income (loss) $ (327) $ (1,484) $ 335 $ (3,306)
=========== ============ =========== ===========
Net income (loss) per share:
Before extraordinary gain $ (0.01) $ (0.05) $ (0.03) $ (0.14)
Extraordinary gain - - 0.04 -
----------- ------------ ----------- -----------
Net income (loss) per share $ (0.01) $ (0.05) $ 0.01 $ (0.14)
=========== ============ =========== ===========
Weighted average number of
shares outstanding 29,292 27,620 29,292 24,127
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30,
1999 1998
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities
Net loss before extraordinary gain $ (782) $ (3,306)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 85 371
Change in allowance for doubtful accounts (117) -
Changes in assets and liabilities
(Increase) decrease in trade receivables 192 (205)
(Increase) decrease in other receivables (16) (77)
Decrease in prepaid expenses 5 645
Decrease in inventories 7 15
Increase (decrease) in payables & accruals (102) (296)
Increase (decrease) in severance liability (15) (215)
----------------- -----------------
Net cash used in operating activities (743) (3,068)
----------------- -----------------
Investing activities
Acquisition of equipment (1) (25)
Proceeds from disposition of assets 10 -
Increase in other long term assets - 2
----------------- -----------------
Net cash used in investing activities 9 (23)
----------------- -----------------
Financing activities
Net proceeds received on issuance of preferred shares - 3,750
Ordinary shares issued in satisfaction of accounts payable - 264
Loan proceeds 600 -
Cancellation of shares issued in payment for services - (61)
----------------- -----------------
Net cash used for financing activities 600 3,953
----------------- -----------------
Increase (Decrease) in cash and cash equivalents (134) 862
Cash and cash equivalents, beginning of period 141 2,499
----------------- -----------------
Cash and cash equivalents, end of period $ 7 $ 3,361
================= =================
Supplemental Schedule of Non-Cash Investing and Financing Activities
Debt extinguished in exchange for warrants $ 1,191 $ -
================= =================
Prepaid assets received in exchange for shares $ - $ (61)
================= =================
Preferred shares issued in satisfaction of convertible debt $ 600 $ -
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Accent Software International Ltd., and its subsidiaries ("Accent"
or "the Company") have been prepared in accordance with United States
generally accepted accounting principles for interim financial
information. The significant accounting policies, certain financial
information and footnote disclosures which are normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which are not required for interim
reporting purposes, have been condensed or omitted. In the opinion of
management, all adjustments (consisting of adjustments of a normal,
recurring nature) necessary for a fair presentation of these financial
statements have been reflected in the interim periods presented.
Operating results for the three and six months ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. Although the Company believes that the
disclosures presented herein are adequate to make the information
presented not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the
audited financial statements and footnotes included in the Company's
1998 Annual Report on Form 10-K for the year ended December 31, 1998.
Note 2 - GOING CONCERN
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The report of the Company's
Independent Auditors (included in the Company's 1998 Annual Report on
Form 10-K), however, raises doubt about the Company's ability to
continue as a going concern. Management acknowledges that the
Company's history of operating losses and operating cash flow deficits
raises legitimate concern about the Company's longer term prospects.
To enhance the Company's longer term prospects, management will
continue to focus on increasing revenue, reducing expenses and
obtaining additional external financing.
To increase revenue, the Company has developed new products to serve
the language information industry, has redirected its operations
toward Internet products and services, entered into alliances with
other companies in the industry aimed at broadening the Company's
market reach and has expanded its translation services business.
To reduce expenses, the Company has reduced its staffing level (which
is its largest element of expense) from approximately 170 employees at
its peak in 1996 to 15 at June 30, 1999.
Related expenses such as rent, telephone, travel and training costs
have been reduced proportionately. The shift away from the retail
market has led to reductions in production and inventory carrying
costs. Product development costs
5
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
have been reduced by closing the Company's product development
facility in Jerusalem, narrowing the number of new products under
development and focusing on those opportunities that provide the
greatest near-term revenue potential. The Company has reduced
discretionary spending on advertising and marketing as well as the
amount it spends on exhibitions and trade shows and has closed its
sales offices in London, England, and Newport Beach, California. The
sale in 1998 of the assets of the Company's subsidiary, AgentSoft,
also reduced costs with no decrease in total revenue.
To obtain additional external financing, the Company sold convertible
debentures and convertible preferred stock in the third and fourth
quarters of 1997 and again in the second quarter of 1998. In the
first quarter of 1999 the Company obtained $600 in the form of a
short-term loan convertible, at the discretion of the lender, into
convertible preferred stock. Effective June 30, 1999, the lender
elected to convert the loan, plus accrued interest, into 2.9 million
shares of preferred stock. In July 1999, the Company entered into an
agreement which provides for an investor to purchase, at $0.21 per
share, up to 9.5 million shares of the Company's ordinary shares for
$2.0 million. At closing, the investor paid $500 thousand for 2.4
million shares and is required to purchase the remaining 7.1 million
shares in the event the Company obtains a strategic partner and enters
into a strategic alliance with such partner. The Company continues to
explore sources of additional financing to satisfy its continuing
operational requirements.
In the first quarter of 1999, an extraordinary gain of $1,117 was
recognized by the Company related to the extinguishment of $1,180 of
long-term debt, plus $11 of accrued interest, in exchange for the
issuance of a warrant to the lender to receive 2,448,000 shares of the
Company's Ordinary Shares anytime after January 25, 2001, but before
January 25, 2006.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability or classification of asset
carrying amounts or the amounts and classification of liabilities that
may result should the company be unable to continue as a going
concern.
Note 3 - LIQUIDITY
As of June 30, 1999 and December 31, 1998, the Company had accumulated
deficits of $53,205 and $53,540, respectively. For the six months
ended June 30, 1999, the Company incurred a loss of $782 before the
extraordinary gain from debt extinguishment mentioned above and
recognizes that it may continue to incur operating losses through the
remainder of 1999 and possibly beyond. Furthermore, the Company has
not generated sufficient cash to finance its operations and has been
dependent upon external sources to meet its liquidity requirements.
In addition to the cost reduction initiatives completed during the
first quarter of 1999 and the fourth quarter of 1998, the Company will
continue to explore new methods to increase revenues and reduce costs
and working capital requirements.
6
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
As mentioned above the Company obtained $600 of short-term financing
under a loan agreement it executed with L&H Investment Company, N.V.
("LHIC") on February 19, 1999. On June 30, 1999, pursuant to the terms
of the loan agreement, the principal of the loan, plus $24 of accrued
interest, was converted into 2,884,874 Series C Preferred Shares of
the Company. Additionally, pursuant to the terms of the loan
agreement, the Company issued to LHIC a warrant to purchase three
million Ordinary Shares of the Company at a price of $0.269 per share.
Additionally, as mentioned above, in July 1999, the Company entered
into an agreement which provides for an investor to purchase, at $0.21
per share, up to 9.5 million shares of the Company's ordinary shares
for $2.0 million. At closing, the investor paid $500 thousand for 2.4
million shares and is required to purchase the remaining 7.1 million
shares in the event the Company obtains a strategic partner and enters
into a strategic alliance with such partner. There can be no
assurance the Company will be able to locate and enter into a
definitive agreement with a strategic partner as required by the
agreement, in which case the Company would not receive from the
investor up to $1.5 million in exchange for the issuance to it of 7.1
million of the Company's Ordinary Shares.
The Company continues to explore sources of additional financing to
satisfy its operational requirements.
Note 4 - SHARE CAPITAL
Accent executed a Preferred Share Purchase Agreement with Lernout &
Hauspie Speech Products, N.V. ("L&H"), an affiliate of LHIC, on June
4, 1998 pursuant to which the Company issued 4,000 Series C Preferred
shares in exchange for $4,000. Fees and expenses related to the
transaction totaled approximately $250 resulting in net proceeds to
the Company of $3,750. As mentioned above, LHIC was issued 2,884,874
Series C Preferred Shares upon conversion of amounts due it under a
loan agreement. The Series C Preferred Shares held by L&H and LHIC do
not pay interest but do provide the investors with a preference over
Ordinary Shareholders in the event of liquidation. The investors also
have the right to vote the shares as if they had all been converted
into Ordinary Shares.
The Series C Preferred Shares issued to LHIC are convertible at any
time into 2,884,874 Ordinary Shares of Accent which would dilute
existing shareholders by approximately 9%. The Series C Preferred
Shares issued to L&H also are convertible at any time into Ordinary
Shares of Accent. The conversion price of $0.45 per share represents a
10% premium over the average closing price of the Company's Ordinary
Shares during the ten trading days preceding execution of the
agreement with L&H. Conversion of all 4,000 Series C Preferred Shares
held by L&H would result in the issuance of 8,888,889 Ordinary Shares
and would dilute existing shareholders by approximately 28%.
7
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
L&H also received warrants to purchase 4,444,444 Ordinary Shares of
the Company at an exercise price of $0.55 per share. The warrants are
exercisable for five years, the conversion of which would dilute
existing shareholders by an additional 13%. LHIC received warrants,
also exercisable for five years, to purchase 3,000,000 Ordinary Shares
of the Company at an exercise price of $0.269 per share. Exercise of
the warrants would dilute existing shareholders by an additional 9%.
On July 14, 1999, subsequent to the date of the financial statements
presented herein, the Company entered into a stock purchase agreement
with an investor, Gotham Bay Partners LLC ("Gotham") which provides
for Gotham to purchase, at $0.21 per share, up to 9.5 million shares
of the Company's Ordinary Shares for $2.0 million. At closing, the
investor paid $500 thousand for 2.4 million shares and is required to
purchase the remaining 7.1 million shares, one half (3.55 million
Ordinary Shares) of which it will be required to purchase if the
Company enters into a letter of intent with a strategic partner and
the remaining one half if the Company subsequently executes a
definitive agreement of strategic alliance with such partner. Gotham
will not be required to purchase the remaining 7.1 million shares if
the Company does not perform the requirements stated above. If the
entire 9.5 million Ordinary Shares are purchased by Gotham, existing
shareholders would be diluted by approximately 25%.
During the second and third quarters of 1998, Accent reached
agreements with several of its major creditors pursuant to which these
creditors agreed to accept Ordinary Shares in the Company in payment
for all or a portion of amounts due them. Approximately 1,000,000
shares were issued to these creditors at market value which averaged
approximately $0.45 per share. Dilution, at the date of the
agreements, to existing shareholders from the issuance of these shares
amounted to approximately 3%.
As mentioned in the preceding Note 2, the Company recognized an
extraordinary gain of $1,117 from the extinguishment of bank debt. On
January 25, 1999, the Company executed an agreement with its prime
lending bank in Israel pursuant to which the balances of $1,180 in
principal and approximately $11 in interest due the bank were
extinguished in exchange for the Company issuing to the bank a warrant
to receive 2,448,000 of the Company's Ordinary Shares. The warrant
will fully vest on January 25, 2001 and expires on January 25, 2006.
Note 5 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
(a) SOP 97-2, regarding software revenue recognition became effective for
all transactions entered into, in fiscal years commencing December 15,
1997. The Company recognizes revenue in accordance with this Standard.
8
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
(b) In June 1998, the Financial Accounting Standards Board issued SFAS
133, Accounting for Derivative Instruments and Hedging Activities.
The Statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allow a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must
formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.
Statement 133 is effective for fiscal years commencing after June 15,
1999. Statement 133 cannot be applied retroactively. Statement 133
must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or subsequently modified after December 31,1997.
The Company believes that the adoption of Statement 133 will not have
a material effect on its financial statements.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition. (U.S. dollars in thousands, except per share
data.)
Introduction
This Form 10-Q for Accent Software International Ltd., and its subsidiaries
("Accent" or "the Company") contains historical information and forward-looking
statements. Statements looking forward in time are included in this Form 10-Q
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995. Such statements involve known and unknown risks and
uncertainties including, but not limited to, the timely availability of new
products, market acceptance of the Company's existing products and products
under development, the impact of competing products and pricing, the
availability of sufficient resources including short- and long-term financing to
carry out the Company's product development and marketing plans, and quarterly
fluctuations in operating results. The Company's actual results in future
periods may be materially different from any future performance suggested
herein. Further, the Company operates in an industry sector where securities'
values may be volatile and may be influenced by economic and other factors
beyond the Company's control. In the context of the forward-looking information
provided in this Form 10-Q, please refer to the Company's most recent Form 10-K
and the Company's other filings with the Securities and Exchange Commission.
Accent designs, develops and markets Language Information Technologies
(LIT) over the Internet. These technologies include software products and
services that help businesses easily localize their products and information
into other natural languages. Accent commenced operations in 1988 in Jerusalem,
Israel, and has since moved its operations to Colorado Springs, Colorado in
1997. Over the last year Accent has changed its direction toward Internet
products and services for corporate customers that are reaching international
markets. Revenues are currently being generated through Internet portals,
translation services and software products that increase the efficiencies of
localizing media and products.
The Company has accumulated deficits in excess of $53 million since its
inception through June 30, 1999, and it may continue to incur deficits through
the remainder of 1999 and possibly beyond. Accent historically has generated
operating cash flow deficits and its liquidity is essentially exhausted. To
enhance the Company's longer term prospects, management has focused on
increasing revenue by changing its direction toward Internet products and
services, reducing expenses and obtaining additional external financing. There
can be no assurance that the Company will be successful in reversing the trend
of operating losses and in generating sufficient working capital to meet its
operating requirements and any failure on the part of the Company to do so will
have a material adverse impact on the Company and could force it to cease
operations. Although the Company believes it has made substantial progress in
penetrating Internet markets and reducing its operating expenses and annual
losses, its historical failure to generate adequate operating income and cash
flow to meet its working capital requirements create doubt about the Company's
ability to continue as a going concern and there can be no assurance that the
Company will be able to continue as a going concern.
The Company completed a restructuring during 1998 designed to reduce its
working capital requirements and to align its operating expenses with its
revised revenue projections. The restructuring eliminated the Company's Israeli-
based product development, sales and marketing functions and various general and
administrative activities. Staffing was reduced to 15 people during the first
quarter of 1999.
The Company is continuing to work on significant new sales opportunities
and intends to gradually expand its sales and marketing operations through the
expanded use of sales representatives and cooperative agreements with other
businesses. There can be no assurance, however, that future revenue will meet
management's expectations.
10
<PAGE>
The Company's ability to generate increased revenue and to fund planned
expenditures is dependent on a number of factors, some of which are outside its
control. In particular, revenue growth and profitability, if any, will depend on
the ability of the Company to develop and market new products and product
enhancements, demand for the Company's products, the level of product and price
competition, the success of the Company in attracting and retaining motivated
and qualified personnel, the ability of the Company to control its costs and
general economic conditions. There can be no assurance that the Company will
meet such challenges successfully. Any of these or other factors could have a
material adverse effect on the Company's business, operating results or
financial condition.
Results of Operations
The Company's operations produced an operating loss of $327 during the
second quarter of 1999 on revenue of $540 compared with an operating loss of
$1,464 on revenue of $490 during the second quarter of 1998. For the first six
months of 1999, the Company's net loss before an extraordinary gain from debt
extinguishment of $1,117, was $782 on revenue of $1,011 compared to an
operating loss of $3,306 on revenue of $1,195 during the comparable period of
1998.
The improvement in the Company's operating results was achieved through
significant cost reduction efforts in all facets of the business, coupled with
the redirection of the Company's operating strategy as mentioned above. The
Company believes it has now reduced spending to the minimum sustainable level
and has recently begun to rebuild the sales and marketing organization in the
United States to pursue its new operating strategy.
Net Sales. Commencing early in the first quarter of calendar 1999,
management has shifted Accent's focus to generating revenue through Internet
portals. Customer interest in Accent's newest products offered on the Internet,
Loc@le and LanquageWare, has been positive. Additionally, the Company is
- ------
encouraged by the number of requests for proposals for translation services from
customers visiting the Company's web site.
Revenue recorded in the three and six month periods of 1998 included sales
of products that were dropped and/or not supported by the Company in the
comparable periods of 1999. Revenues in the comparable periods of 1999 primarily
include sales of translation services generated through traditional sales
methods. Because the Company is in the early stages of focusing its marketing
and sales efforts over the Internet, the benefits, if any, from such efforts
have yet to be realized.
Cost of Sales. Manufacturing, production, warehousing and shipping expenses
have all been eliminated or significantly reduced from the year earlier period
consistent with the Company's shift away from the retail market and toward the
business-to-business market through Internet portals where manufacturing and
support costs are significantly lower. At the same time, the Company has
increased its emphasis on translation services which have a relatively high cost
of sales due to a reliance on external translators to meet fluctuating demand.
Cost of sales during the second quarter of 1999 was $305, or 56% of sales,
compared to $170 in cost of sales, 35% of sales, during the same quarter of
1998. For the first six months of 1999, cost of sales totaled $548, or 54% of
sales, compared to $375, or 31% of sales, reported during the same period of
1998.
The increased emphasis on translation services with its relatively higher
cost of sales than products previously offered by the Company in the comparable
periods of 1998 is reflected in the above comparisons of cost of sales.
11
<PAGE>
Product Development Costs. Product development costs were $33 and $54
during the second quarter and first six months of 1999, respectively, compared
to $718 and $1,843 during the comparable periods of 1998. The reduction in such
costs from the 1998 periods reflects primarily the cost savings realized from
the closure of the Company's product development center in Jerusalem coincident
to the change in the Company's operating strategy.
Product development costs historically included costs incurred by the
Company's subsidiary, AgentSoft. Founded in 1996, AgentSoft was a Jerusalem-
based start-up business focused on developing "intelligent agent" technology for
use on the Internet. Because the Company did not anticipate near-term revenue or
profit from AgentSoft and to allow the Company to focus all of its energies on
its core competencies in the Language Information Industry, the Board of
Directors concluded early in 1998 that the divestiture of AgentSoft would be in
the best interests of all concerned. The assets of AgentSoft were sold for $225
in September, 1998.
Marketing Expenses. The Company's marketing expenses were $148 for the
quarter ended June 30,1999; a reduction of 55% from $331 in the comparable
period in 1998. Marketing expenses for the first six months of 1999 were reduced
approximately 65% to $278 from $789 for the first half of 1998.
Sales and marketing personnel were eliminated from the Jerusalem operation
during the third quarter of 1998 as the Company concluded it would be more
economical to rely on sales representatives for its Middle East activity rather
than full time employees. At the same time, the Company commenced establishing
the sales and marketing capability at its U.S. base in Colorado Springs,
Colorado. The Company's shift away from the retail market allows it to function
with fewer sales and marketing personnel and has also led to reductions in non-
personnel expenses such as trade shows, advertising and public relations costs.
General and Administrative Expenses. General and administrative expenses
during the second quarter of 1999 were $384 compared to $689 during the same
quarter of 1998 for a reduction of $305, or 44%. Such costs were $889 for the
six months ended June 30, 1999, a reduction of 37% from $1,403 for the same
period of 1998. The reductions in general and administrative expenses are
primarily attributable to staff reductions from the closure of the Company's
offices in Jerusalem.
Other expenses, net. The Company had other income of $3 during the three
months ended June 30, 1999, primarily as a result of accrued interest recorded
in the first quarter of 1999 being converted to Series C Preferred Shares by
LHIC on June 30, 1999. For the comparable period of 1998, $46 in net other
expenses was incurred consisting primarily of interest and expense arising from
foreign exchange rate fluctuations. For the most recent six month period, the
Company's other expenses totaled $24 compared to $91 during the year earlier
period. As with the three month periods, other expenses consisted primarily of
interest and foreign exchange rate fluctuations.
Net loss before extraordinary item. Accent's net loss before an
extraordinary item during the second quarter of 1999 of $327 was less than the
year earlier figure of $1,464. On a per share basis, the Company lost $0.01 per
share before the extraordinary item during the second quarter of 1999 compared
to a net loss of $0.05 per share during the second quarter of 1998. For the
first half of 1999 the net loss before an extraordinary item was $782, or $0.03
per share, compared to $3,306, or $0.14 per share, during the first half of
1998. The significant reductions in net losses before the extraordinary item
recorded in 1999 reflect the impact of the Company's cost reduction initiatives
and change in operating strategy.
Extraordinary gain from debt extinguishment. As previously mentioned, the
Company recognized an extraordinary gain of $1,117 in the first quarter of 1999
as a result of the extinguishment of $1,180 of long-term debt, plus $11 of
accrued interest, in exchange for the
12
<PAGE>
issuance of a warrant to the lender to receive 2,448,000 shares of the Company's
Ordinary Shares anytime after January 25, 2001, but before January 25, 2006. No
such gain or loss was reported in the first half of 1998. The extraordinary gain
amounted to $0.04 per share on a per share basis.
Net Income (Loss). The Company recognized net income of $335, or $0.01 per
share, for the six months ended June 30, 1999 compared to a net loss of $3,306,
or $0.14 per share, for the comparable period of 1998.
Liquidity and Capital Resources
For the six month period ended June 30, 1999, the Company's operating
activities used cash of $736 compared to $3,068 used during the comparable
period of 1998.
The Company has been successful on several occasions during the past two
and one half years in raising additional working capital through the sale of
convertible securities. The Company secured $600 in additional working capital
during the first quarter of 1999 in the form of short-term debt which was
converted to Series C Preferred Shares on June 30, 1999. Those funds, coupled
with cost reduction efforts which substantially reduced its working capital
requirements, were sufficient to meet its requirements through June, 1999. In
July 1999, the Company sold 2.4 million Ordinary Shares for $500 under an
agreement more fully described above. In the event current working capital falls
short of its requirements due to (1) the inability of the Company to locate and
enter into a strategic alliance with a strategic partner under the terms of the
stock purchase agreement with Gotham, (2) revenue shortfalls, or (3) other
unanticipated contingencies, the Company will need to seek additional financing.
Although management currently is seeking additional financing, there is no
assurance that the Company will be successful in securing additional working
capital and any failure on the part of the Company to do so will have a material
adverse impact on the Company and may cause the Company to cease operations.
On January 25, 1999 the Company entered into an agreement with the
government of Israel and various Israeli banking officials whereby the Company
issued a warrant to the bank to issue to the bank 2,448,000 Ordinary Shares in
full satisfaction of the balance of the loan. The warrant vests on the second
anniversary of the grant (that is, January 25, 2001) and expires on January 25,
2006.
Management has taken additional steps in securing additional external
financing and increasing revenues. At its annual meeting held on June 25,
1999, shareholders approved a reverse stock split and an increase in the
Company's capitalization. Management believes these actions will provide a
sufficient number of unreserved and unissued shares to pursue, among other
things, equity financing transactions and strategic alliances and enhance the
marketability of the Company's outstanding Ordinary Shares to the investment
community.
Additionally, shareholders approved a change in the Company's name with a
".net" extension which would, in the opinion of management, better reflect the
Company's movement toward Internet products and services and away from its
historical product line. The name change currently is going through the
approval process of the Israeli Registrar of Companies.
The Company's investing activities for both the first six months of 1999
and 1998 were immaterial wherein cash of $9 was provided by such activities in
the 1999 period and cash of $23 was used during the 1998 period.
Financing activities provided cash of $600 and $3,953 during the six month
periods ended June 30, 1999, and 1998, respectively. Proceeds from a short-term
loan provided cash of $600 during the first half of 1999, whereas the majority
of the cash provided during the comparable period of 1998 was from proceeds from
the sale of Series C Preferred Shares to L&H.
13
<PAGE>
The Company obtained $600 of short-term financing under a Loan Agreement it
executed with L&H Investment Company, N.V. ("LHIC") on February 19, 1999. The
principal amount of the loan, plus $24 of accrued interest, was converted into
2,884,874 Series C Preferred Shares on June 30, 1999. Additionally, pursuant to
the terms of the loan agreement, the Company issued to LHIC a warrant to
purchase three million Ordinary Shares of the Company at a price of $0.269 per
share.
On July 14, 1999, the Company entered into an agreement with an investor,
Gotham Bay Partners, LLC, to purchase, at $0.21 per share, up to 9.5 million
shares of the Company's ordinary shares for $2.0 million. At closing, the
investor paid $500 thousand for 2.4 million shares and is required to purchase
the remaining 7.1 million shares for $1.5 million when and if the Company
obtains a strategic partner and enters into a strategic alliance with such
partner. Under the terms of the agreement , in the event the Company is unable
to find and enter into a definitive agreement with a strategic partner, the
investor will not be required to purchase the remaining 7.1 million ordinary
shares. The Company believes that its operations may not generate adequate cash
flow to meet its needs without additional external financing. The inability of
the Company to find and enter into a strategic alliance with a strategic
partner, or obtain other external financing in the event it is unable to do so
will have a material adverse impact and may cause the Company to cease
operations.
Year 2000
The Company has reviewed its operations in relation to the Year 2000 issue
and has concluded that the likelihood of this issue having a material adverse
impact on the Company is remote. Any costs incurred in relation to the Year 2000
issue are expected to be immaterial.
Accent develops all of its software products in compliance with Year 2000
industry guidelines. The Company's software products are not date sensitive and,
therefore, are not likely to be adversely impacted by Year 2000. The Company,
therefore, believes that it has minimal, if any, exposure to contingencies
related to the Year 2000 issue for the products it manufactures and sells. The
Company has reviewed the third-party custom-written software it uses in its
operations and has determined that this software is also not date sensitive and
poses minimal, if any, Year 2000 risk.
Accent has a policy of purchasing only information technology ("IT")
hardware that is warranted to be Year 2000 compliant and, therefore, believes
its only Year 2000 exposure in this regard is if the hardware fails to perform
as warranted, which is unlikely. The Company also utilizes "off-the-shelf"
software products in its operations. Such software is issued with frequent
updates which have or which are expected to address the Year 2000 issue.
The potential impact of the Year 2000 issue on the Company's non-IT systems
that may include embedded technology, such as microprocessors, is more difficult
to assess. The Company believes, however, that its operations are small enough
that any Year 2000 issue that may arise in its non-IT systems will amount to
inconveniences, which it can work around, rather than significant business
problems.
Because the Company believes the possibility that a Year 2000 issue
significantly disrupting its operations is remote, it has not developed a
contingency plan in this regard. The Company will continue to monitor and assess
the Year 2000 issue, particularly the extent to which its operations are
vulnerable from interactions with its vendors, customers and financial
institutions.
14
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On June 25, 1999, the Company held its Annual Meeting of Shareholders
at its offices in Colorado Springs, Colorado. Matters voted on at the meeting
and the results of such voting are as follows:
1. The election of five directors to hold office until the next Annual
Meeting of Shareholders or until their respective successors shall be
elected and qualified. The following persons were elected as
directors of the Company and received the number of votes set forth
below:
Director For
-------- ---
Todd A. Oseth 21,924,968
Esther Dyson 21,924,968
Chantal Mestdagh 21,924,968
Bob Kutnick 21,924,968
Francis Vanderhoydonck 21,924,968
2. To increase authorized share capital by New Israel Shekels (NIS)
650,000, divided into 65,000,000 Ordinary Shares with nominal value
NIS 0.01 each, following which the total number of Ordinary Shares,
nominal value NIS 0.01 per share (the "Ordinary Shares") shall be
130,000,000, and to approve a corresponding amendment to the
Company's Memorandum of Association and Articles of Association
For: 30,113,689
Against: 703,877
Abstain: 101,850
3. To approve a reverse stock split of the Company's outstanding shares
on such ratio (a one-for-seven basis, a one-for-ten basis or a one-
for-fifteen basis) as the Board of Directors shall determine; (ii) to
approve a corresponding increase in the nominal value of the
Company's Ordinary Shares from NIS 0.01 (to NIS 0.07, NIS 0.10 or NIS
0.15, depending on the ratio of the reverse stock split determined by
the Board of Directors); and (iii) to approve amendments to the
Memorandum of Association and Articles of Association to reflect
these matters; such reverse stock split to take place at the sole
discretion of the Board Directors at any time prior to January 1,
2000;
For: 29,784,322
Against: 1,060,494
Abstain: 0
____________________________
* Incorporated by reference.
15
<PAGE>
4. To increase the number of options to purchase Ordinary Shares which
may be granted under the Employee Share Option Plan (1995) by
625,000, from 1,875,000 to 2,500,000;
For: 13,247,709
Aginst: 770,577
Abstain: 79,990
5. To approve the adoption of the CEO Share Option Plan (1999), and the
grant of certain options pursuant thereto;
For: 13,062,490
Against: 969,727
Abstain: 101,300
6. To approve a change in the name of the Company to "LanguageWare.net
Ltd." or such other similar name as shall be determined by the Board
of Directors and approved by the Israeli Registrar of Companies;
For: 30,734,964
Against: 92,235
Abstain: 92,217
7. To appoint Luboshitz, Kasierer & Co., a member firm of Arthur
Andersen, as independent auditors to audit the Financial Statements
of the Company and its subsidiaries for the year ended December 31,
1999, and to authorize the Board of Directors to determine their
level of compensation
For: 30,671,774
Against: 148,475
Abstain: 99,167
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1(a) - Memorandum of Association of Registrant (filed as Exhibit 3.1(a) to
the Company's Registration Statement No. 33-92754).*
3.1(b) - Certificate of Name Change dated October 23, 1994 (filed as Exhibit
3.1(b) to the Company's Registration Statement No. 33-92754).*
3.1(c) - Certificate of Name Change dated April 23, 1995 (filed as Exhibit
3.1(c) to the Company's Registration Statement No. 33-92754).*
3.2(a) - Articles of Association of Registrant (filed as Exhibit 3.2 to the
Company's Registration Statement No. 33- 92754).*
3.2(b) - Authorization of Registration of Increase in Share Capital dated July
18, 1999.
4.1 - Form of Ordinary Share Certificate (filed as Exhibit 4.1 to the
Company's
__________________________
*Incorporated by reference
16
<PAGE>
Registration Statement No. 33-92754).*
4.2 - Form of Underwriter's Warrant Agreement (filed as Exhibit 4.4 to the
Company's Registration Statement No. 33-92754).*
4.3 - Form of Bridge Financing Warrant dated as of May 22, 1995 between the
Company and each of the Holders (filed as Exhibit 4.5 to the
Company's Registration Statement No. 33-92754).*
4.4 - Form of Representative's Warrant Agreement, between the Company and
Sands Brothers & Co, Ltd., as representative of the several
underwriters (filed as Exhibit 4.4 to the Company's Registration
Statement No. 333-7637). *
4.5 - Form of IMR Warrant dated as of November 22, 1996 between the Company
and IMR Fund, L.P. (filed as Exhibit 4.5 to the Company's
Registration Statement No. 333-7637).*
4.6 - Form of Redeemable Warrant Agreement dated as of Exhibit 4.6 to the
Company's Registration November 22, 1996 between the Company, Sands
Statement No. 333-7637).* Brothers & Co., Ltd., as representative of
the several underwriters, and American Stock Transfer & Trust Company
(filed as Exhibit 4.6 to the Company's Registration Statement No.
333-7637).*
4.7 - Form of Redeemable Warrant Certificate (filed as Exhibit 4.6 to the
Company's Registration Statement No. 333-7637).*
4.8 - Form of Unit Certificate (filed as Exhibit 4.6 to the Company's
Registration Statement No. 333-7637).*
4.9 - Securities Purchase Agreement dated August 5, 1997, between CC
Investments LDC and Accent Software International Ltd., which
includes the Convertible Debenture, two Warrant Agreements and the
Registration Rights Agreement as exhibits thereto. (filed as Exhibit
4.1 to the Company's Registration Statement filed on August 27, 1997,
Reg. No. 333-34455).*
4.10 - Warrant Agreement with The Shemano Group, Inc. (filed as Exhibit 4.6
to the Company's Registration Statement filed on October 16, 1997,
Reg. No. 333-380043).*
4.11 - Warrant Agreement with Equity Management Partners LLP (filed
__________________________
*Incorporated by reference
17
<PAGE>
as Exhibit 4.7 to the Company's Registration Statement filed on
October 16, 1997, Reg. No. 333-38043).*
4.12 - Warrant Agreement with Brad Gillingham (filed as Exhibit 4.8 to the
Company's Registration Statement filed on October 16, 1997, Reg. No.
333-38043).*
4.13 - Form of Warrant Agreement covering warrant agreements with Robert J.
Laikin, Michael Mosher and Manufacturers Indemnity and Insurance
Company of America (filed as Exhibit 4.9 to the Company's
Registration Statement filed on October 16, 1997, Reg. No. 333-
38043).*
4.14 - Form of Securities Purchase Agreement dated November 6, 1997, between
Accent Software International Ltd., and CC Investments LDC, Nelson
Partners, Olympus Securities, Ltd., Marshall Companies, Profinsa
Investments, which includes the Convertible Debenture, the Warrant
Agreement, Registration Rights Agreement and Certificate of
Designation as exhibits thereto. (filed as Exhibit 4.1 to the
Company's Registration Statement filed on November 6, 1997, Reg. No.
333-39697).*
4.15 - Warrant Agreement with The Shemano Group, Inc. (filed as Exhibit 4.1
to the Company's Form S-3 filed on November 6, 1997, Reg. No. 333-
39697).*
4.16 - Form of Warrant to Lernout & Hauspie Speech Products, N.V.
4.17 - Form of Warrant to L&H Investment Company, N.V..
10.1 - Stock Purchase Agreement between IMR Investments V.O.F. and Kivun
Computers Company (1988), Ltd., Robert Rosenschein, Jeffrey
Rosenschein, Accent Software Partners, Pal-Ron Marketing, Ltd., and
KZ Overseas Holding Corp., dated as of May 11, 1994, as amended July
20, 1995 (filed as Exhibit 10.1 to the Company's Form 10-K on April
1, 1996).*
10.2 - Shareholders' Agreement by and among Kivun Computers Company (1988)
Ltd., Robert Rosenschein, Dr. Jeffrey Rosenschein, Pal-Ron Marketing,
Ltd., Accent Software Partners, KZ Overseas Holding Corp. and IMR
Investments V.O.F., dated May 11, 1994, as amended July 20, 1995
(filed as Exhibit 10.2 to the Company's Form 10-K on April 1, 1996).*
__________________________
*Incorporated by reference
18
<PAGE>
10.3(a) - Option Agreement dated March 23, 1993 between the Company and Robert
S. Rosenschein (filed as Exhibit 10.3(a) to the Company's
Registration Statement No. 33-92754).*
10.3(b) - Schedule of other option agreements substantially identical in all
material respects to the option agreement filed as Exhibit 10.3(a)
(filed as Exhibit 10.3(b) to the Company's Registration Statement No.
33-92754).*
10.4(a) - Warrant Acquisition Agreement dated January 1, 1995 between the
Registrant and Robert S. Rosenschein (filed as Exhibit 10.4(a) to the
Company's Registration Statement No. 33-92754).*
10.4(b) - Schedule of other warrant acquisition agreements substantially
identical in all material respects to the warrant agreement (filed as
Exhibit 10.4(b) to the Company's Registration Statement No. 33-
92754).*
10.5 - Form of Registration Rights Agreements dated as of May 22, 1995
between the Company and each of the Holders (filed as Exhibit 10.5 to
the Company's Registration Statement No. 33-92754).*
10.6(a) - Employee Share Option Plan (1995) (filed as Exhibit 10.7(a) to the
Company's Registration Statement No. 33-92754).*
10.6(b) - Amended and Restated Employee Share Option Plan (1995) (filed as
Exhibit 4.2 to the Company's Registration Statement No. 333-04285).*
10.6(c) - Non-Employee Director Share Option Plan (1995) (filed as Exhibit
10.7(b) to the Company's Registration Statement No. 33-92754).*
10.6(d) - Amended and Restated Non-Employee Share Option Plan (1995) (filed as
Exhibit 4.2 to the Company's Registration Statement No. 333-07965).*
10.6(e) - Amended and Restated Non-Employee Share Option Plan (1995) (filed as
Exhibit 10-6(e) to the Company's Form 10-K on March 31, 1998).*
__________________________
*Incorporated by reference
19
<PAGE>
10.6(f) - CEO Share Option Plan (1999)
10.6(g) - Non-Employee Share Option Plan (1998) (filed as Exhibit B to the
Company's Form DEF14A on April 29, 1998)*
10.7(b) - Employment Agreement between the Company and Todd A. Oseth, dated
February 3, 1997 (filed as exhibit 10.7(b) to the Company's Form 10-K
on March 31, 1998).*
10.8 - Consulting Agreement, dated August 4, 1997, between the Company and
Investor Resource Services, Inc. (filed as Exhibit 4.1 to the
Company's Registration Statement filed on October 16, 1997, Reg. No.
333-38043).*
10.9 - Amendment to the Consulting Agreement, dated January 30, 1998,
between Company and Investor Resource Services, Inc. (filed as
Exhibit 10-9 to the Company's Form 10-K on March 31, 1998).*
10.10 - Shareholders Agreement by and between Accent Software International
Limited and Gilad Zlotkin, dated February 21, 1996 (filed as Exhibit
10.10 to the Company's Form 10-K on April 1, 1996).*
10.11 - Debenture between the Company and Bank Leumi (filed as Exhibit 10.11
to the Company's Registration Statement No. 333-7637).*
10.12 - Agreement between the Company and The Bank for Industrial Development
(filed as Exhibit 4-1 to the Company's Form S-3 on August 4, 1998)*
10.13 - Stock Purchase Agreement between the Company and Gotham Bay Partners
LLC dated July 14, 1999.
21 - Subsidiaries of Registrant (filed as Exhibit 21 to the Company's Form
10-K filed on April 2, 1996).*
27 - Financial Data Schedule.
(b) Reports on Form 8-K
None.
__________________________
*Incorporated by reference
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCENT SOFTWARE INTERNATIONAL LTD.
(Registrant)
Date: August 10, 1999 by: /S/ Todd A. Oseth
--------------- -------------------
Todd A. Oseth
(Principal Executive Officer and
acting Principal Financial
Officer)
21
<PAGE>
EXHIBIT 3.2(b)
[Free Non-Binding Translation From the Hebrew Original]
MINISTRY OF JUSTICE REGISTRAR OF COMPANIES
[Shield of the State of Israel]
STATE OF ISRAEL
Authorization of Registration of Increase in Share Capital
-----------------------------------------------------------
Accent Software International Ltd.
1. I hereby notify you that on 18/07/99 the special resolution dated 25/06/99,
regarding the increase in share capital in the amount of 650,000.00 New
Israeli Shekels, was registered.
2. A notice thereof shall be published in the Official Gazette.
Company number: 52-004271-4
P.P./Registrar of Companies
[signed]
________________________________________________________________________________
Clal Center (13th Floor), 97 Jaffa Rd. Jerusalem 94340
Tel. 02-6209444, P.O. Box 28178, Jeruslaem, 91281
<PAGE>
EXHIBIT 4.16
Void After 5:00 p.m., Warrant to Purchase 4,444,444
Eastern Standard Time Shares (Subject to Adjustment)
September 3, 2003
ACCENT SOFTWARE INTERNATIONAL LTD.
Warrant to Purchase Ordinary Shares
Accent Software International Ltd. (the "Company"), a company organized and
operating under the laws of the State of Israel, hereby certifies that, for
value received, Lernout & Hauspie Speech Products, N.V., (the "Holder") is
entitled to purchase from the Company at any time before 5:00 p.m., Eastern
Standard Time, on September 2, 2003, 4,444,444 shares of the Company's ordinary
shares with a nominal value of NIS .01, subject to the conditions of this
Warrant and to adjustment as hereinafter provided, at a price of $0.55 per share
(the "Warrant Price"). In the event the aforesaid expiration date of the
Warrant falls on a Saturday or Sunday, or on a legal holiday on which the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Exchange is
closed, then the Warrant shall expire at 5:00 p.m. Eastern Standard Time on the
next succeeding business day.
Section 1. Vesting Schedule. The Holder may exercise this Warrant, in whole or
----------------
in part, at any time subsequent to the date hereof.
Section 2. Method of Exercise. The Warrant may be exercised by the Holder as to
------------------
the whole or any part of the ordinary shares covered hereby by surrender of the
warrant at the registered office of the Company, with the Cash Purchase Form
attached hereto duly executed and upon payment to the Company of the Warrant
Price for the ordinary shares to be purchased in cash or by certified check or
bank draft. Thereupon, this Warrant shall be deemed to have been exercised and
the person exercising the same to have become a holder of record of ordinary
shares purchased hereunder for all purposes, and certificates for the
appropriate number of fully paid and non-assessable shares so purchased shall be
delivered to the Purchaser within a reasonable time thereafter. If the Warrant
shall be exercised in respect of a part only of the shares of ordinary shares
covered hereby, the Holder shall be entitled to receive a similar Warrant of
like tenor and date covering the number of ordinary shares in respect of which
this Warrant shall not have been exercised.
Section 3. Transfers and Exchanges. If permitted by the provisions of Section
-----------------------
11, the Company shall transfer, from time to time, any outstanding Warrant upon
the books to be maintained for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by a written assignment of such Warrant
substantially in the form attached hereto duly executed by the Holder or his
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such a transfer. Upon any such transfer, a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.
Section 4. Registration Rights. This Warrant, except as provided herein, will
-------------------
not be registered under the Securities Act of 1933 (the "Act") or state
securities laws. The Holder, by acceptance hereof, and with reference to the
Warrant and the ordinary shares issuable upon exercise of the Warrant,
represents and warrants that:
(a) The Holder is acquiring such securities for the Holder's own account
for investment and not with the view to or in connection with any
offering or distribution, and the Holder has no present intention of
selling or otherwise disposing of such securities.
<PAGE>
(b) The Holder is not acquiring such securities for resale or other
disposition upon the occurrence or nonoccurrence of some
predetermined event or circumstance such as, for example, after
holding them for any specific period to realize long-term capital
gains, or upon any price rise, or upon any price decline or for a
fixed or determined period in the future.
(c) Notwithstanding anything to the contrary herein, the Holder will not
sell, assign or transfer for value this Warrant or the shares of
ordinary shares issuable upon exercise hereof except pursuant to
registration under the Act or receipt of an opinion of counsel
satisfactory to the Company that registration under the Act is not
required, and the Company may place a legend on this Warrant and on
any certificates for such shares acknowledging the foregoing
restrictions.
Subject to the provisions of the Preferred Stock Purchase Agreement executed by
the Company and Holder on June 4, 1998, the Company shall use its reasonable
business efforts to cause all the ordinary shares issuable upon the exercise of
this Warrant to be registered under the Securities Act to the extent required to
permit the disposition by the Holder of such shares.
Section 5. Registration Procedures. Pursuant to the provisions of Section 4,
-----------------------
the Company will as expeditiously as reasonably possible and at its expense:
(a) prepare and file with the SEC a registration statement with respect
to the ordinary shares issuable upon exercise of this Warrant and use
reasonable business efforts to cause such registration statement
become and remain effective for the period of time required for the
disposition of such shares as contemplated thereby, not to exceed
twelve months (the "Disposition Period");
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all shares covered
by such registration statement in accordance with the method of
disposition set forth in such registration statement for such period;
(c) furnish to the Holder such number of copies of the registration
statement and the prospectus included therein (including each
preliminary prospectus and each document incorporated by reference
therein to the extent then required by the rules and regulations of
the SEC) as such persons may reasonable request in order to
facilitate the public sale or other disposition of the Shares covered
by such registration statement;
(d) during the Disposition Period immediately notify in writing the
Holder of the happening of any event which the prospectus contained
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing
(in which case, the Company shall promptly prepare and file with the
SEC and provide the Holder with revised or supplemental prospectuses
and if so requested by the Company in writing, the Holder shall
promptly take action to cease making any offers of the shares until
receipt and distribution of such revised supplemental prospectuses).
In connection with any registration hereunder, the Holder of this Warrant shall
furnish promptly to the Company in writing such information (together with such
supplements as may be necessary from time to
<PAGE>
time) with respect to himself and the proposed disposition as shall be
reasonably necessary in order to ensure compliance with federal and state
securities laws.
Section 6. Dividend Rights. With respect to the financial year of the exercise
---------------
of this Warrant, any ordinary shares issued as a result of an exercise of this
Warrant shall benefit from a proportional dividend right from the date of the
applicable exercise.
Section 7. Adjustment of Warrant Price. The Warrant Price and the number of
---------------------------
ordinary shares subject to being purchased pursuant to this Warrant shall be
subject to adjustment from time to time as follows:
(a) In case, prior to the expiration of this Warrant by exercise or by
its terms, the Company shall issue any ordinary shares as a share
dividend or subdivide the number of outstanding ordinary shares into
a greater number of shares, then, in either of such cases, the
purchase price per share of the ordinary shares purchasable pursuant
to this Warrant in effect at the time of such action shall be
proportionately reduced and the number of shares at the time
purchasable pursuant to this Warrant shall be proportionately
increased; and conversely, in the event the Company shall contract
the number of outstanding ordinary shares by combining such shares
into a smaller number of shares, then, in such case, the purchase
price per ordinary share purchasable pursuant to this Warrant in
effect at the time of such action shall be proportionately increased,
and the number of shares at that time purchasable pursuant to this
Warrant shall be proportionately decreased. If the Company, at any
time during the life of this Warrant, shall declare a dividend
payable in cash on its ordinary shares, and shall at substantially
the same time offer to its shareholders the right to purchase new
ordinary shares from the proceeds of such dividend or for an amount
substantially equal to the dividend, all ordinary shares so issued
shall, for purposes of this Warrant, be deemed to have been issued as
a share dividend. Any dividends paid or distributed upon ordinary
shares in shares of any other class or securities convertible into
ordinary shares shall be treated as a dividend paid in ordinary
shares to the extent that ordinary shares are issuable upon the
conversion thereof.
(b) In case, prior to the expiration of this Warrant by exercise or by
its terms, the Company shall be recapitalized by reclassifying its
outstanding ordinary shares into shares of a different par value, or
the Company shall merge into or consolidate with another corporation
or shall sell all or substantially all of its or any of its successor
corporation's property and assets to any other corporation or
corporations (any such corporation being included within the meaning
of the term "successor corporation"), then Holder shall thereafter
have the right to purchase, upon the basis and on the terms and
conditions and during the time specified in this Warrant in lieu of
the ordinary shares of the Company theretofore purchasable upon the
exercise of this Warrant, such shares, securities, or assets as may
be issued or payable with respect to, or in exchange for, the
ordinary shares of the Company theretofore purchasable upon the
exercise of this Warrant had such recapitalization, consolidation,
merger, or conveyance not taken place; and in any such event, the
rights of the Holder to an adjustment in the number of ordinary
shares purchased upon the exercise of this Warrant as herein provided
shall continue and be preserved in respect of any shares, securities,
or assets which the Holder becomes entitled to purchase.
(c) If the Company shall set a record date with respect to its ordinary
shares or shall propose to give notice to or take a vote of the
holders of its ordinary shares for any of the purposes set forth in
paragraphs (a) or (b) above, the Company shall give notice to the
<PAGE>
Holder at least thirty (30) days prior to any such action to be
taken. Such notice shall specify the date or expected date, if any is
to be fixed, as to which holders of ordinary shares of record shall
be entitled to participate in any such action.
(d) In case the Company at any time while this Warrant remains unexpired
and unexercised shall sell all or substantially all of its property
or dissolve, liquidate, or wind-up its affairs, the Holder may
thereafter receive upon exercise hereof in lieu of each ordinary
share of the Company which it would have been entitled to receive,
the same kind and amount of any securities or assets which may be
issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding-up in respect of each ordinary share of the
Company.
(e) If the ordinary shares of the Company shall be delisted from the
Nasdaq Small Cap Market at any time prior to December 4, 1998, and
the closing price of the ordinary shares is less than the Warrant
Price at any time during the ten (10) trading days following the
effective date of delisting, then the Warrant Price shall be adjusted
to the average closing price of the Company's ordinary shares for the
ten (10) trading days following the effective date of delisting.
Section 8. Payment of Taxes. The Company will pay any documentary stamp taxes
----------------
attributable to the initial issuance of ordinary shares issuable upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of any ordinary share certificates in a name other than
that of the Holder in respect of which such shares are issued, and in such case
the Company shall not be required to issue or deliver any certificate for
ordinary shares or any Warrant until the person requesting the same has paid to
the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or that such person has an exemption
from the payment of such tax.
Section 9. Reservation of Ordinary Shares. There have been reserved, and the
------------------------------
Company shall at all times keep reserved out of the authorized and unissued
ordinary shares, a number of ordinary shares sufficient to provide for the
exercise of the rights of purchase represented by this Warrant. The Company
agrees that all ordinary shares issued upon exercise of this Warrant shall be,
at the time of delivery of the certificates of such shares, validly issued and
outstanding, fully paid and non assessable and listed on any national securities
exchange upon which the other ordinary shares of the Company are then listed.
All warrants surrendered in the exercise of the rights thereby evidenced shall
be canceled by the Company, and such canceled warrants shall constitute
sufficient evidence of the exercise of such warrants. Promptly after the
expiration of this Warrant, the Company shall certify the total aggregate number
of warrants then outstanding, and thereafter no ordinary shares shall be subject
to reservation in respect of such Warrant which has expired.
Section 10. Fractional Interest. The Warrant may only be exercised to purchase
-------------------
full ordinary shares and the Company shall not be required to issue fractions of
ordinary shares on the exercise of the Warrant. However, if the Holder
exercised all warrants then owned of record by him and such exercise would
result in the issuance of a fractional share, the Company will pay to the
Holder, in lieu of the issuance of any fractional share otherwise issuable, an
amount of cash based on the market value of the ordinary shares of the Company
on the last trading day prior to the exercise date.
Section 11. Restrictions on Transferability. This Warrant shall not be
-------------------------------
transferred, hypothecated or assigned before satisfaction of the conditions
specified in this Section 11, which conditions are intended to ensure compliance
with the provisions of the Securities Act with respect to the transfer of any
Warrant. The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 11.
<PAGE>
(a) Except as otherwise provided by this Section 11, each Warrant shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and the securities represented hereby have not be
registered under the Securities Act of 1933, as amended, and may
not be transferred n violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
(b) Notwithstanding the foregoing provision of this Section 11, the
restrictions imposed by this Section 11 upon the transferability of
the Warrant and the legend requirements of the subsection (a) hereof
shall terminate as to any particular Warrant (i) when and so long as
such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto; or (ii) when the
Company shall have received an opinion of counsel reasonable
satisfactory to it that such securities may be transferred without
registration thereof under the Securities Act. Whenever the
restrictions on this Warrant shall terminate, as herein above
provided, the Holder shall be entitled to received from the Company a
new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON THE TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 11 HEREOF TERMINATED ________________,_____,
AND ARE OF NO FURTHER FORCE AND EFFECT."
All warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon.
Section 12. Notices. Any notice pursuant to this Warrant to be given by the
-------
Holder shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
Accent Software International Ltd.
2864 South Circle Drive, Suite 500
Colorado Springs, CO 80906
United States of America
Attention: Todd A. Oseth
President and Chief Executive Officer
Any notice pursuant to this Warrant to be given by the Company to the Holder
shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
Patrick De Schrijver
Senior Vice President Legal
Sint-Krispijnstraat 7
8900 Ieper Belgium
Section 13. Supplements and Amendments. The Company may from time to time
--------------------------
supplement or amend this Warrant in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not be inconsistent with the provisions of the Warrant
and which shall not adversely affect the interest of the Holder.
<PAGE>
Section 14. Governing Law and Severability. This Warrant shall be deemed to be
------------------------------
a contract made under the laws of the State of Israel and shall be construed in
accordance with the laws of the State of Israel applicable to agreements to be
performed wholly within the State of Israel. The invalidity or unenforceability
of any provision of this Warrant shall not affect the validity or enforceability
of any other provision hereof.
Section 15. Benefits of this Warrant. Nothing in this Warrant shall be
------------------------
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Warrant; but
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder. Notwithstanding the foregoing, this Warrant shall not entitle the
Holder to any rights as a shareholder of the Company.
Section 16. Successors. All the covenants and provisions of this Agreement by
----------
or for the benefit of the Company or the Holder shall bind an inure to the
benefit of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date written below.
Dated: September 4, 1998
ACCENT SOFTWARE INTERNATIONAL LTD.
By President and Chief Executive Officer
------------------------------- -------------------------------------
Todd A. Oseth Title
Attest:
- ---------------------------------
<PAGE>
TO:
-----------------------------------------------------------------------------
PURCHASE FORM -- To be executed by the Holder in Order to Exercise the Warrant.
- -------------
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, of shares issuable upon the exercise of such Warrant,
-------
and requests that certificates for such shares shall be issued in the name of:
------------------------------------------
Please insert social security (Name)
or other identifying number
of Holder of
certificate (_________________)
------------------------------------------
(Address)
------------------------------------------
(Signature)
------------------------------------------
(Signature)
<PAGE>
ASSIGNMENT FORM -- To be Executed by the Holder in Order to Transfer the
- ---------------
Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
of the Warrants represented by the attached Warrant unto
- -----------
(Please
- ------------------------------------------------------------------------
print or typewrite name and address, including postal zip code of assignee)
(Social Security or other identifying number of assignee: )
---------------------
and does irrevocably constitute and appoint
----------------------------------
attorney to transfer the Warrant Certificate on the records of the Company with
full power of substitution in the premises.
Date:
-----------------------, -------------.
Signature(s)
------------------------------------------------
NOTICE - The signature(s) to the Purchase form or the Assignment form must
------
correspond to the name as written upon the face of the Warrant Certificate
in every particular without alteration or enlargement or any change
whatsoever.
<PAGE>
Exhibit 4.17
Void After 5:00 p.m., Warrant to Purchase 3,000,000
Eastern Standard Time Shares (Subject to Adjustment)
February 18, 2004
THIS WARRANT AND THE CAPITAL STOCK OR OTHER SECURITIES RECEIVABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("THE
ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE TRANSFERRED OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED.
ACCENT SOFTWARE INTERNATIONAL LTD.
Warrant to Purchase Ordinary Shares
Accent Software International Ltd. (the "Company"), a company organized and
operating under the laws of the State of Israel, hereby certifies that, for
value received, L&H Investment Company N.V., (the "Holder") is entitled to
purchase from the Company at any time before 5:00 p.m., Eastern Standard Time,
on February 18, 2004, 3,000,000 shares of the Company's ordinary shares with a
nominal value of NIS .01, subject to the conditions of this Warrant and to
adjustment as hereinafter provided, at a price of $0.269 per share (the "Warrant
Price"). In the event the aforesaid expiration date of the Warrant falls on a
Saturday or Sunday, or on a legal holiday on which the New York Stock Exchange,
the American Stock Exchange or the Nasdaq Stock Exchange is closed, then the
Warrant shall expire at 5:00 p.m. Eastern Standard Time on the next succeeding
business day.
Section 1. Vesting Schedule. The Holder may exercise this Warrant, in whole or
----------------
in part, at any time subsequent to the date hereof.
Section 2. Method of Exercise. The Warrant may be exercised by the Holder as to
------------------
the whole or any part of the ordinary shares covered hereby by surrender of the
warrant at the registered office of the Company, with the Cash Purchase Form
attached hereto duly executed and upon payment to the Company of the Warrant
Price for the ordinary shares to be purchased in cash or by certified check or
bank draft. Thereupon, this Warrant shall be deemed to have been exercised and
the person exercising the same to have become a holder of record of ordinary
shares purchased hereunder for all purposes, and certificates for the
appropriate number of fully paid and non-assessable shares so purchased shall be
delivered to the Purchaser within a reasonable time thereafter. If the Warrant
shall be exercised in respect of a part only of the shares of ordinary shares
covered hereby, the Holder shall be entitled to receive a similar Warrant of
like tenor and date covering the number of ordinary shares in respect of which
this Warrant shall not have been exercised.
Section 3. Transfers and Exchanges. If permitted by the provisions of Section
-----------------------
11, the Company shall transfer, from time to time, any outstanding Warrant upon
the books to be maintained for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by a written assignment of such Warrant
substantially in the form attached hereto duly executed by the Holder or his
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such a transfer. Upon any such transfer, a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.
Section 4. Registration Rights. This Warrant, except as provided herein, will
-------------------
not be registered under the Securities Act of 1933 (the "Act") or state
securities laws. The Holder, by acceptance hereof, and with reference to the
Warrant and the ordinary shares issuable upon exercise of the Warrant,
represents and warrants that:
<PAGE>
(a) The Holder is acquiring such securities for the Holder's own account for
investment and not with the view to or in connection with any offering or
distribution, and the Holder has no present intention of selling or
otherwise disposing of such securities.
(b) The Holder is not acquiring such securities for resale or other disposition
upon the occurrence or nonoccurrence of some predetermined event or
circumstance such as, for example, after holding them for any specific
period to realize long-term capital gains, or upon any price rise, or upon
any price decline or for a fixed or determined period in the future.
(c) Notwithstanding anything to the contrary herein, the Holder will not sell,
assign or transfer for value this Warrant or the shares of ordinary shares
issuable upon exercise hereof except pursuant to registration under the Act
or receipt of an opinion of counsel satisfactory to the Company that
registration under the Act is not required, and the Company may place a
legend on this Warrant and on any certificates for such shares
acknowledging the foregoing restrictions.
Subject to the provisions of the Loan Agreement executed by the Company and
Holder on February 19, 1999, ("Loan Agreement") the Company shall use its
reasonable business efforts to cause all the ordinary shares issuable upon the
exercise of this Warrant to be registered under the Securities Act to the extent
required to permit the disposition by the Holder of such shares.
Section 5. Registration Procedures. Pursuant to the provisions of Section 4 and
-----------------------
the Loan Agreement, the Company will at its expense:
(a) prepare and file with the SEC a registration statement with respect to the
ordinary shares issuable upon exercise of this Warrant and use reasonable
business efforts to cause such registration statement become and remain
effective for the period of time required for the disposition of such
shares as contemplated thereby, not to exceed twelve months (the
"Disposition Period");
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all shares covered by such registration
statement in accordance with the method of disposition set forth in such
registration statement for such period;
(c) furnish to the Holder such number of copies of the registration statement
and the prospectus included therein (including each preliminary prospectus
and each document incorporated by reference therein to the extent then
required by the rules and regulations of the SEC) as such persons may
reasonable request in order to facilitate the public sale or other
disposition of the Shares covered by such registration statement;
(d) During the Disposition Period immediately notify in writing the Holder of
the happening of any event which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing (in which case, the Company shall
promptly prepare and file with the SEC and provide the Holder with revised
or supplemental prospectuses and if so requested by the Company in writing,
the Holder shall promptly
<PAGE>
take action to cease making any offers of the shares until receipt and
distribution of such revised supplemental prospectuses).
In connection with any registration hereunder, the Holder of this Warrant shall
furnish promptly to the Company in writing such information (together with such
supplements as may be necessary from time to time) with respect to himself and
the proposed disposition as shall be reasonably necessary in order to ensure
compliance with federal and state securities laws.
Section 6. No Shareholders' Rights. Prior to the exercise of this Warrant, the
-----------------------
Holder of this Warrant shall not be entitled to any rights of a shareholder of
the Company, including, without limitation, the rights to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company except
as provided herein.
Section 7. Adjustment of Warrant Price. The Warrant Price and the number of
---------------------------
ordinary shares subject to being purchased pursuant to this Warrant shall be
subject to adjustment from time to time as follows:
(a) In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall issue any ordinary shares as a share dividend or
subdivide the number of outstanding ordinary shares into a greater number
of shares, then, in either of such cases, the purchase price per share of
the ordinary shares purchasable pursuant to this Warrant in effect at the
time of such action shall be proportionately reduced and the number of
shares at the time purchasable pursuant to this Warrant shall be
proportionately increased; and conversely, in the event the Company shall
contract the number of outstanding ordinary shares by combining such shares
into a smaller number of shares, then, in such case, the purchase price per
ordinary share purchasable pursuant to this Warrant in effect at the time
of such action shall be proportionately increased, and the number of shares
at that time purchasable pursuant to this Warrant shall be proportionately
decreased. If the Company, at any time during the life of this Warrant,
shall declare a dividend payable in cash on its ordinary shares, and shall
at substantially the same time offer to its shareholders the right to
purchase new ordinary shares from the proceeds of such dividend or for an
amount substantially equal to the dividend, all ordinary shares so issued
shall, for purposes of this Warrant, be deemed to have been issued as a
share dividend. Any dividends paid or distributed upon ordinary shares in
shares of any other class or securities convertible into ordinary shares
shall be treated as a dividend paid in ordinary shares to the extent that
ordinary shares are issuable upon the conversion thereof.
(b) In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall be recapitalized by reclassifying its outstanding
ordinary shares into shares of a different par value, or the Company shall
merge into or consolidate with another corporation or shall sell all or
substantially all of its or any of its successor corporation's property and
assets to any other corporation or corporations (any such corporation being
included within the meaning of the term "successor corporation"), then
Holder shall thereafter have the right to purchase, upon the basis and on
the terms and conditions and during the time specified in this Warrant in
lieu of the ordinary shares of the Company theretofore purchasable upon the
exercise of this Warrant, such shares, securities, or assets as may be
issued or payable with respect to, or in exchange for, the ordinary shares
of the Company theretofore purchasable upon the exercise of this Warrant
had such recapitalization, consolidation, merger, or conveyance not taken
place; and in any such event, the rights of the Holder to an adjustment in
the number of ordinary shares
<PAGE>
purchased upon the exercise of this Warrant as herein provided shall
continue and be preserved in respect of any shares, securities, or assets
which the Holder becomes entitled to purchase.
(c) If the Company shall set a record date with respect to its ordinary shares
or shall propose to give notice to or take a vote of the holders of its
ordinary shares for any of the purposes set forth in paragraphs (a) or (b)
above, the Company shall give notice to the Holder at least thirty (30)
days prior to any such action to be taken. Such notice shall specify the
date or expected date, if any is to be fixed, as to which holders of
ordinary shares of record shall be entitled to participate in any such
action.
(d) In case the Company at any time while this Warrant remains unexpired and
unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind-up its affairs, the Holder may thereafter
receive upon exercise hereof in lieu of each ordinary share of the Company
which it would have been entitled to receive, the same kind and amount of
any securities or assets which may be issuable, distributable, or payable
upon any such sale, dissolution, liquidation, or winding-up in respect of
each ordinary share of the Company.
Section 8. Payment of Taxes. The Company will pay any documentary stamp taxes
----------------
attributable to the initial issuance of ordinary shares issuable upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of any ordinary share certificates in a name other than
that of the Holder in respect of which such shares are issued, and in such case
the Company shall not be required to issue or deliver any certificate for
ordinary shares or any Warrant until the person requesting the same has paid to
the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or that such person has an exemption
from the payment of such tax.
Section 9. Reservation of Ordinary Shares. There have been reserved, and the
------------------------------
Company shall at all times keep reserved out of the authorized and unissued
ordinary shares, a number of ordinary shares sufficient to provide for the
exercise of the rights of purchase represented by this Warrant. The Company
agrees that all ordinary shares issued upon exercise of this Warrant shall be,
at the time of delivery of the certificates of such shares, validly issued and
outstanding, fully paid and non assessable and listed on any national securities
exchange upon which the other ordinary shares of the Company are then listed.
All warrants surrendered in the exercise of the rights thereby evidenced shall
be canceled by the Company, and such canceled warrants shall constitute
sufficient evidence of the exercise of such warrants. Promptly after the
expiration of this Warrant, the Company shall certify the total aggregate number
of warrants then outstanding, and thereafter no ordinary shares shall be subject
to reservation in respect of such Warrant which has expired.
Section 10. Fractional Interest. The Warrant may only be exercised to purchase
-------------------
full ordinary shares and the Company shall not be required to issue fractions of
ordinary shares on the exercise of the Warrant. However, if the Holder
exercised all warrants then owned of record by him and such exercise would
result in the issuance of a fractional share, the Company will pay to the
Holder, in lieu of the issuance of any fractional share otherwise issuable, an
amount of cash based on the market value of the ordinary shares of the Company
on the last trading day prior to the exercise date.
Section 11. Restrictions on Transferability. This Warrant shall not be
-------------------------------
transferred, hypothecated or assigned before satisfaction of the conditions
specified in this Section 11, which conditions are intended to ensure compliance
with the provisions of the Securities Act with respect to the transfer of any
Warrant. The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 11.
<PAGE>
(a) Except as otherwise provided by this Section 11, each Warrant
shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby have
not be registered under the Securities Act of 1933, as
amended, and may not be transferred n violation of such
Act, the rules and regulations thereunder or the
provisions of this Warrant."
(b) Notwithstanding the foregoing provision of this Section 11, the
restrictions imposed by this Section 11 upon the
transferability of the Warrant and the legend requirements of
the subsection (a) hereof shall terminate as to any particular
Warrant (i) when and so long as such security shall have been
effectively registered under the Securities Act and disposed of
pursuant thereto; or (ii) when the Company shall have received
an opinion of counsel reasonable satisfactory to it that such
securities may be transferred without registration thereof
under the Securities Act. Whenever the restrictions on this
Warrant shall terminate, as herein above provided, the Holder
shall be entitled to received from the Company a new Warrant
bearing the following legend in place of the restrictive legend
set forth hereon:
"THE RESTRICTIONS ON THE TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 11 HEREOF TERMINATED
__________________,_____, AND ARE OF NO FURTHER FORCE
AND EFFECT."
All warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon.
Section 12. Notices. Any notice pursuant to this Warrant to be given by the
-------
Holder shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
Accent Software International Ltd.
2864 South Circle Drive, Suite 500
Colorado Springs, CO 80906
United States of America
Attention: Todd A. Oseth
President and Chief Executive Officer
Any notice pursuant to this Warrant to be given by the Company to the Holder
shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
L&H Investment Company N.V.
Sint-Krispijnstraat 7
8900 Ieper Belgium
Attention: Francis Vanderhoydonck
Section 13. Supplements and Amendments. The Company may from time to time
--------------------------
supplement or amend this Warrant in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not be inconsistent with the provisions of the Warrant
and which shall not adversely affect the interest of the Holder.
<PAGE>
Section 14. Governing Law and Severability. This Warrant shall be deemed to be
------------------------------
a contract made under the laws of the State of Israel and shall be construed in
accordance with the laws of the State of Israel applicable to agreements to be
performed wholly within the State of Israel. The invalidity or unenforceability
of any provision of this Warrant shall not affect the validity or enforceability
of any other provision hereof.
Section 15. Benefits of this Warrant. Nothing in this Warrant shall be
------------------------
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Warrant; but
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder. Notwithstanding the foregoing, this Warrant shall not entitle the
Holder to any rights as a shareholder of the Company.
Section 16. Successors. All the covenants and provisions of this Warrant by or
----------
for the benefit of the Company or the Holder shall bind an inure to the benefit
of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date written below.
Dated: February 19, 1999
-----------------
ACCENT SOFTWARE INTERNATIONAL LTD.
By President and Chief Executive Officer
- -------------------------------------- -------------------------------------
Todd A. Oseth Title
Attest:
- --------------------------------------
<PAGE>
TO:_________________________________________________________________________
PURCHASE FORM -- To be executed by the Holder in Order to Exercise the Warrant.
- -------------
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, __________________________ of shares issuable upon the
exercise of such Warrant, and requests that certificates for such shares shall
be issued in the name of:
_________________________________________
Please insert social security (Name)
or other identifying number
of Holder of
certificate (_________________)
_________________________________________
(Address)
__________________________________________
(Signature)
_________________________________________
(Signature)
<PAGE>
ASSIGNMENT FORM -- To be Executed by the Holder in Order to Transfer the
- ---------------
Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
___________ of the Warrants represented by the attached Warrant unto
___________________________________________________________________ (Please
print or typewrite name and address, including postal zip code of assignee)
(Social Security or other identifying number of assignee:_____________________)
and does irrevocably constitute and appoint____________________________________
attorney to transfer the Warrant Certificate on the records of the Company with
full power of substitution in the premises.
Date:_______________________, _____________.
Signature(s)________________________________________________
NOTICE - The signature(s) to the Purchase form or the Assignment form must
------
correspond to the name as written upon the face of the Warrant Certificate
in every particular without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT 10.6(F)
CEO SHARE OPTION PLAN (1999)
A. NAME AND PURPOSE
1. Name: This plan, as amended from time to time, shall be known as the
----
Accent Software International Ltd. CEO Share Option Plan (1999) (the "Plan").
1 2. Purpose: The purpose and intent of the Plan is to provide incentives
-------
to the CEO of Accent Software International Ltd. (the "Company") or of any
parent corporation or subsidiary corporation of the Company (each as defined in
Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"))
("Affiliates") now existing or subsequently formed or acquired by providing him
with opportunities to purchase shares in the Company, pursuant to the Plan that
was approved by the Board of Directors of the Company.
B. GENERAL TERMS AND CONDITIONS OF THE PLAN
3. Administration:
---------------
3.1 The Plan will be administered by a Share Option Committee (the
"Committee"), which will consist of such number of Directors of the Company (not
less than two (2) in number), as may be fixed from time to time by the Board of
Directors of the Company. The Board of Directors shall appoint the members of
the Committee, may from time to time remove members from, or add members to, the
Committee and shall fill vacancies in the Committee however caused. All members
of the Committee shall be disinterested persons within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
3.2 The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it shall determine. Actions
at a meeting of the Committee at which a majority of its members are present or
acts reduced to or approved in writing by all members of the Committee, shall be
the valid acts of the Committee. The Committee may appoint a Secretary, who
shall keep records of its meetings and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
3.3 Subject to the general terms and conditions of this Plan, the
Committee shall have full authority in its discretion, from time to time and at
any time, to determine (i) the persons to whom Option Awards (as hereinafter
defined) shall be granted ("Grantees"), (ii) the number of shares to be covered
by each Option Award, (iii) the time or times at which the same shall be
granted, (iv) the schedule and conditions on which such Option Awards may be
exercised and on which such shares shall be paid for, and/or (v) any other
matter which is necessary or desirable for, or incidental to, the administration
of the Plan. In determining the number of shares covered by the Option Awards
to be granted to each Grantee, the Committee shall consider, among other things,
the Grantee's salary and the duration of the Grantee's employment by the
Company.
3.4 The Committee may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem best. No member of the Board of
Directors or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option Award granted
thereunder.
3.5 The interpretation and construction by the Committee of any provision
of the Plan or of any Option Award thereunder shall be final and conclusive
unless otherwise determined by the Board of Directors.
<PAGE>
4. Eligible Grantees:
------------------
4.1 No Option Award may be granted pursuant to this Plan to any person
serving as a member of the Committee at the time of the grant.
4.2 Subject to this limitation and any restriction imposed by applicable
law, Option Awards may be granted to any Chief Executive Officer of the Company
or an Affiliate, whether or not a Director of the Company or Affiliate ("CEO").
The grant of an Option Award to a Grantee hereunder, shall neither entitle such
Grantee to participate, nor disqualify him from participating, in any other
grant of options pursuant to this Plan or any other share incentive or share
option plan of the Company or any of its subsidiaries.
5. Trustee: The Option Awards and/or shares in the Company which will be
-------
issued upon the exercise of the Option Awards may be held in trust, by a trustee
(the "Trustee"). The Trustee shall hold the same pursuant to the Company's
instructions from time to time. The Trustee shall not use the voting rights
vested in such shares and shall not exercise such rights in any way whatsoever,
except in cases when, at its discretion and after consulting with the Committee,
the Trustee believes that the said rights should be exercised for the protection
of the Grantees as a minority among the Company's shareholders.
6. Reserved Shares: The Company has reserved 2,000,000 authorized but
---------------
unissued Ordinary Shares (nominal value NIS 0.01 per share) of the Company for
purposes of the Plan, subject to adjustment as provided in paragraph 11 hereof.
Any shares under the Plan, in respect of which the right hereunder of a Grantee
to purchase the same shall for any reason terminate, expire or otherwise cease
to exist, shall again be available for grant through Option Awards under the
Plan.
7. Option Awards:
--------------
7.1 The Committee in its discretion may award to Grantees options to
purchase shares in the Company available under the Plan ("Option Awards"). The
Plan is intended to be a Section 102 Employee Option Plan within the meaning of
the Israel Income Tax Ordinance (New Version). The Option Awards granted under
the Plan are intended to be either incentive share options ("Incentive Options")
within the meaning of Section 422 of the Code, or options ("Non-Qualified
Options"). The Company makes no warranty, however, as to the qualification of
any Option Award as an Incentive Option. Option Awards may be granted at any
time after this Plan has been approved by the Board of Directors of the Company
(or prior to this Plan being so approved, provided that the grant of such Option
Awards is made subject to such approval) and the shares reserved for the Plan
effectively created. The date of grant of each Option Award shall be the date
specified by the Committee at the time such award is made.
7.2 The instrument granting an Option Award shall state, inter alia, the
number of shares covered thereby, the dates when it may be exercised (subject to
Section 9.1), the option price, the schedule on which such shares may be paid
for and such other terms and conditions as the Committee at its discretion may
prescribe, provided that they are consistent with this Plan.
8. Option Prices:
--------------
8.1 The price per share covered by each Option Award shall be 100% of the
fair market value of each share as determined by the Committee on the date of
grant, or such other percentage as determined by the Committee; provided,
---------
however, that in the case of an Incentive Option granted to a CEO who, at the
- -------
time such Incentive Option is granted, owns shares possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Company or any subsidiary corporation or parent corporation, the purchase price
for
<PAGE>
each share shall be not less than one hundred ten percent (110%) of the fair
market value per share at the date the Option Award is granted. In determining
the share ownership of a CEO for any purpose under the Plan, the rules of
Section 424(d) of the Code shall be applied, and the Committee may rely on
representations of fact made to it by the CEO and believed by it to be true..
9. Exercise of Option Award:
-------------------------
9.1 Option Awards shall be exercisable pursuant to the terms under which
they were awarded and subject to the terms and conditions of this Plan;
provided, however, that in no event shall an Incentive Option be exercisable
- -----------------
after the expiration of ten (10) years from the date such Option Award is
granted; provided, further, that in the case of an Incentive Option granted to a
-----------------
person who, at the time such Incentive Option is granted, owns shares possessing
more than ten percent (10%) of the total combined voting power of all classes of
shares of the Company or of any subsidiary corporation or parent corporation of
the Company, such Incentive Option shall not be exercisable after the expiration
of five (5) years from the date such Incentive Option is granted.
9.2 An Option Award, or any part thereof, shall be exercisable by the
Grantee's signing and returning to the Company at its principal office (and to
the Trustee, where applicable), a "Notice of Exercise" and a Share Incentive
Agreement (the "Agreement") in such form and substance as may be prescribed by
the Committee from time to time.
9.3 Anything herein to the contrary notwithstanding, but without
derogating from the provisions of paragraph 10 hereof, if any Option Award, or
any part thereof, has not been exercised and the shares covered thereby not paid
for within ten (10) years after the date of grant (or any other period set forth
in the instrument granting such Option Award pursuant to Section 7), such Option
Award, or such part thereof, and the right to acquire such shares shall
terminate, all interests and rights of the Grantee in and to the same shall
expire, and, in the event that in connection therewith any shares are held in
trust as aforesaid, such trust shall expire and the Trustee shall thereafter
hold such shares in an unallocated pool until instructed by the Company that
some or all of such shares are again to be held in trust for one or more
Grantees.
9.4 Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of shares for which Incentive Options (under all
share option plans of the Company and of any parent corporation or subsidiary
corporation of the Company) are exercisable for the first time by a CEO during
any calendar year exceeds one hundred thousand dollars ($100,000), such Option
Awards shall be treated as Non-Qualified Options. For purposes of this
limitation, (a) the fair market value of shares is determined as of the time the
Option Award is granted and (b) options will be taken into account in the order
in which they were granted.
9.5 Each payment for shares under an Option Award shall be in respect of a
whole number of shares, shall be effected in cash or by a cashier's or certified
check payable to the order of the Company, or such other method of payment
acceptable to the Company as determined by the Committee, and shall be
accompanied by a notice stating the number of shares being paid for thereby.
10. Termination of Employment:
--------------------------
10.1 In General: Subject to the provisions of paragraph 10.2 hereof, if a
----------
Grantee should, for any reason, cease to be employed by the Company, all of his
rights, if any, in respect of all Option Awards granted to him under the Plan
which are not yet exercisable on the date of the cessation of employment shall
terminate and, unless otherwise determined by the Board of Directors of the
Company, all of his rights in respect of such Option Awards which are
<PAGE>
exercisable on the date of the cessation of employment, but are not exercised
within 90 days after such cessation of employment, shall terminate upon the
expiration of such 90 day period. In the event of resignation or discharge of a
Grantee from the employ of the Company or a subsidiary thereof, his or her
employment shall, for the purposes of this paragraph 10.1, be deemed to have
ceased upon the delivery to the Company of notice of resignation or the delivery
to the employee of notice of discharge, as the case may be, irrespective of the
effective date of such resignation or discharge. In the event the employment of
a Grantee is terminated by the Company for cause, such Grantee shall not be
entitled to exercise the Option Awards subsequent to the time of delivery of the
notice of discharge.
10.2 Death, Disability, Retirement: Anything herein to the contrary
----------------------------
notwithstanding: If a Grantee should die, or if a Grantee is unable to continue
to be employed by the Company by reason of becoming incapacitated while in the
employ of the Company as a result of an accident or illness or other cause which
is approved by the Committee, or if a Grantee should retire, such Grantee shall,
subject to approval of the Committee (which shall not be unreasonably withheld),
continue to enjoy rights under the Plan on such terms and conditions as the
Committee in its discretion may determine.
11. Adjustments: Upon the happening of any of the following described
-----------
events, a Grantee's rights to purchase shares under the Plan shall be adjusted
as hereinafter provided;
11.1 In the event the Ordinary Shares of the Company shall be subdivided
or combined into a greater or smaller number of shares or if, upon a merger,
consolidation, reorganization, recapitalization or the like, the Ordinary Shares
of the Company shall be exchanged for other securities of the Company or of
another corporation, each Grantee shall be entitled, subject to the conditions
herein stated, to purchase such number of Ordinary Shares or amount of other
securities of the Company or such other corporation as were exchangeable for the
number of Ordinary Shares of the Company which such Grantee would have been
entitled to purchase except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision, combination
or exchange.
11.2 In the event that the Company shall issue any of its Ordinary Shares
or other securities as bonus shares (stock dividend) upon or with respect to any
shares which shall at the time be subject to a right of purchase by a Grantee
hereunder, each Grantee upon exercising such right shall be entitled to receive
(for the purchase price payable upon such exercise), the shares as to which he
or she is exercising such right and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such bonus shares
(stock dividend) were declared, and such amount of shares and the amount of cash
in lieu of fractional shares, as is equal to the shares which he would have
received had he been the holder of the shares as to which he is exercising his
right at all times between the date of the granting of such right and the date
of its exercise.
11.3 Upon the happening of any of the foregoing events, the class and
aggregate number of Ordinary Shares issuable pursuant to the Plan (as set forth
in paragraph 6, hereof), in respect of which Option Awards have not yet been
granted, shall also be appropriately adjusted to reflect the events specified in
paragraphs 11.1 and 11.2 above.
11.4 The Committee shall determine the specific adjustments to be made
under this paragraph 11, and its determination shall be conclusive.
12. Assignability and Sale of Shares:
--------------------------------
12.1 No shares purchasable hereunder which were not fully paid for, shall
be assignable or transferable by the Grantee. For avoidance of doubt, the
foregoing shall not be
<PAGE>
deemed to restrict the transfer of a Grantee's rights in respect of Option
Awards or shares purchasable pursuant to the exercise thereof upon the death of
such Grantee to his estate or other successors by operation of law or will,
whose rights therein shall be governed by paragraph 10.2 hereof.
12.2 No Option Award may be transferred other than by will or by the laws
of descent and distribution, and during the Grantee's lifetime an Option Award
may be exercised only by him.
13. Securities Act of 1933: By his exercise of an Option Award hereunder,
----------------------
the Grantee agrees not to sell, transfer or otherwise dispose of any of the
shares so purchased by him except in compliance with the United States
Securities Act of 1933, as amended, and the rules and regulations thereunder and
the Grantee further agrees that all certificates evidencing any of such shares
shall be appropriately legended to reflect such restriction. The Company does
not obligate itself to register any shares under the United States Securities
Act of 1933, as amended.
14. Term and Amendment of the Plan:
-------------------------------
14.1 The Plan was adopted by the Board of Directors of the Company on May
15, 1995, and shall expire on May 14, 2005 (except as to Option Awards
outstanding on that date). This Plan was approved on May 15, 1995 by a majority
of the Company's shareholders in accordance with Regulation 240.16b-3(b)
promulgated under the Exchange Act.
14.2 The Board of Directors may, at any time and from time to time,
terminate or amend the Plan in any respect except that, without the prior
approval of the Shareholders of the Company: (i) the total number of Ordinary
Shares which may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 11 hereof) and (ii) the provisions of paragraph
4.1 regarding the eligibility may not be modified. In no event may any action
of the Company alter or impair the rights of a Grantee, without his consent,
under any Option Award previously granted to him.
15. Continuance of Employment: Neither the Plan nor the Agreement shall
-------------------------
impose any obligation on the Company or a subsidiary thereof (to the extent
there shall be one or more), to continue any Grantee in its employ, and nothing
in the Plan or in any Option Award granted pursuant thereto shall confer upon
any Grantee any right to continue in the employ of the Company or a subsidiary
thereof, or restrict the right of the Company or a subsidiary thereof, to
terminate such employment at any time.
16. Governing Law: The Plan and all instruments issued thereunder or in
-------------
connection therewith, shall be governed by, and interpreted in accordance with,
the laws of the State of Israel.
17. Application of Funds: The proceeds received by the Company from the
--------------------
sale of shares pursuant to Option Awards granted under the Plan will be used for
general corporate purposes of the Company or any subsidiary thereof.
18. Tax Consequences: Any tax consequences arising from the grant or
----------------
exercise of any Option Award, from the payment for shares covered thereby or
from any other event or act (of the corporation that employs the Grantee or the
Grantee) hereunder, shall be borne solely by the Grantee. Furthermore, the
Grantee shall agree to indemnify the corporation that employs the Grantee and
the Trustee and hold them harmless against and from any and all liability for
any such tax or interest or penalty thereon, including
<PAGE>
without limitation, liabilities relating to the necessity to withhold, or to
have withheld, any such tax from any payment made to the Grantee.
<PAGE>
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into this
14th day of July, 1999, by and among ACCENT SOFTWARE INTERNATIONAL LTD., an
Israeli corporation (the "Company") and the investors listed on the signature
page to this Agreement (individually referred to as "Purchaser" and collectively
as the "Purchasers").
RECITALS
--------
A. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission the "SEC") under the Securities Act of
1933, as amended (the "Act").
B. The Purchasers desire to purchase, upon the terms and conditions set
forth in this Agreement, a number of shares ("Shares") of the Company's Ordinary
Shares, nominal value NIS .01 per share (the "Common Stock").
IN CONSIDERATION OF the mutual promises, representations, warranties and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions set forth in this Agreement, the
Purchasers will purchase in aggregate 9,523,810 Shares with an aggregate
purchase price of $2,000,000 ("Purchase Price") in the names and amounts as set
forth on Exhibit A hereto. The price per share of Common Stock shall be $0.21.
---------
ARTICLE II. CLOSINGS
The closing of the sale and purchase of the Shares under this Agreement
shall take place at the offices of the Company at 2864 South Circle Drive, Suite
500, Colorado Springs, Colorado, in the following three phases:
1.1 Phase I Closing. Immediately upon the execution of this Agreement, or
---------------
at such other time as the parties may agree (the "Phase I Closing Date"), the
Company shall deliver to Purchasers certificates for the Shares being purchased
by each Purchaser on the Phase I Closing Date as set forth on Exhibit A,
---------
registered in the name of each such Purchaser, and each
-1-
<PAGE>
Purchaser shall pay to the Company the respective Purchase Price for the Shares
as set forth on Exhibit A by wire transfer, certified check or other method
---------
acceptable to the Company. Upon receipt of the Purchase Price to be paid on the
Phase I Closing Date, the Company agrees to pay to Gotham Bay Partners, LLC
investment advisory fees representing 6.5% of the Purchase Price received on the
Phase I Closing Date.
1.2 Phase II Closing. The parties hereto covenant and agree to use
----------------
commercially reasonable efforts to help the Company obtain a strategic partner
("Strategic Partner") to market the services provided by the Company in
connection with its Languageware.net website (the "Product"). Within ten (10)
business days after the signing of a letter of intent ("Letter of Intent")
between the Company and a Strategic Partner to market the Product, the Company
shall deliver to Purchasers certificates for the Shares being purchased by each
Purchaser on the Phase II Closing Date as set forth on Exhibit A, registered in
---------
the name of each such Purchaser, and each Purchaser shall pay to the Company the
respective Purchase Price for the Shares as set forth on Exhibit A by wire
---------
transfer, certified check or other method acceptable to the Company. Upon
consummation of the transactions on the Phase II Closing Date, such transactions
shall be final among the parties irrespective of whether the conditions
precedent to the Phase III Closing Date transactions shall be achieved.
1.3 Phase III Closing. Within ten (10) business days after the execution
-----------------
of a definitive agreement memorializing the terms of the strategic alliance set
forth in the Letter of Intent, the Company shall deliver to Purchasers
certificates for the Shares being purchased by each Purchaser on the Phase III
Closing Date as set forth on Exhibit A, registered in the name of each such
---------
Purchaser, and each Purchaser shall pay to the Company the respective Purchase
Price for the Shares as set forth on Exhibit A by wire transfer, certified check
---------
or other method acceptable to the Company.
ARTICLE III. REPRESENTATIONS OF THE COMPANY
The following are representations, warranties and agreements made by the
Company as of the Closing Date.
-2-
<PAGE>
3.1 Organization and Standing. The Company and each of its subsidiaries
-------------------------
is a corporation duly organized and validly existing under the laws of the
jurisdiction in which it is incorporated, and has full corporate power and
authority to conduct its business as presently conducted and as proposed to be
conducted by it and to enter into and perform this Agreement and to carry out
the transactions contemplated herein. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of the
State of Colorado and under the laws of any other state in which qualification
by the Company to do business is required and where failure to do so would have
a Material Adverse Effect. "Material Adverse Effect" means any material adverse
effect on (i) the Shares; (ii) the ability of the Company to perform its
obligations hereunder, or (iii) the business, operations, properties, prospects
or financial condition of the Company and its subsidiaries, taken as a whole.
3.2 Issuance of Shares. The issuance, sale and delivery of the Shares in
------------------
accordance with this Agreement, has been or will be on or prior to the Phase I
Closing Date, duly authorized and reserved for issuance, as the case may be, by
all necessary corporate action on the part of the Company, and the Shares when
so issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable.
3.3 Authority for Agreement. The execution, delivery and performance by
-----------------------
the Company of this Agreement have been duly authorized by all necessary
corporate action, including actions of the Board of Directors of the Company,
and this Agreement has been duly executed and delivered by the Company. This
Agreement constitutes a valid and binding obligation of the Company enforceable
in accordance with its terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. The execution of, and the
Company's performance of the transactions contemplated by, this Agreement and
compliance with its provisions by the Company will not violate any provision of
law and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under the Company's
Memorandum of Association or Articles of Association ("Organizational
Documents"), or any indenture, lease, agreement or other instrument to which the
Company is a party or by which it or any of its properties is bound, or any
decree, judgment, order, statute, rule or regulation applicable to the Company
and will not constitute an event which with the lapse of time or notice by a
third party could result in any default under any of the foregoing or result in
the creation of any lien, charge or encumbrance upon the assets or properties of
the Company or upon its stock.
3.4 Governmental Consents. Based on the representations made by the
---------------------
Purchasers in Article IV of this Agreement, the offer and sale of the Shares to
the Purchasers will be in
-3-
<PAGE>
compliance with applicable federal and state securities laws. All consents,
approvals, orders or authorizations of, or registrations, qualifications,
designations, declarations or filings with, any governmental authority required
on the part of the Company in connection with the execution and delivery of this
Agreement, the offer, issue, sale and delivery of the Shares, or the other
transactions to be consummated at the Closing, as contemplated by this Agreement
have been, or will by the Closing be, obtained.
3.5 Litigation. Except as disclosed in the Company's Private Placement
----------
Memorandum, dated July 13, 1999 (the "PPM"), there is no action, suit,
proceeding or investigation pending, or, to the best of the Company's knowledge,
any basis therefor or threat thereof, against the Company, which questions the
validity of this Agreement or the right of the Company to enter into it, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition (financial or otherwise), business or
prospects of the Company, nor is there any litigation pending or, to the best of
the Company's knowledge, any basis therefor or threat thereof, against the
Company by reason of the past employment relationships of any of the Company's
officers, directors, employees or consultants, the proposed activities of the
Company, or negotiations by the Company with possible investors in the Company.
3.6 Absence of Liabilities. To the best knowledge of the Company, the
----------------------
Company does not have any material liabilities of any type, whether absolute or
contingent, other than those reflected in the financial statements (the
"Financial Statements") included in the Company's most recent periodic reports
filed with the U.S. Securities and Exchange Commission (the "SEC") incorporated
by reference into the PPM, or otherwise disclosed in the PPM.
3.7 Absence of Changes. Since the dates of the Financial Statements,
------------------
there has been no material adverse change in the condition, financial or
otherwise, net worth or operations of the Company, other than changes occurring
in the ordinary course of business except as disclosed in the PPM.
3.8 SEC Documents, Financial Statements. The Common Stock of the Company
-----------------------------------
is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the Company has filed on a timely basis,
during the twelve calendar months and any portion of the month immediately
preceding the date hereof, all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company has not provided to the
Purchasers any information which,
-4-
<PAGE>
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed, other than with
respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Act or the Exchange Act as the case may be
and the rules and regulations of the SEC promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
3.9 Disclosures. As of the date of this Agreement, neither this
-----------
Agreement, the PPM nor any exhibit hereto, nor any report, other written
statement or certificate delivered or to be furnished to Purchasers in
connection with the transactions contemplated by this Agreement, when read
together, contains or will contain any material misstatement of fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
3.10 Registration and Listing. For a period of five (5) years after the
------------------------
Closing Date, the Company will cause its Common Stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all
respects with its reporting and filing obligations under such Exchange Act, will
comply with all requirements related to any registration statement filed
pursuant to this Agreement and will not take any action or file any document
(whether or not permitted by the Act or the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Acts, except as permitted
herein. For a period of five (5) years after the Closing Date, the Company will
take all action within its power to continue the listing or trading of its
Common Stock on the Nasdaq Over-the-Counter Bulletin Board or on a principal
market including the New York Stock Exchange, American Stock Exchange, Nasdaq
NMS or Nasdaq SmallCap Market, and will comply in all respects with the
Company's reporting, filing
-5-
<PAGE>
and other obligations under the bylaws or rules of such principal market. The
covenants set forth in this Section 3.10 shall not be deemed to prohibit a
merger, sale of all assets or other corporate reorganization if the entity
surviving or succeeding to the Company is bound by this Agreement with respect
to its securities issued in exchange for or in replacement of the Common Stock
or the consideration received for or in replacement of the Common Stock is cash.
ARTICLE IV. REPRESENTATIONS OF THE PURCHASER
Each Purchaser, severally and not jointly, represents and warrants to the
Company as follows:
4.1 Investment. Each Purchaser is acquiring the Shares, for their own
----------
account, for investment and not with a view to, or for sale in connection with,
any public distribution thereof and, except as contemplated by this Agreement,
each Purchasers has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition thereof.
4.2 Authority. Each Purchaser has full power and authority to enter into
---------
and to perform this Agreement in accordance with its terms. No Purchaser has
been organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.3 Experience. Each Purchaser has reviewed the representations
----------
concerning the Company contained in this Agreement, and has had the opportunity
to make inquiry concerning the Company, its business and its personnel; each
Purchaser has received any and all written information which it has requested
and all questions and inquiries have been answered to each Purchaser's
satisfaction; and each Purchaser has sufficient business and financial
experience to be able to evaluate the merits and risks of an investment in the
Company.
4.4 Accredited Investor. Each Purchaser is an "accredited investor"
-------------------
within the definition set forth in Securities Act Rule 501 (a) and has executed
and delivered to the Company an "Accredited Investor Questionnaire" in the form
attached hereto as Exhibit B.
4.5 Binding Effect. This Agreement has been duly executed and delivered
--------------
by each Purchaser, constitutes a valid and binding obligation of each Purchaser,
and is enforceable in accordance with its terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies.
-6-
<PAGE>
4.6 Restricted Securities. Each Purchaser understands that (i) except as
---------------------
provided herein, the Shares have not been and are not being registered under the
Securities Act or any state securities laws, and may not be transferred unless
(a) subsequently registered thereunder, or (b) an exemption from such
registration is available, or (c) a Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, or (d) sold pursuant to Rule
144 promulgated under the Securities Act (or a successor rule) ("Rule 144") or
(e) sold or transferred to an affiliate of a Purchaser; (ii) any sale of such
Shares made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Shares under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Shares under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to this Agreement).
4.7 Legends. Each Purchaser understands that until such time as the
-------
Shares have been registered under the Securities Act as contemplated herein, or
otherwise may be sold by a Purchaser pursuant to Rule 144, the certificates for
the Shares shall 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.
The Company shall promptly (within three (3) business days) instruct its
stock transfer agent to issue a certificate without such legend to the holder of
any Shares if (a) the sale of such Shares are registered under the Securities
Act, or (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Shares may be
made without registration under the Securities Act or (c) such holder provides
the Company with reasonable assurances that such Shares can be sold pursuant to
Rule 144.
-7-
<PAGE>
4.8 Solicitation. Each Purchaser acknowledges that the Shares are not
------------
being purchased as a result of any form of general solicitation or general
advertising including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or broadcast over radio,
or television or any seminar or meeting whose attendees have been invited by
general solicitation or general advertising.
ARTICLE V. CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchasers to purchase the Shares on the Phase I, Phase
II and Phase III Closing Dates (collectively, the "Closing Dates") is subject to
the fulfillment, or the waiver by Purchasers, of the following conditions on or
before each of the Closing Dates:
5.1 Accuracy of Representations and Warranties. Each representation and
------------------------------------------
warranty contained in Article III shall be true on and as of each of the Closing
Dates with the same effect as though such representation and warranty had been
made on and as of that date.
5.2 Performance. The Company shall have performed and complied with all
-----------
agreements and conditions contained in this Agreement required to be performed
or complied with by the Company prior to or at each of the Closing Dates.
5.3 Compliance Certificate of the Company. The Company shall have
-------------------------------------
delivered to the Purchasers certificates, executed by the President of the
Company, dated on each of the Closing Dates, certifying to the fulfillment of
the conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.4 Regulatory Matters. No statute, rule, regulation, executive order,
------------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
5.5 Consents. The Company shall have received all consents,
--------
authorizations, approvals and orders necessary to enter into this Agreement and
consummate the transactions contemplated hereby.
5.6 Other Matters. All corporate and other proceedings in connection with
-------------
the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to Purchasers and Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
-8-
<PAGE>
ARTICLE VI. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to sell the Shares at the Closing are
subject to fulfillment, on or before the Closing Date, of each of the following
conditions:
6.1 Accuracy of Representations and Warranties. The representations and
-------------------------------------------
warranties of each of the Purchasers contained in Article IV shall be true on
and as of the Closing Dates with the same effect as though such representations
and warranties had been made on and as of that date.
6.2 Investment. Purchasers shall have tendered, in the manner specified
-----------
in Article II hereof, the Purchase Price for the Shares at each of the Closing
Dates.
6.3 Regulatory Matters. No statute, rule, regulation, executive order,
------------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
6.4 Consents. The Company shall have received all consents,
--------
authorizations, approvals and orders necessary to enter into this Agreement and
consummate the transactions contemplated hereby.
ARTICLE VII. COVENANTS OF THE COMPANY AND PURCHASERS
7.1 Registration of Shares. The Company agrees to file, within ninety
----------------------
(90) days after the Phase I Closing Date, a Registration Statement on Form S-3
registering the Shares issued or to be issued to the Purchasers on the Closing
Dates (the "Registrable Securities").
7.2 Demand Registration. The Company shall cause the Registration
-------------------
Statement required to be filed pursuant to Section 7.1 hereof to become
effective as soon as practicable after filing, but in no event later than six
(6) months after the Phase I Closing Date ("Registration Deadline"). In the
event such registration is not so declared effective or does not include all
Shares, a holder of Registrable Securities shall have the right to require by
notice in writing that the Company register all or any part of the Registrable
Securities held by such holder (a "Demand Registration") and the Company shall
thereupon effect such registration in accordance herewith (which may include
adding such shares to an existing shelf registration). The parties agree that if
the holder of Registrable Securities demands registration of less than all of
the Registrable Securities, the Company, at its option, may nevertheless file a
registration statement covering all of the Registrable Securities. If such
registration statement is declared
-9-
<PAGE>
effective with respect to all Registrable Securities and the Company is in
compliance with its obligations under this Agreement, the demand registration
rights granted pursuant to this Section shall cease. If such registration
statement is not declared effective with respect to all Registrable Securities
or if the Company is not in compliance with such obligations, the demand
registration rights described herein shall remain in effect. The Company shall
not be obligated to effect a Demand Registration as described above: (i) if all
of the Registrable Securities held by the holder of Registrable Securities which
are demanded to be covered by the Demand Registration are, at the time of such
demand, included in an effective registration statement and the Company is in
compliance with its obligations under this Agreement; (ii) if all of the
Registrable Securities may be sold under Rule 144(k) of the Act and the
Company's transfer agent has accepted an instruction from the Company to such
effect; or (iii) at any time after two (2) years from the Closing Date.
7.3 Obligations of the Company. In connection with any registration of
--------------------------
the Registrable Securities required herein, the Company shall have the following
obligations:
(a) The Company shall keep the Registration Statement effective
pursuant to SEC Rule 415 at all times until such date as is the earlier of (i)
the date on which all of the Registrable Securities have been sold and (ii) the
date on which all of the Registrable Securities (in the reasonable opinion of
counsel to the Purchaser) may be immediately sold to the public without
registration pursuant to Rule 144(k) under the Securities Act (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein and all documents incorporated by
reference therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein not misleading.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement.
(c) The Company shall furnish to each Purchaser whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the
-10-
<PAGE>
Registration Statement referred to in Sections 7.1 and 7.2, each letter written
by or on behalf of the Company to the SEC or the staff of the SEC (including,
without limitation, any request to accelerate the effectiveness of any
Registration Statement or amendment thereto), and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion, if any, thereof which contains information
for which the Company has sought confidential treatment), (ii) on the date of
effectiveness of the Registration Statement or any amendment thereto, a notice
stating that the Registration Statement or amendment has been declared
effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Purchaser may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Purchaser.
(d) The Company shall, at its expense, use its best efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as each Purchaser who holds Registrable Securities being
offered reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 7.3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its organizational documents, which in each
case the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
(e) In the event the Purchasers who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
(f) As promptly as practicable after becoming aware of such event, the
Company shall notify each Purchaser of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading,
-11-
<PAGE>
and use its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Purchaser as such
Purchaser may reasonably request.
(g) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued to obtain the withdrawal of such order at the
earliest practicable moment (including in each case by amending or supplementing
such Registration Statement) and to notify each Purchaser who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Purchaser as such
Purchaser may reasonably request).
(h) The Company shall permit a single firm of counsel designated by
the Purchasers to review the Registration Statement and all amendments. and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
(i) The Company shall make available for inspection by (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Purchasers, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to a Purchaser) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 7.3(i). Each Purchaser
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent
-12-
<PAGE>
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Purchasers' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(j) At the request of any Purchaser, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(k) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated by
the SEC.)
(l) The Company shall take all such other actions as any Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
7.4 Reporting Status. So long as the Purchasers beneficially own any of
----------------
the Shares, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
7.5 Corporate Existence. So long as the Purchasers beneficially own any
-------------------
of the Shares, the Company shall maintain its corporate existence, and in the
event of a merger, consolidation or sale of all or substantially all of the
Company's assets, the Corporation shall ensure that the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
the agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
exercise of all Warrants outstanding as of the date of such transaction and (ii)
is a publicly traded corporation whose common stock is listed for trading on the
NASDAQ, NYSE or AMEX.
7.6 Reserved Employee Shares. So long as the Purchasers, in the
------------------------
aggregate, hold more than five percent (5%) of the outstanding shares of Common
Stock, the Company agrees that it will not reserve more than 4,500,000 shares of
Common Stock ("Reserved Employee
-13-
<PAGE>
Shares") for issuance upon exercise of options granted under the Company's
Employee Stock Option Plan and CEO Option Plan (collectively, the "Employee
Option Plans"). Any shares of Common Stock issued upon conversion of options
granted under the Employee Option Plans in excess of the Reserved Employee
Shares shall be subject to the rights granted to Purchasers under Section 7.7
hereof.
7.7 Anti-Dilution. So long as the Purchasers, in the aggregate, hold more
-------------
than five percent (5%) of the outstanding shares of Common Stock, if the Company
offers or sells or enters into any agreement to offer or sell its Common Stock
(other than in connection with an acquisition of technology or a business
entity), then each Purchaser shall have the right to maintain their then current
respective percentage ownership in the Company's outstanding Common Stock,
through the purchase of additional shares of Common Stock at the offering price
offered to third parties in such offer or sale.
7.8 Right of First Refusal. So long as the Purchasers, in the aggregate,
----------------------
hold more than five percent (5%) of the outstanding shares of Common Stock, if
an unaffiliated third party makes a bona fide offer for all of the stock or
substantially all of the assets of the Company (or to lease its product line on
an exclusive basis) ("Acquisition Offer"), the Purchasers shall have thirty (30)
days to match the terms and conditions of the Acquisition Offer. If Purchasers
shall fail to match the terms and conditions of the Acquisition Offer under this
Section 7.8, Purchasers agree to sell their shares of Common Stock under the
terms of the Acquisition Offer, or to vote their shares of Common Stock in favor
of the sale of the assets of the Company or to lease the Company's product line
under the terms of the Acquisition Offer, as the case may be.
7.9 Lock-Up Period. Each of the Purchasers agrees that (a) for a period
--------------
of six (6) months beginning on the Phase I Closing Date, no Purchaser will
transfer, conduct any offering or sale or enter into an agreement to transfer or
sell any of the Shares purchased on the Phase I Closing Date without the prior
written consent of the Company; (b) for a period of six (6) months beginning on
the Phase II Closing Date, no Purchaser will transfer, conduct any offering or
sale or enter into an agreement to transfer or sell any of the Shares purchased
on the Phase II Closing Date without the prior written consent of the Company;
(c) for a period of six (6) months beginning on the Phase III Closing Date, no
Purchaser will transfer, conduct any offering or sale or enter into an agreement
to transfer or sell any of the Shares purchased on the Phase III Closing Date
without the prior written consent of the Company.
7.10 Board Representation. Upon closing of the transactions contemplated
--------------------
to be consummated on the Phase I Closing Date, the Company will take all steps
necessary and appropriate under its Organizational Documents, including the
calling of a special meeting of the Board of Directors of the Company, to
appoint two (2) members of the Company's Board of Directors as shall be
designated by the Purchasers.
-14-
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by the Company. Subject to the conditions set forth
------------------------------
below, in connection with any registration of Registrable Securities pursuant to
Article 7 above, the Company agrees to indemnify and hold harmless Purchasers,
each person, if any, who controls any Purchaser within the meaning of Section 15
of the Securities Act and Purchasers' officers, directors and agents, if any, as
follows:
(a) Against any and all loss, claim, damage and expense whatsoever arising
out of or based upon (including but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or
defending any litigation, commenced or threatened, or any claim
whatsoever based upon) any untrue or alleged material fact contained
in any preliminary prospectus (if used prior to the effective date of
the Registration Statement), the Registration Statement or the
prospectus (as from time to time amended and supplemented), or in any
application or other document executed by the Company or based upon
written information furnished by the Company filed in any jurisdiction
in order to qualify the Company's securities under the securities laws
thereof; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or any other violation of applicable federal
or state statutory or regulatory requirements or limitations relating
to action or inaction by the Company in the course of preparing,
filing, or implementing the Registration Statement; provided however,
that the indemnity contained in this subsection (a) shall not apply to
a holder of Registrable Securities with respect to any loss, claim,
damage, liability or action arising out of or based upon any untrue or
alleged untrue statement or omission made in reliance upon and in
conformity with any information furnished in writing to the Company by
or on behalf of such holder expressly for use in connection therewith
or arising out of any action or inaction of any such holder;
(b) Subject to the provision contained in subsection (a) above, against
any and all loss, liability, claim, damage and expense whatsoever to
the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened or of any claim whatsoever based
upon any such untrue statement or omission or any such alleged untrue
statement or omission (including but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or
defending against any such litigation or claim) if such settlement is
effected with the written consent of the Company.
-15-
<PAGE>
(c) The Company shall be entitled to participate at its own expense in the
defense of any suit brought to enforce any such claim, but if the
Company elects to assume the defense, such defense shall be conducted
by counsel chosen by it, provided that such counsel is reasonably
satisfactory to the Purchasers and any other holders of Registrable
Securities or controlling persons who are defendants in any suit so
brought. In the event the Company elects to assume the defense of any
such suit and retain such counsel, such holders or controlling persons
shall, after the date they are notified of such election, bear the
fees and expenses of any counsel thereafter retained by them as well
as any other expenses thereafter incurred by them in connection with
the defense thereof unless, in the reasonable opinion of such holders
or controlling persons, separate representation is advisable because
of conflict in the interests of the parties, in which case the Company
shall continue to pay the fees of such counsel.
8.2 Indemnification of Company. Each Purchaser, severally and not
--------------------------
jointly, agrees to indemnify and hold harmless the Company, any underwriters for
the offering and each of their officers and directors and agents and each other
person, if any, who controls the Company or such underwriters within the meaning
of Section 15 of the U.S. Securities Act against any and all such losses,
liabilities, claims, damages and expenses as are indemnified against by the
Company under Section 8; provided however, that such indemnification shall be
limited to statements or omissions, if any, made (or in settlement of any
litigation effected with your written consent, alleged to have been made) in any
preliminary prospectus, the Registration Statement or prospectus or any
amendment or supplement thereof, or written information furnished by a
Purchaser. In case any action shall be brought against the Company or any other
person so indemnified, in respect of which indemnity may be sought against a
Purchaser, the Purchasers shall have the rights and duties given to the Company,
and each other person so indemnified shall have the rights and duties given to
Purchasers by the provisions of Section 8(c).
ARTICLE IX MISCELLANEOUS
9.1 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
agreements, representations, warranties and covenants contained herein shall
survive the execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
-16-
<PAGE>
9.2 Expenses. Each party shall pay its own expenses in connection with
--------
the investment contemplated herein.
9.3 Notices. All notices, requests, consents and other communications
-------
when deemed given under this Agreement shall be in writing and shall be
delivered by hand, which shall include delivery by express courier service, or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid, and notice shall be deemed given when actually received by the
intended recipient:
If to the Company:
Accent Software International, Ltd.
2864 South Circle Drive, Suite 500
Colorado Springs, CO 80906
Attention: President
With a copy to:
Herbert H. Davis III
Rothgerber, Johnson & Lyons LLP
1200 17th Street, Suite 3000
Denver, Colorado 80202-5839
If to Purchasers:
Gotham Bay Partners LLC
Attn: Brian Johnson
600 17th Street, Suite 600
Denver, CO 80202
or at such other address or addresses as may have been furnished in writing
pursuant to the provision of this Section 9.3.
9.4 Entire Agreement. This Agreement together with the other agreements
----------------
referred to herein embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.
9.5 Amendments and Waivers. Except as otherwise expressly set forth in
----------------------
this Agreement, any term of this Agreement may be amended and the observance of
any term of
-17-
<PAGE>
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) with the written consent of the Company
as to any provision that is for the benefit of the Company and by the
Purchasers.
9.6 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.7 Headings. The headings of the sections, articles and paragraphs of
--------
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
9.8 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision.
9.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado.
9.10 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto.
9.11 Specific Enforcement, Consent to Jurisdiction. The Company and the
---------------------------------------------
Purchasers acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which either of them may be entitled by law or equity.
The Company and the Purchasers each (i) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the United
States sitting in Colorado for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and the Purchasers each consent to
process being served in any such suit action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
-18-
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the day
and year first above written.
THE COMPANY:
ACCENT SOFTWARE
INTERNATIONAL LTD.
By:
----------------------------
Name: Todd Oseth
--------------------------
Title: President, CEO
-------------------------
THE PURCHASERS:
GOTHAM BAY PARTNERS LLC
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
-19-
<PAGE>
EXHIBIT A
---------
PHASE I CLOSING DATE
INVESTOR SHARES PURCHASE PRICE
- -------- ------ --------------
Gotham Bay
Partners LLC 2,380,952 $500,000
PHASE II CLOSING DATE
INVESTOR SHARES PURCHASE PRICE
- -------- ------ --------------
Gotham Bay
Partners LLC 3,571,429 $750,000
PHASE III CLOSING DATE
INVESTOR SHARES PURCHASE PRICE
- -------- ------ --------------
Gotham Bay
Partners LLC 3,571,429 $750,000
TOTALS 9,523,810 $2,000,000
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 292
<ALLOWANCES> 102
<INVENTORY> 0
<CURRENT-ASSETS> 304
<PP&E> 111
<DEPRECIATION> 106
<TOTAL-ASSETS> 309
<CURRENT-LIABILITIES> 683
<BONDS> 0
0
7
<COMMON> 77
<OTHER-SE> (458)
<TOTAL-LIABILITY-AND-EQUITY> 309
<SALES> 1,011
<TOTAL-REVENUES> 1,011
<CGS> 548
<TOTAL-COSTS> 1,769
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (782)
<INCOME-TAX> 0
<INCOME-CONTINUING> (782)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,117
<CHANGES> 0
<NET-INCOME> 335
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
