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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Accent Software International, LTD.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
ACCENT SOFTWARE INTERNATIONAL LTD.
C/O Yigal Arnon & Co.
22 Rivlin Street
Jerusalem 91000, Israel
Accent Software International
2864 S. Circle Dr., Suite 500
Colorado Springs, CO 80906
Phone: 719-955-3400
Fax: 719-955-0282
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NOTICE OF ANNUAL GENERAL AND
EXTRAORDINARY MEETING OF SHAREHOLDERS
To Be Held June 25, 1999
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May 13, 1999
To Our Shareholders:
You are cordially invited to attend the Annual General and Extraordinary
Meeting of Shareholders to be held June 25, 1999, beginning at 10:00 A.M., at
the Sheraton Colorado Springs Hotel, 2886 S. Circle Drive, Colorado Springs,
Colorado, U.S.A. The principal items of business will be:
1. To elect the Board of Directors;
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 authorized Ordinary
Shares shall be 130,000,000 by approving a corresponding amendment to
the Company's Memorandum of Association and Articles of Association;
3. (i) 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;
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;
5. To approve the adoption of the CEO Share Option Plan (1999) and the
grant of certain options pursuant thereto;
6. To approve an amendment to the Company's Articles of Association that
will (i) authorize the holders of Series C Preferred Shares to elect,
voting as a separate class, one (1) individual to the Board of
Directors while allowing holders of Ordinary Shares to elect remaining
directors voting as a separate class from Series C Preferred; (ii)
require any vacancies on the Board of Directors to be filled only by
the holders of the capital stock of the class originally electing the
directors whose seat is vacant, and (iii) reflect
1
that the right of the holders of the Series C Preferred to elect one
director shall continue for as long as the holders hold all or part of
the Series C Preferred or at least 25% of the Ordinary Shares issued
upon conversion of the Series C Preferred;
7. 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;
8. To appoint Luboshitz, Kasierer & Co., a member firm of Arthur Andersen,
as independent auditors, and to authorize the Board of Directors to
determine their level of compensation; and
9. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Israel Companies Ordinance confers upon the shareholders of an Israeli
company limited rights to receive and deliberate with respect to the Company's
financial statements for the year ended and as of December 31, 1998.
Concurrently herewith, the Company is mailing to its shareholders its Annual
Report to Shareholders which includes the audited financial statements referred
to above.
Only holders of record of the Series C Preferred Shares and Ordinary
Shares, whether directly or as part of the Company's outstanding Units, at the
close of business on May 3, 1999, will be entitled to notice of and to vote at
the Meeting. Please sign, date and mail the enclosed proxy so that your shares
may be represented at the Meeting if you are unable to attend and vote in
person.
By Order of the Board of Directors.
Todd Oseth
Chairman
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ACCENT SOFTWARE INTERNATIONAL LTD.
C/O Yigal Arnon & Co.
22 Rivlin Street
Jerusalem 91000, Israel
Accent Software International
2864 S. Circle Dr., Suite 500
Colorado Springs, CO 80906
Phone: 719-955-3400
Fax: 719-955-0282
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PROXY STATEMENT
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Annual General and Extraordinary Meeting of Shareholders
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May 13, 1999
This Proxy Statement is being furnished to shareholders of Accent Software
International Ltd., a company organized under the laws of the State of Israel
(the "Company"). The Board of Directors of the Company is soliciting your proxy
on the proxy card included with this proxy statement to be voted at the Annual
General and Extraordinary Meeting of Shareholders (the "Meeting") to be held on
June 25, 1999, beginning at 10:00 A.M., and at any adjournments thereof.
At the Meeting, Shareholders will be asked:
1. To elect five (5) individuals to the Board of Directors;
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;
3. (i) 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;
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;
5. To approve the adoption of the CEO Share Option Plan (1999), and the grant
of certain options pursuant thereto;
6. To approve an amendment to the Company's Articles of Association that will
(i) authorize the holders of Series C Preferred Shares to elect, voting as
a separate class, one (1) individual to the Board of Directors while
allowing holders of Ordinary Shares to elect remaining directors voting
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as a separate class from Series C Preferred; (ii) require any vacancies on
the Board of Directors to be filled only by the holders of the capital
stock of the class originally electing the directors whose seat is vacant,
and (iii) reflect that the right of the holders of the Series C Preferred
to elect one director shall continue for as long as the holders hold all or
part of the Series C Preferred or at least 25% of the Ordinary Shares
issued upon conversion of the Series C Preferred;
7. 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;
8. 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; and
9. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The Israel Companies Ordinance confers upon the shareholders of an Israeli
company limited rights to receive and deliberate with respect to the Company's
financial statements for the year ended and as of December 31, 1998.
Concurrently herewith, the Company is mailing to its shareholders its Annual
Report to Shareholders which includes the audited financial statements referred
to above.
The Board of Directors has fixed the close of business on May 3, 1999, as
the record date (the "Record Date") for the determination of the holders of the
Series C Preferred Shares and Ordinary Shares, whether directly or as part of
the Company's outstanding Units, entitled to notice of and to vote at the
Meeting. Each Shareholder of Series C Preferred Shares will be entitled to
2222.22 votes for each Series C Preferred Share held on all matters to come
before the Meeting except for the election of the Company's Board of Directors
(see "PROPOSAL 6: AMENDMENT TO THE ARTICLES OF ASSOCIATION TO ENTITLE THE
HOLDERS OF THE COMPANY'S SERIES C PREFERRED SHARES TO ELECT ONE MEMBER TO THE
BOARD OF DIRECTORS Each Shareholder of Ordinary Shares will be entitled to one
vote for each Ordinary Share held on all matters to come before the Meeting.
Holders of both the Series C Preferred Shares and Ordinary Shares may vote in
person or by proxy authorized in writing. At the close of business on May 3,
1999, there were 29,291,504 Ordinary Shares outstanding and entitled to vote and
4,000 Series C Preferred Shares outstanding and entitled to vote on the basis
that all Series C Preferred Shares had been converted into an aggregate of
8,888,889 Ordinary Shares.
This Proxy Statement and the accompanying form of proxy are first being
sent to holders of the Ordinary Shares on or about May 13, 1999.
THE MEETING
Date, Time and Place
The Meeting will be held June 25, 1999, beginning at 10:00 A.M., at the
Sheraton Colorado Springs Hotel, 2886 S. Circle Drive, Colorado Springs,
Colorado, U.S.A.
Matters To Be Considered
At the Meeting, Shareholders will be asked to consider and vote upon:
(i) the election of the Board of Directors (See "PROPOSAL 1:
ELECTION OF DIRECTORS");
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(ii) the increase in the authorized share capital and in the
number of Ordinary Shares which are authorized and available
for issuance (See "PROPOSAL 2: CAPITALIZATION AMENDMENT");
(iii) a reverse stock split of the Company's outstanding shares,
together with an increase in the nominal value of the
Ordinary Shares, and amendments to the Memorandum of
Association and Articles of Association of the Company to
reflect these matters (See "PROPOSAL 3: AMENDMENT TO THE
ARTICLES OF ASSOCIATION TO EFFECT A REVERSE STOCK SPLIT".
(iv) the increase in the number of shares which may be granted
under the Employee Share Option Plan (1995). (See "PROPOSAL
4: APPROVAL OF AN INCREASE IN THE TOTAL NUMBER OF OPTIONS TO
PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED UNDER THE
COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)");
(v) the adoption of the CEO Share Option Plan (1999) and grant
of certain options pursuant thereto; (See "PROPOSAL 5:
ADOPTION OF THE COMPANY'S CEO SHARE OPTION PLAN (1999) AND
GRANT OF CERTAIN OPTIONS");
(vi) to approve an amendment to the Company's Articles of
Association to authorize the holders of Series C Preferred
Shares, voting as a separate class, to elect one (1) member
to the Board of Directors with such right continuing for as
long as holders hold all or part of the Series C Preferred
or at least 25% of the Ordinary Shares issued upon
conversion of the Series C Preferred; to reflect the right
of holders of Ordinary Shares to elect remaining directors
voting as a separate class from Series C Preferred; and
require any vacancies on the Board of Directors to be filled
only by the holders of the capital stock of the class
originally electing the directors whose seat is vacant (See
"PROPOSAL 6: AMENDMENT TO THE ARTICLES OF ASSOCIATION TO
ENTITLE HOLDERS OF THE COMPANY'S SERIES C PREFERRED SHARES
TO ELECT ONE MEMBER TO THE BOARD OF DIRECTORS"); and
(vii) to approve a change in the name of the Company to 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 (See "PROPOSAL 7: CHANGE IN
NAME OF COMPANY");
(viii) the appointment of independent auditors (See "PROPOSAL 8:
APPOINTMENT OF INDEPENDENT AUDITORS").
The Board of Directors knows of no matters that are to be brought before
the Meeting other than as set forth in the Notice of Meeting and this Proxy
Statement. If any other matters properly come before the Meeting or at any
adjournment thereof, the persons named in the enclosed form of proxy or their
substitutes will vote in accordance with their best judgment on such matters.
Record Date; Quorum; Shares Outstanding and Entitled to Vote
Shareholders as of the Record Date are entitled to notice of and to vote at
the Meeting. As of the Record Date, there were 29,291,504 Ordinary Shares
outstanding and entitled to vote, with each Ordinary Share entitled to one vote.
As of the Record Date, there were 4,000 Series C Preferred Shares outstanding
and entitled to vote with each Series C Preferred Share entitled to 2222.22
votes as Ordinary Shares . At the Meeting, except with respect to the election
of the Company's Board of Directors, the holders of the Series C Preferred
Shares have the right to vote with the holders of the Ordinary Shares as a
single class on all matters with a number of votes equal to the number of
Ordinary Shares into which the Series C Preferred Shares are convertible. Except
with respect to the election of the Company's Board of Directors, the holders of
the Series C Preferred Shares have an aggregate of 8,888,889 votes on all
matters submitted to the holders of the Company's Ordinary Shares. Pursuant to
the Company's Articles of Association, the presence, in person or by proxy, of
two persons entitled to vote upon the business to be transacted in the Annual
General and Extraordinary Meeting, each being a shareholder, a proxy for a
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shareholder or a representative of a corporate shareholder, holding together
more than 33-1/3% of the outstanding Ordinary Shares and Series C Preferred
Shares as if converted to Ordinary Shares, is necessary to constitute a quorum
at the Annual General and Extraordinary Meeting with respect to all matters
apart from items (ii), (iii), (vi) and (vii) on page 4. With respect to items
(ii), (iii), (vi) and (vii), the presence, in person or by proxy, of two
persons entitled to vote upon the business to be transacted in the Annual
General and Extraordinary Meeting, each being a shareholder, a proxy for a
shareholder or a representative of a corporate shareholder, holding together
more than 51% of the outstanding Ordinary Shares and Series C Preferred Shares
as if converted to Ordinary Shares, is necessary to constitute a quorum.
Required Votes
The affirmative vote of the holders of a majority of the Ordinary Shares
and Ordinary Shares issuable upon conversion of the Series C Preferred Shares
present and voting at the Meeting is required to approve each of the matters
upon which the Shareholders will be asked to vote apart from items (ii), (iii),
(vi) and (vii) on page 4. The affirmative vote of the holders of at least 75%
of the Ordinary Shares and Ordinary Shares issuable upon conversion of the
Series C Preferred Shares present and voting at the meeting is required to
approve the matter set out in items (ii), (iii), (vi) and (vii).
Voting and Revocation of Proxies
Shareholders are requested to complete, date, sign and promptly return the
accompanying form of proxy in the enclosed envelope. Ordinary Shares, Units and
Preferred Shares represented by properly executed proxies received by the
Company and not revoked will be voted at the Meeting in accordance with the
instructions contained therein. If instructions are not given, proxies will be
voted FOR the election of each nominee for director named herein, FOR the
--- ---
increase in the total number of authorized Ordinary Shares, FOR an amendment to
---
the Company's Articles of Association to effect a reverse stock split, FOR the
---
increase in the total number of options available for grant under the Employee
Share Option Plan (1995), FOR the adoption of the CEO Share Option Plan (1999)
---
and grant of certain options pursuant thereto, FOR an amendment to the Company's
---
Articles of Association entitling holders of Series C Preferred Shares to vote
as a separate class to elect one (1) member to the Board of Directors while
holders of Ordinary Shares voting as a separate class from Series C Preferred to
elect remaining members to the Board of Directors, FOR the change in the name of
---
the Company to LanguageWare.net Ltd., and FOR the appointment of the selection
---
of independent auditors and authorization for the Board of Directors to
determine their compensation.
Any proxy signed and returned by a Shareholder may be revoked at any time
before it is voted by filing with the President of the Company, at the address
2864 S. Circle Drive, Suite 500, Colorado Springs, CO 80906, U.S.A., written
notice of such revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person. Attendance at the Meeting will not
in and of itself constitute revocation of a proxy.
Proxy Solicitation
The Company will bear the costs of solicitation of proxies for the Meeting.
In addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies from Shareholders by telephone, telegram, personal
interview or otherwise. Such directors, officers and employees will not receive
additional compensation, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation. Brokers, nominees, fiduciaries and other
custodians have been requested to forward soliciting material to the beneficial
owners of Ordinary Shares and Units held of record by them, and such custodians
will be reimbursed for their reasonable expenses.
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Independent Auditors
The Company has been advised that a representative of Luboshitz, Kasierer &
Co., a member firm of Arthur Andersen and the Company's independent auditors for
1998, will not be present at the Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
Directors are to be elected to serve until the next Annual General Meeting
or until their successors are elected and qualified. Unless authority to vote
is withheld, the proxies will be voted FOR the five (5) nominees named and
---
described below, all of whom have consented to being named in this proxy
statement and to serve if elected. The Board of Directors does not expect that
any of the nominees will be unavailable for election as a director. However,
if, by reason of an unexpected occurrence, one or more of the nominees is not
available for election, the persons named in the form of proxy have advised that
they will vote for such substitute nominees as the Board of Directors of the
Company may propose. The following information is current and correct as of May
3, 1999.
Todd A. Oseth Mr. Oseth, 37, was appointed President and Chief Executive
Officer of the Company on February 6, 1997. He has also
served as Chairman of the Company since October 8, 1998.
Prior to joining the Company, Mr. Oseth served as Vice
President, Business Development of Sony Information
Technologies of America. From 1989 to 1995, he served in
various senior managerial capacities, including two years as
President of Enhanced Memory Systems, Inc., a subsidiary of
Ramtron International Corp. He holds a B.S. degree in
Electrical Engineering and Computer Science from the
University of Minnesota and an M.B.A. degree from the
University of St. Thomas.
Esther Dyson Ms. Dyson, 45, has served as a Director of the Company since
June 1996. Ms. Dyson has been President of EDventure
Holdings, Inc., a diversified holding company which
publishes newsletters and sponsors conferences for the
software industry, for more than the past five years. Ms.
Dyson is a member of the advisory boards of the Software
Entrepreneurs Forum, the Poynter Institute for Media
Studies, the Institute for Research on Learning and the
Cyberspace Law Institute. Ms. Dyson is a limited partner of
the Mayfield Software Fund. Ms. Dyson is also a Director of
Thinking Tools, Inc.
Bob Kutnick Mr. Kutnick has served as a Director of the Company since
July 1998. Mr. Kutnick currently serves as Senior Vice
President of Strategic Business Development and Chief
Technology Officer in the Office of the Chief Executive for
Lernout and Hauspie Speech Products, N.V. ("L&H"). In this
role, Mr. Kutnick is responsible for mergers, joint ventures
and acquisitions, development of technical strategy for
future products and markets, and establishing relationships
with strategic partners. Previously, Mr. Kutnick held
similar positions at Quarterdeck Corporation, a utilities
and Internet software company, and AMKLY Systems, Inc., a PC
hardware vendor. Prior to AMKLY Systems, he served as Vice
President of Strategic Projects for AST Research, Inc. where
he was responsible for repositioning the company into the
systems business from its original add-on and peripheral
focus. Kutnick received a Masters degree in Computer
Information and Control Engineering from the University of
Michigan. He is a well-known industry speaker who has spoken
at numerous industry trade shows and conferences.
7
Pursuant to a Preferred Stock Purchase Agreement, dated
June 4, 1998, between the Company and L&H, whereby L&H
purchased 4,000 Series C Preferred Shares for $4
million, the signatories agreed, subject to approval by
holders of Ordinary Shares, that the Series C Preferred
Shareholders be entitled to vote as a separate class to
elect one (1) director and holders of Ordinary Shares,
voting as a separate class, be entitled to elect
remaining directors. Mr. Kutnick currently serves as
L&H's designee to the Company's Board of Directors.
Francis Vanderhoydonck Mr. Vanderhoydonck, 40, has served as a Director of the
Company since March 1999. Mr. Vanderhoydonck serves as
President and Managing Director of Lernout & Hauspie
Investment Company ("LHIC") since its incorporation.
Prior to joining LHIC, Francis Vanderhoydonck worked at
the Generale Bank, Belgium's largest bank, since 1986
where he became the head of Corporate & Investment
Banking in 1995.
Chantal Mestdagh Ms. Mestdagh, 37, has served as a Director of the
Company since March 1999. Ms. Mestdagh joined LHIC at
its incorporation as Chief Financial Officer. She was
formerly a Senior Audit Manager at KPMG Belgium where
she was the audit manager for several public companies
including Lernout & Hauspie Speech Products, N.V.
Pursuant to a Loan Agreement, dated March 3, 1999,
between the Company and LHIC, the Company agreed that
LHIC would be entitled to appoint two (2) individuals
as interim members of the Company's Board of Directors
and that such members would be presented as nominees at
the Company's next Annual General and Extraordinary
Meeting of Shareholders. Mr. Vanderhoydonck and Ms.
Mestdagh currently serve as LHIC's designees to the
Company's Board of Directors.
The Board of Directors recommends a vote FOR the above named nominees.
---
PROPOSAL 2: CAPITALIZATION AMENDMENT
On April 23, 1999, the Board of Directors unanimously adopted a resolution
recommending that the shareholders approve an amendment to the Articles of
Association of the Company which increases the authorized share capital of the
Company by NIS 650,000, divided into 65,000,000 Ordinary Shares, each with a
nominal value of NIS 0.01 per share, so that the Company's authorized share
capital shall consist of 130,000,000 Ordinary Shares (together with 10,000,000
authorized Preferred Shares).
The funds raised during 1998 are essentially exhausted and the Company is
dependent on new sources of revenue, further cost reduction initiatives, an
infusion of additional external capital, or some combination of these actions if
it is to have adequate working capital to meet its operating requirements. Any
failure on the part of the Company to obtain adequate working capital will have
a material adverse impact on the Company and may cause the Company to cease
operations.
As of May 3, 1999, the Company had 29,291,504 Ordinary Shares issued and
outstanding. It also had 15,760,357 shares reserved for issuance upon the
exercise of outstanding warrants, 3,854,416 shares reserved for issuance upon
the exercise of outstanding options and 11,660,452 shares reserved for the
conversion of its Series C Preferred Shares or debt convertible into Series C
Preferred Shares. Thus, of
8
the current authorized number of Ordinary Shares of 65,000,000, only 4,433,271
shares remained available for further issuance by the Company in pursuit of its
business activities.
Furthermore, the Company has been having discussions with potential financial
and strategic investors regarding possible investments in the Company.
The proposed amendment will give the Company a sufficient number of
unreserved and unissued shares to allow the Company to pursue equity financing
transactions, strategic alliances or acquisitions, to compensate consultants and
employees, and for other transactions which the Board of Directors believes may
be in the best interest of the Company's shareholders, including, potentially,
the use of equity to satisfy the claims of the Company's creditors. Any unissued
authorized shares may be issued in the future by the Board of Directors, without
further shareholder approval (except in those situations where shareholder
approval is required by applicable laws, regulations, rules or contract), for
such corporate purposes as the Board may deem in the best interest of the
Company.
The increase in the authorized shares proposed by the Board is substantial
and is designed to provide flexibility to the Company. If, in the future, a
significant amount of additional shares are issued, significant dilution of the
beneficial ownership interests and/or voting power of the Company's current
shareholders will occur.
Although the Company does not currently contemplate using any of the
authorized shares for such purpose, the additional authorized shares could be
used for purposes that might be deemed to be in defense of a potential takeover
threat. For example, Ordinary Shares could be issued to persons favoring the
Board of Directors, thereby making removal of the incumbent Board more difficult
and making acquisition of a sufficient number of shares to accomplish a takeover
more costly. Moreover, the additional shares could be used as part of a "rights"
or "poison pill" plan to deter future takeovers.
Vote Required
Pursuant to the terms of the Israeli Companies Ordinance, the increase in the
share capital by NIS 650,000 divided into 65,000,000 Ordinary Shares, nominal
value NIS 0.01 per share, must be approved by 75% of Shares outstanding present
and voting at a duly convened meeting of the shareholders of the Company.
Consequently, the shareholders of the Company are requested to adopt the
following special resolution:
RESOLVED, that the authorized share capital of the Company be increased by NIS
650,000, divided into 65,000,000 Ordinary Shares, nominal value 0.01 per share,
and that the Articles of Association be amended to increase the number of
authorized shares by an additional 65,000,000 Ordinary Shares.
The Board of Directors recommends a vote FOR this proposal.
---
PROPOSAL 3: AMENDMENT TO THE ARTICLES OF ASSOCIATION
TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors proposes to obtain authorization from the Shareholders
to effect a reverse stock split of the Ordinary Shares in a range from one share
for every five shares outstanding to one share for every fifteen shares
outstanding. Under the proposal, the Board would be authorized to effect a
reverse stock split at any time prior to January 1, 2000; however, the
determination of whether or not to
9
effect a reverse stock split, and the timing and the exchange ratio of a reverse
stock split, would remain, within the range provided for in the resolution,
within the sole discretion of the Board.
The possible reverse stock split is intended to result in a higher per share
market price for the Company's Ordinary Shares that will increase investor
interest and eliminate the resistance of brokerage firms.
Reasons for the Reverse Stock Split
The Board believes that effecting a reverse stock split would be beneficial
to the Company and its shareholders. The Board of Directors believes there may
be several reasons for effecting a reverse stock split during the remainder of
the year in an attempt to enhance investor interest in the Ordinary Shares and
to attempt to help the investment community realize the underlying value of the
Ordinary Shares. First, the Board of Directors believes that the relatively low
per share market price of the Ordinary Shares (US$0.25 as of the record date)
impairs the acceptability of the Ordinary Shares to institutional investors and
other members of the investing public. Theoretically the number of shares
outstanding should not, by itself, affect the marketability of the Ordinary
Shares, the type of investor who acquires it, or the Company's reputation in the
financial community. In practice this is not necessarily the case, as many
institutional investors look upon stock price below $10.00 per share as unduly
speculative and volatile in nature and, as a matter of policy, avoid investment
in such stocks.
Further, the Board of Directors believes that the current per-share price
level of the Ordinary Shares as quoted on the OTC Bulletin Board has reduced the
effective marketability of the shares because of the reluctance of many leading
brokerage firms to recommend low-priced stock to their clients. In addition, a
variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing in low-priced stocks. Some of those
policies and practices pertain to the payment of brokers' commissions and to
time-consuming procedures that function to make the handling of low-priced
stocks unattractive to brokers from an economic standpoint. Many brokerage
firms also prohibit investors from purchasing on margin stocks that are trading
below certain levels.
The Board also believes that the structure of trading commissions also
tends to have an adverse impact upon holders of low-priced stock because the
brokerage commission on a sale of low priced stock generally represents a higher
percentage of the sales price than the commission on a relatively higher priced
stock. Also, the financial press is less interested in low-price shares.
Finally, the low share price may have a negative effect on the potential ability
of the Company to raise capital by issuing additional Ordinary Shares or other
securities convertible into Ordinary Shares or to undertake merger or
acquisition transactions.
The Board is soliciting Shareholders approval of the reverse stock split at
the Annual meeting in order to save the cost and expense as well as time which
would be required to hold a special meeting during the year to obtain such
approval. Accordingly, the Board of Directors recommends the adoption of the
following special resolution by the Shareholders:
"Resolved, that the Board of Directors be, and hereby is, authorized: (i) to
cause the Company to effect a reverse stock split of the Ordinary Shares of the
Company at any time prior to January 1, 2000 in such exchange ratio as the
Board, in its sole discretion, shall deem advisable; provided, however, that the
exchange ratio shall not be less than one Ordinary Share for every five Ordinary
Shares outstanding or greater than one Ordinary Share for every fifteen Ordinary
Shares outstanding; and provided further, that any fractional share shall be
rounded upward to the nearest share. (ii) to take all actions necessary,
including the sale of shares on the open market to compensate shareholders for
fractional shares, if any, resulting from such reverse stock split; (iii) to
increase the par value of the Ordinary Shares of the Company from NIS 0.01 to
such value between NIS 0.05 and NIS 0.15 as will correspond to the exchange
ratio; and (iv) to amend the Memorandum of Association and Articles of
Association, accordingly."
10
Whether or not the Board of Directors determines to effect the reverse stock
split prior to January 1, 2000 will depend on events and circumstances that
exist from time to time during the coming year and whether the reverse stock
split is in the best interests of the Company and its shareholders. Such
determination shall be based upon various factors, including but not limited to,
the likely effect of the reverse stock split on the market price of the Ordinary
Shares, the Company's working capital needs in light of the existing and
expected marketability and liquidity of the Ordinary Shares, the perceived need
for the split in connection with any sale of securities, the cost and expenses
associated with effecting the split, and prevailing market conditions. There are
no assurances that a reverse split will be consummated.
It is expected that the filing of any amendments to the Articles of
Association of the Company determined by the Board will be made only after ten
days' advance written notice of the record date for the reverse stock split has
been given to the National Association of Securities Dealers, Inc., in
accordance with Rule 10b-17 under the Securities Exchange Act of 1934, as
amended.
While the board believes that the Ordinary Shares will trade at higher prices
than those which have prevailed in recent months, there is no assurance that
such increase in the trading price will occur or, if it does occur, that it will
equal or exceed the direct arithmetical result of a reverse stock split since
there are numerous factors and contingencies which could affect such price.
Effects of a Reverse Stock Split
The reverse stock split will not change the proportionate equity interests
of the Company's shareholders, nor will the respective voting rights and other
rights of shareholders be altered, except for possible immaterial changes due
the rounding up of fractional shares to the nearest whole share as described
below. Upon effectiveness, the reverse stock split will result in a reduction
of the number of Ordinary Shares issued and outstanding with a corresponding
decrease in the number of authorized and unissued Ordinary Shares. The Ordinary
Shares issued pursuant to the reverse stock split will remain fully paid and
non-assessable. The Company will continue to be subject to the periodic
reporting requirements of the Securities Exchange Act of 1934.
There will be no dilution of ownership interests of the current
Shareholders as compared to the ownership interests immediately prior to the
reverse stock split because the number of Ordinary Shares that the Company is
authorized to issue will be decreased by the reverse stock split and the nominal
value of Ordinary Shares will be proportionately increased by the reverse stock
split.
Upon the date of effectiveness of the reverse stock split ("Effective
Date"), all issued and outstanding options, warrants, and convertible securities
would be appropriately adjusted for the reverse stock split automatically on the
Effective Date. The reverse stock split would not affect any shareholders
proportionate equity interest in the Company except for those shareholders who
would receive an additional Ordinary Share in lieu of fractional shares. None of
the rights currently accruing to holders of the Ordinary Shares, or options or
warrants to purchase Ordinary Shares, or securities convertible into Ordinary
Shares, will be affected by the reverse stock split.
In addition to outstanding options granted under the Company's stock option
plans, the Company also has outstanding warrants to purchase the Company's
Ordinary Shares, outstanding debt convertible into Series C Preferred Shares and
reserved Ordinary Shares issuable upon conversion of the Series C Preferred
Shares currently outstanding or issuable upon conversion of existing debt. Under
the terms of the warrants, the debt and the Certificate of Designation of the
Series C Preferred Shares, the Reverse Stock Split will effect a reduction in
the number of shares and an increase in the price per share of the Company's
Ordinary Shares issuable upon exercise of such warrants or conversion of the
debt or Series C Preferred Shares, in proportion to the exchange ratio.
Procedure for Effecting the Reverse Stock Split and Exchange of Stock
Certificates
As soon as practicable after the Effective Date, shareholders will be
notified that the reverse stock split has been effected. The Company's transfer
agent will act as exchange agent (the "Exchange Agent") for purposes of
implementing the exchange of stock certificates representing Ordinary Shares
issued prior
11
to the reverse stock split ("Old Ordinary Shares"). Holders of Old Ordinary
Shares will be asked to surrender to the Exchange Agent certificates
representing Old Ordinary Shares in exchange for certificates representing the
newly issued Ordinary Shares ("New Ordinary Shares") in accordance with the
procedures to be set forth in a letter of transmittal to be sent by the Company.
No new certificates will be issued to a shareholder until such shareholder has
surrendered such shareholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the Exchange Agent.
Shareholders should not destroy any stock certificate and should not submit any
certificates until requested to do so.
Until a shareholder forwards a completed letter of transmittal together
with certificates representing his, her or its Old Ordinary Shares to the
transfer agent and receives a certificate representing New Ordinary Shares, such
shareholder's Old Ordinary Shares shall be deemed equal to the number of whole
shares of New Ordinary Shares to which each shareholder is entitled as a result
of the reverse stock split.
No service charges, brokerage commissions or transfer taxes will be payable
by any holder of any certificate which, prior to approval of the reverse stock
split, represented any Old Ordinary Shares, except that if any certificates of
New Ordinary Shares are to be issued in a name other than that in which the
certificates for Old Ordinary Shares surrendered are registered, it shall be a
condition of such issuance that (i) the person requesting such issuance shall
pay to the Company any transfer taxes payable by reason thereof or establish to
the satisfaction of the Company that such taxes have been paid or are not
payable, (ii) such transfer shall comply with all applicable federal and state
securities laws, and (iii) such surrendered certificate shall be properly
endorsed and otherwise be in the proper form for transfer.
Fractional Shares
No scrip or fractional certificates will be issued in connection with
the reverse stock split. Shareholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Ordinary Shares not evenly
divisible by the exchange number, will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to receive one whole
Ordinary Share in lieu of a fractional share.
No Dissenters Rights
Under Israeli law, shareholders are not entitled to dissenter's rights
with respect to the proposed Reverse Stock Splits.
Tax Consequences of the Reverse Split
The tax treatment of a shareholder may vary depending upon the
particular facts and circumstances of such shareholder. Each shareholder should
consult with such shareholders own tax advisor with respect to the consequences
of the reverse split.
Vote Required
Pursuant to the terms of the Israeli Companies Ordinance, the
Amendment to the Articles of Association to effect the reverse stock split must
be approved by 75% of the Shares outstanding and present and voting at a duly
convened meeting of shareholders of the Company.
The Board of Directors recommends a vote FOR this proposal.
---
12
PROPOSAL 4: APPROVAL OF AN INCREASE IN THE TOTAL NUMBER OF OPTIONS TO
PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED UNDER THE
COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)
In order to attract, retain and motivate employees (including officers) who
perform for or on behalf of the Company, in May 1995, the Board of Directors of
the Company adopted, and the shareholders approved, the Employee Share Option
Plan (1995) (the "Employee Share Option Plan"). The Employee Share Option Plan
currently authorizes the granting of options to purchase up to 1,875,000
Ordinary Shares, consisting of options intended to qualify as "incentive stock
options" within the meaning of Section 422 of the United States Internal Revenue
Code of 1986, as amended (the "Code") and options not intended to satisfy the
requirements for incentive stock options.
Stock options have been and will continue to be an important aspect of the
compensation arrangements for both existing and new employees. To date, the
Company has granted options to purchase 1,687,791 Ordinary Shares under the
Employee Share Option Plan and thus only 187,209 options are currently available
to be granted thereunder. Thus, the Board of Directors has proposed that the
total number of options which may be granted under the Employee Share Option
Plan be increased by 625,000 from 1,875,000 to 2,500,000.
Description of the Plan
The Employee Share Option Plan is administered by a committee of the Board of
Directors consisting of at least two directors appointed by the Board of
Directors. To serve as a member of the committee, a director must be a
"disinterested person" within the meaning of Rule 16b-3 of the Securities and
Exchange Act of 1934, as amended. The committee is vested with complete
authority to administer and interpret the Employee Share Option Plan, including
determining the persons to whom options will be granted, the number of options
to be granted and the terms of such option grants. Current members of the
Executive, Audit & Compensation Committee are Esther Dyson and Bob Kutnick.
Options granted under the Employee Share Option Plan shall be for no more than
a ten-year term, provided, however, that options that are intended to qualify as
incentive stock options and that are granted to an employee who on the date of
grant is a 10% shareholder in the Company or any subsidiary corporation or
parent corporation shall be for no more than a five-year term. The exercise
price of options granted under the Employee Share Option Plan is determined by
the Committee but may not be less than the fair market value of the Ordinary
Shares on the date of the grant. In the case of options that are intended to be
incentive stock options granted to an employee who, at the date of such grant,
is a 10% shareholder in the Company or any subsidiary corporation or parent
corporation, the exercise price for such options may not be less than 110% of
the fair market value of the Ordinary Shares on the date of such grant. The
number of shares covered by an option granted under the Employee Share Option
Plan is subject to adjustment for stock splits, mergers, consolidations,
reorganizations and recapitalizations. Options are non-assignable except by
will or by the laws of descent and distribution. Options which have vested may
be exercised at any time until their expiration, so long as the grantee is still
employed by the Company. Should the grantee's employment with the Company be
terminated, any vested options must be exercised within 90 days of such
termination, unless otherwise determined by the Board of Directors of the
Company. If the optionee dies, becomes disabled or retires, the right to
exercise the option will be determined by the Committee in its sole discretion.
The optionee is responsible for all personal tax consequences of the grant and
the exercise thereof. For so long as the Company is not a U.S. taxpayer, the
Company believes that no tax consequences will result to the Company in
connection with the grant or exercise of options pursuant to the Employee Share
Option Plan.
13
Vote Required
Pursuant to the terms of the Employee Share Option Plan, the increase in the
total number of options which may be granted under the Employee Share Option
Plan by 625,000 from 1,875,000 to 2,500,000 must be approved by the shareholders
of the Company. Consequently, the shareholders of the Company are requested to
adopt the following resolution:
RESOLVED, that the increase of 625,000 in the number of options which may be
granted under the Company's Employee Share Option Plan (1995), from 1,875,000 to
2,500,000, is hereby approved.
The Board of Directors recommends a vote FOR this proposal.
---
PROPOSAL 5: ADOPTION OF THE COMPANY'S CEO SHARE
OPTION PLAN (1999) AND GRANT OF CERTAIN
OPTIONS
In order to attract, retain and motivate the Company's Chief Executive
Officer, in April 1999, the Board of Directors of the Company adopted, subject
to shareholder approval, the CEO Share Option Plan (1999) (the "CEO Share Option
Plan"). The CEO Share Option Plan authorizes the granting of options to
purchase up to 2,000,000 Ordinary Shares, consisting of options intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
United States Internal Revenue Code of 1986, as amended (the "Code") and options
not intended to satisfy the requirements for incentive stock options.
Description of the Plan
The following description of the CEO Share Option Plan is qualified in its
entirety by reference to the full text of the CEO Share Option Plan, which is
attached to this Proxy Statement as Annex A. If approved by the shareholders,
the CEO Share Option Plan will be administered by the Executive, Audit &
Compensation Committee of the Board of Directors
Options granted under the CEO Share Option Plan shall be for no more than a
ten-year term, provided, however, that options that are intended to qualify as
incentive stock options and that are granted to an employee who on the date of
grant is a 10% shareholder in the Company or any subsidiary corporation or
parent corporation shall be for no more than a five-year term. The exercise
price of options granted under the CEO Share Option Plan is determined by the
Committee but may not be less than the fair market value of the Ordinary Shares
on the date of the grant. In the case of options that are intended to be
incentive stock options granted to the CEO who, at the date of such grant, is a
10% shareholder in the Company or any subsidiary corporation or parent
corporation, the exercise price for such options may not be less than 110% of
the fair market value of the Ordinary Shares on the date of such grant. The
number of shares covered by an option granted under the CEO Share Option Plan is
subject to adjustment for stock splits, mergers, consolidations, reorganizations
and recapitalizations. Options are non-assignable except by will or by the laws
of descent and distribution. Options which have vested may be exercised at any
time until their expiration, so long as the grantee is still employed by the
Company. Should the grantee's employment with the Company be terminated, any
vested options must be exercised within 90 days of such termination, unless
otherwise determined by the Board of Directors of the Company. If the optionee
dies, becomes disabled or retires, the right to exercise the option will be
determined by the Committee in its sole discretion. The optionee is responsible
for all personal tax consequences of the grant and the exercise thereof. For so
long as the Company is not a U.S. taxpayer, the Company believes that no tax
consequences will result to the Company in connection with the grant or exercise
of options pursuant to the CEO Share Option Plan.
14
If the CEO Share Option Plan is approved by the shareholders, the Executive,
Audit & Compensation Committee intends to immediately grant up to 1,812,000
options to the Company's current CEO, Todd A. Oseth. The Executive, Audit &
Compensation Committee also contemplates that these options will be granted with
a provision that any unvested options will immediately vest upon a change in
control of the Company. As a condition to the immediate grant of options to Mr.
Oseth under the CEO Share Option Plan, the Committee will require the exchange
and cancellation of all unexercised options previously granted to Mr. Oseth
under the Company's Employee Share Option Plan (1995).
Vote Required
Pursuant to Israeli law, all director compensation and changes thereof must be
approved by the shareholders. Consequently, the shareholders of the Company are
requested to adopt the following resolution:
RESOLVED, that the adoption of the Company's CEO Share Option Plan (1999), as
set forth in Annex A, is approved, and the immediate grant of up to 1,812,000
options to the Company's current CEO, Todd A. Oseth, is also approved.
The Board of Directors recommends a vote FOR this proposal.
---
PROPOSAL 6: AMENDMENT TO THE ARTICLES OF ASSOCIATION TO ENTITLE THE HOLDERS
OF THE COMPANY'S SERIES C PREFERRED SHARES TO ELECT ONE MEMBER OF
THE BOARD OF DIRECTORS
In May 1998, the Company executed a Preferred Share Purchase Agreement with
Lernout & Hauspie Speech Products, N.V. under which the Company issued 4,000
shares of its Series C Preferred shares, face value US$1,000. Under the
Certificate of Designation governing the preferences, voting rights, and
qualifications of the Series C Preferred, the Series C Preferred are convertible
into a number of the Company's Ordinary Shares obtained by dividing the face
value of the Series C Preferred shares to be converted by US$0.45. The Series C
Preferred are convertible at any time, at the option of the holders, into an
aggregate of 8,888,889 Ordinary Shares. As of May 3, 1999 no shares of the
Series C Preferred had been converted into Ordinary Shares.
Under the terms of the Series C Preferred Certificate of Designation, and
except with respect to the election of the Company's Board of Directors and as
otherwise required by law, the holders of the Series C Preferred have the right
to vote with the holders of the Ordinary Shares as a single class on all matters
with a number of votes equal to the number of Ordinary Shares into which the
Series C Preferred shares are convertible. Except with respect to the election
of the Company's Board of Directors, the holders of the Series C Preferred
shares have 8,888,889 votes on all matters submitted to the holders of the
Company's Ordinary Shares.
In the Series C Preferred Certificate of Designation, the Company has
undertaken to amend its Articles of Association, in the form attached to this
Proxy Statement as Annex B, to entitle the holders of the Company's Series C
Preferred shares to elect one member of the Board of Directors voting as a
separate class from the Ordinary Shares, while allowing the Ordinary Shares to
elect the remaining directors voting as a separate class from the Series C
Preferred shares. Also, the agreed upon amendment to the Articles of
Association will provide that any vacancies on the Board of Directors would be
filled only by the holders of the capital stock of the class originally electing
the directors whose seat is vacant, and that the right of the holders of the
Series C Preferred to elect one director shall continue for as long as
15
the holders hold all or part of the Series C Preferred or at least 25% of the
Ordinary Shares issued upon conversion of the Series C Preferred.
Vote Required
Pursuant to the terms of the Israeli Companies Ordinance, the Amendment to the
Articles of Association to entitle the holders of the Series C Preferred shares
to elect one director must be approved by 75% of the Shares outstanding and
present and voting at a duly convened meeting of shareholders of the Company.
Consequently, the shareholders of the Company are requested to adopt the
following special resolution:
RESOLVED, that the Articles of Association be amended in the form attached to
this Proxy Statement as Annex B, to reflect the terms of the Certificate of
Designation of Series C Preferred shares that entitles the holders of the Series
C Preferred shares to elect one member of the Company's Board of Directors
voting as a class separate from the holders of the Company's Ordinary Shares and
entitles the holders of the Company's Ordinary Shares to elect the remaining
authorized members of the Company's Board of Directors voting as a class
separate from the Series C Preferred Shares.
The Board of Directors recommends a vote FOR this proposal.
---
PROPOSAL 7: CHANGE OF NAME
Reasons for a Change of Name
The major restructuring undertaken within the last two years has
significantly changed the Company's direction and focus. The proposed name,
LanguageWare.net, Ltd., or a name with a .net extension, would better reflect
the Company's movement toward Internet products and services.
The Company's older products and services are no longer being sold,
but for years many customers identified the company with its "Accent" product
line. The name recognition for Accent and its product line released in 1996
serves little value for our current customers and shareholders. Accent's new
products and services have very little in common with the old product line and
management feels a change in name would help previous customers understand the
Company's change of direction. In addition, a new customer base could be
developed without explaining the shift away from the historical product line.
Management is aware that one drawback to a name change is lack of name
recognition within the industry. Management feels, however, that with
appropriate marketing, this obstacle will be surmounted.
Vote Required
Pursuant to the terms of the Israeli Companies Ordinance, the change
in the name of the Company must be approved by 75% of the Shares outstanding and
present and voting at a duly convened meeting of shareholders of the Company.
Consequently, the shareholders of the Company are requested to adopt the
following special resolution:
RESOLVED, that the name of the Company be changed 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.
The Board of Directors recommends a vote FOR this proposal.
---
16
PROPOSAL 8: APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders appoint Luboshitz,
Kasierer & Co., a member firm of Arthur Andersen, certified public accountants,
as independent auditors to audit the accounts of the Company and its
subsidiaries for 1999, and to authorize the Board of Directors of the Company to
determine the level of compensation of the independent auditors. Luboshitz,
Kasierer & Co. served as the Company's independent auditors for the year ended
December 31, 1998.
The Board of Directors recommends a vote FOR this proposal.
---
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of the date of this
filing and their respective ages and positions with the Company are set forth
below. Biographical information for those officers not included on page 7 and 8
is also set forth below. The officers hold office until the next Annual Meeting
or until their successors are appointed by the Board of Directors.
Name Age Position
- ---- --- ---------
Todd A. Oseth 37 President, Chief Executive Officer and Director
Esther Dyson 45 Director
Francis Vanderhoydonck 40 Director
Chantal Mestdagh 37 Director
Bob Kutnick 41 Director
Robert V. Antoniazzi 43 Vice President - Marketing
Bob Antoniazzi has been Vice President of Marketing for the Company since June
1997. Prior to joining the Company, he was the Managing Director and Co-founder
of GlobalKey Inc., an Internet-based secure communications technology developer
and provider. In addition, he has served in senior sales, marketing, and
general management positions for several start-up companies to establish their
European offices and operations.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Meetings and Committees
During 1998, the Board of Directors held 15 meetings and took actions by
unanimous consent 15 times. Mark Tebbe missed 4 meetings while still on the
board, Esther Dyson missed 2 meetings and Bob Kutnick missed 3 meetings after
being appointed to the board. All other members attended all of the meetings.
There were a number of changes to the board within the last year. Roger
Cloutier resigned from the board on October 8, 1998, and Bob Rosenschein and
Mark Tebbe resigned January 26, 1999, to pursue other personal and business
commitments. Bob Kutnick was appointed to the Board on July 30, 1998 as the
Lernout & Hauspie Speech Products representative after its June 1998 investment.
17
Additionally, Francis Vanderhoydonck and Chantal Mestdagh were appointed on
March 3, 1999 as the Lernout & Hauspie Investment Company representatives after
its March 3, 1999 short-term loan to the Company.
During 1998, the Board of Directors combined its three special committees
into one Executive, Audit and Compensation Committee. The members appointed to
this committee were Roger Cloutier, Esther Dyson and Mark Tebbe. Upon the
resignations of Roger Cloutier and Mark Tebbe, Bob Kutnick was appointed to this
committee.
The current members of the Executive, Audit and Compensation Committee are
Esther Dyson and Bob Kutnick. This committee met one time during 1998 while
Roger Cloutier and Mark Tebbe were still members. The role of the committee is:
1) To be a board level resource for the management of the Company between
formal board meetings and from time to time, to take on other tasks that
were delegated by the full Board.
2) To recommend to the Board independent auditors for the Company, to
review financial statements and transactions between the Company and
interested parties, to analyze and review internal audit procedures and
controls.
3) To determine and review the compensation of the Company's executive
officers, and to establish and review the Company's employee benefit plans
and to present and make recommendations to the Board. To administer the
Company's share option grants and the terms associated with each of the
grants under the Company's share option plans.
The Board of Directors does not have a nominating committee. Nominees for the
Board of Directors are selected by the entire Board.
PRESENT BENEFICIAL OWNERSHIP OF ORDINARY SHARES
Security Ownership of Certain Beneficial Owners and Management
Set forth below is certain information with respect to the beneficial
ownership of the Company's voting securities as of May 3, 1999 by (i) each
person who, to the knowledge of the Company, is the beneficial owner of more
than 5% of the outstanding Series C Preferred Shares and Ordinary Shares and
Units, all of which comprise the Company's voting securities, (ii) each director
and named executive officer of the Company and (iii) all executive officers and
directors of the Company as a group. As of May 3, 1999, there were 4,000 Series
C Preferred Shares outstanding convertible at any time into 8,888,889 Ordinary
Shares and 29,291,504 Ordinary Shares outstanding (including 2,000 Ordinary
Shares that are part of Units).
Amount and Nature of
Beneficial Ownership
------------------------
Name of Beneficial Owner(1)(2) Number Percent
- ------------------------------ ------------------------ -----------
Lernout & Hauspie Speech Products, N.V
Sint- Krispijnstraat 7 13,333,333(3) 31.3%
8900 Ieper, Belgium
Lernout & Hauspie Investment Company 5,871,563(4) 16.7%
Sint- Krispijnstraat 7
8900 Ieper, Belgium
18
Amount and Nature of
Beneficial Ownership
--------------------
Name of Beneficial Owner(1)(2) Number Percent
- ------------------------------ -------------------- -------
Todd A. Oseth 890,666(5) 3.0%
Bob Kutnick 50,000(6) 0.2%
Sint- Krispijnstraat 7
8900 Ieper, Belgium
Chantal Mestdagh * (7) 0%
Sint- Krispijnstraat 7
8900 Ieper, Belgium
Francis Vanderhoydonck * (8) 0%
Sint- Krispijnstraat 7
8900 Ieper, Belgium
Esther Dyson 52,000(9) 0.2%
Edventure Holdings, Inc.
104 Fifth Avenue
New York, New York 10011
Robert Antoniazzi 171,667(10) 0.6%
All Executive Officers and Directors as a Group 1,164,333(11) 3.8%
(6 persons)
- ------------------------------------------
(1) Unless otherwise indicated the address of each beneficial owner
identified is 2864 South Circle Drive, Suite 500, Colorado
Springs, Colorado 80906.
(2) Unless otherwise noted, the Company believes that all persons
named in the table have sole voting and investment power with
respect to all Ordinary Shares beneficially owned by them. Each
beneficial owner's percentage ownership is determined by
assuming that options, warrants or Series C Preferred Shares
convertible into Ordinary Shares that are held by such person
(but not those held by any other person) and which are
exercisable or convertible within 60 days of May 3, 1999 have
been exercised or converted.
(3) Assumes conversion of 4,000 Series C Preferred Shares into
8,888,889 Ordinary Shares and includes warrants to purchase an
aggregate of 4,444,444 Ordinary Shares.
(4) Includes warrants to purchase 3,000,000 Ordinary Shares; options
to purchase 100,000 Ordinary Shares granted to two of its
employees who sit on the Company's Board of Directors(Ms.
Mestdagh and Mr. Vanderhoydonck); and assumes conversion of debt
of $600,000 into 2,771,563 Series C Preferred Shares which would
be convertible at any time into 2,771,563 Ordinary Shares.
(5) Includes options to purchase 874,666 Ordinary Shares
representing the exercisable portion of options granted to Mr.
Oseth by the Board of Directors that are the subject to
shareholder approval.
(6) Includes options to purchase 50,000 Ordinary Shares. Mr. Kutnick
is a Senior Vice President of and the designee to the Company's
Board of Directors for Lernout & Hauspie Speech Products, N.V.
Mr. Kutnick disclaims beneficial ownership of the equity
securities owned by Lernout & Hauspie Speech Products, N.V.
(7) Ms. Mestdagh is the Chief Financial Officer of and one of the
two designees to the Company's Board of Directors for Lernout &
Hauspie Investment Company. In connection with being appointed
to the Board of Directors, Ms. Mestdagh was granted options to
purchase 50,000 Ordinary Shares, the options of which have been
issued in the name of Lernout & Hauspie Investment Company in
accordance with Belgian law. Ms. Mestdagh disclaims beneficial
ownership of the equity securities owned by Lernout & Hauspie
Investment Company.
19
(8) Mr. Vanderhoydonck is the President and Managing Director of and
one of the two designees to the Company's Board of Directors for
Lernout & Hauspie Investment Company. In connection with being
appointed to the Board of Directors, Mr. Vanderhoydonck was
granted options to purchase 50,000 Ordinary Shares, the options
of which have been issued in the name of Lernout & Hauspie
Investment Company in accordance with Belgian law. Mr.
Vanderhoydonck disclaims beneficial ownership of the equity
securities owned by Lernout & Hauspie Investment Company.
(9) Includes options to purchase 52,000 Ordinary Shares.
(10) Includes options to purchase 171,667 Ordinary Shares.
(11) Includes options to purchase 1,148,333 Ordinary Shares.
As of April 16, 1999, Cede & Co. held of record 27,739,529 Ordinary Shares
and Units (approximately 95% of the total number of Ordinary Shares outstanding
including Ordinary Shares which are part of Units). Cede & Co. held such shares
as a nominee for broker-dealer members of The Depository Trust Company, which
conducts clearing and settlement operations for securities transactions
involving its members.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information in respect to the compensation
of the Chief Executive Officer and the Company's other most highly compensated
executive officer who had annual compensation in 1998 in excess of $100,000.
Long-Term
Compensation
Awards
---------------
Number of
Annual Compensation Securities
-----------------------------
Other Annual Underlying All Other
Year Salary Bonus Compensation Options Compensation
---- -------- ----- ------------ --------------- ---------------
Todd A. Oseth 1998 $199,998 $ - $0 812,000/(1)/ -
President & CEO 1997 $181,153 $ - $0 350,000/(1)/ $102,905/(2)/
Robert V. Antoniazzi 1998 $120,000 $ - $0 45,000 -
Vice President, Marketing 1997 $ 90,000 $ - $0 40,000 -
- --------------------------------------------------------------
(1) Options to purchase 812,000 Ordinary Shares were granted Mr. Oseth by the Board of Directors subject to the approval by
shareholders of the proposal to adopt the CEO Share Option Plan (1999) referred to earlier in this Proxy Statement. Mr.
Oseth will forfeit the options to purchase 350,000 Ordinary Shares upon approval by shareholders of the proposal to adopt
the CEO Share Option Plan (1999).
(2) Includes reimbursement of expenses associated with the relocation of Mr. Oseth's household in accordance with his employment
agreement.
The following table sets forth information concerning individual grants of
stock options made pursuant to the Company's Employee Share Option Plan (1995)
and CEO Share Option Plan (1999) during 1998 to each of the named executive
officers and the potential realizable value for the stock options based on
future appreciation assumptions. There can be no assurance that the values
shown in this table will be achieved. No stock appreciation rights ("SARs")
were granted in 1998.
20
Option Grants in 1998
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Underlying Options Granted Exercise Stock Price Appreciation
Options Granted to Employees Price Expiration for Option Term(2)
------------------------
(#) in 1998 ($) Date 5% ($) 10%($)
--------------- ------------- ------- ---------- ------- -----------
Todd A. Oseth 812,000(1) 47.5% $0.34 5/23/2003 $76,276 $168,550
Robert V. Antoniazzi 45,000 2.6% $0.34 5/23/2003 $ 4,227 $ 9,341
- --------------------------
(1) The options granted to Mr. Oseth in calendar year 1998 by the Board of
Directors to purchase 812,000 Ordinary Shares is subject to the approval of
shareholders as described in the proposal to adopt the CEO Share Option
Plan (1999) referred to earlier in this Proxy Statement.
(2) Amounts reported in these columns show hypothetical gains that may be
realized upon exercise of the options, assuming the market price of common
stock appreciates at the specified annual rates of appreciation, compounded
annually over the term of the options. These numbers are calculated based
upon rules promulgated by the SEC. Actual gains, if any, depend on the
future performance of the Company's Ordinary Shares and overall market
conditions.
The following table summarizes for each of the named executive officers,
the total number of unexercised outstanding options to purchase Ordinary Shares
as of December 31, 1998, and the aggregate dollar value of unexercised in-the-
money options to purchase Ordinary Shares, if any, held by them at December 31,
1998. The value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise price of such options and the market value of
the underlying Ordinary Shares at the close of business on December 31, 1998.
Since the exercise price of $0.34 was greater than the December 31, 1998 market
value, which was $0.16 per share, the amounts shown in the table are $0. None of
the named executive officers exercised any options to purchase Ordinary Shares
in 1998.
Value of Unexercised
Number of Securities In-the-Money Options
Underlying Unexercised Fiscal Year-End
Options/SARs at Fiscal --------------------------------
Year-End
--------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
Todd A. Oseth 270,667 541,333 $0 $0
Robert V. Antoniazzi 43,333 15,000 $0 $0
In May 1998, the Company's Board of Directors approved a repricing of all
employee stock options outstanding under the Company's Employee Share Option
Plan (1995). The following table sets forth information concerning the repricing
of stock options held by each named executive officer:
TEN-YEAR OPTION REPRICING IN 1998
Securities Length of
underlying Market price original option
number of of stock at Exercise price New term remaining
options time of at time of Exercise at date of
Name Date repriced (#) repricing ($) repricing ($) price ($) repricing
- ----------------------- ------- --------------- ---------------- ---------------- ------------ ------------------
Robert V. Antoniazzi
Vice President Marketing 5/24/98 40,000 $0.34 $1.63 $0.34 3.7 years
21
Employment Agreements
The Company has an employment agreement with Todd A. Oseth for a three-year
term beginning on February 6, 1997, which is terminable upon three months notice
at the option of the Company. The agreement provides that Mr. Oseth will
receive an annual salary of $200,000, together with employee benefits granted by
the Company to its senior managerial personnel. The agreement contains
provisions prohibiting Mr. Oseth from competing with the Company for a two-year
period following termination of employment and requiring him not to disclose
confidential or proprietary information of the Company for a six-year period
following termination of employment.
Compensation of Directors
All Directors hold office until the next annual meeting of shareholders and
the election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. The Company has also agreed
to reimburse non-employee directors for their reasonable out-of-pocket expenses
incurred in performing various services on behalf of the Company.
In addition, the Company has granted to its non-employee directors options
to purchase Ordinary Shares pursuant to the Company's Non-Employee Share Option
Plan (1998). Under the Non-Employee Share Option Plan (1998), (i) each non-
employee who served as a director of the Company upon adoption of the Non-
Employee Share Plan (1998) automatically received an initial grant of
immediately vested options equal to the number of options which had been granted
under the Non-Employee Share Option Plan (1995), which plan was replaced by the
Non-Employee Share Option Plan (1998) in May 1998, (ii) each non-employee who
served as a director of the Company upon adoption of the Non-Employee Share Plan
(1998) automatically received an initial grant of options to purchase 25,000
Ordinary Shares which vested six (6) months after the date of grant, (iii) each
non-employee who became a member of the Board of Directors after the adoption of
the Non-Employee Share Option Plan (1998) automatically received an initial
grant of options to purchase 50,000 Ordinary Shares, vesting one year from the
date of grant and (iv) upon each anniversary of an initial grant, each non-
employee who served as a director of the Company automatically received an
annual grant of options to purchase 25,000 Ordinary Shares, vesting six months
after the date of grant. Options granted under the Non-Employee Share Option
Plan (1998) are for a five-year term.
As of May 3, 1999, there are 600,000 Ordinary Shares reserved for issuance
under the Company's Non-Employee Share Options Plan (1998). To date, options to
purchase 202,000 Ordinary Shares have been granted under the Company's Non-
Employee Share Option Plan (1998).
Certain Relationships and Related Transactions
On March 3, 1999, L&H Investment Company, N.V. ("LHIC"), an affiliate of
Lernout & Hauspie Speech Products, N.V. which is a beneficial owner of more than
5% of the Company's Ordinary Shares, made a short term loan to the Company in
the amount of $600,000. The loan matures on June 30, 1999 and accrues interest
at an annual percentage rate equal to four (4) percent above the prime rate as
determined by the Wall Street Journal. Upon maturity the principal of the
short-term loan can be converted, at the option of LHIC, into Series C
Preferred Shares of the Company at a price per share of eighty-five percent
(85%) of the average closing bid price of the Company's Ordinary Shares for
twenty (20) trading days prior to March 12, 1999. Accrued interest is due and
payable upon maturity. Additionally, in connection with the short-term loan the
Company issued to LHIC three million warrants to purchase Ordinary Shares of the
Company at a price equal to the average trading price for twenty (20) trading
days prior to March 3, 1999.
The Company believes that the transaction referred to above was on terms no
less favorable to the Company than terms that could have been obtained from
unrelated third parties. Any future transactions between the Company and
affiliated parties will be approved by a majority of the independent and
22
disinterested directors, and under certain circumstances, by the audit committee
or the shareholders, and will be on terms no less favorable than those that
could have been obtained from unrelated third parties.
REPORT OF THE COMPENSATION AND SHARE OPTION
COMMITTEE OF THE BOARD OF DIRECTORS
During 1998, the Compensation and Share Option Committee of the Board of
Directors was composed of Esther Dyson and Bob Kutnick, both independent,
outside directors. The Compensation and Share Option Committee was responsible
for overseeing and administering executive compensation decisions, for
administering the Company's Employee Share Option Plans, and for making option
grants to employees of the Company thereunder. During 1999, the duties and
responsibilities of the Compensation and Share Option Committee are being
assumed by a combined Executive, Audit and Compensation Committee whose current
members are Esther Dyson and Bob Kutnick (the "Committee").
Executive compensation decisions are made by the Committee and are designed
to serve the interest of the Company and its shareholders and to encourage and
reward management initiative and good performance. Specifically, executive
compensation decisions are made to:
(1) implement compensation practices which allow the Company to attract
and retain highly qualified executives and maintain a competitive
position in the executive marketplace with employers of comparable
size and in similar lines of business;
(2) enhance the compensation potential of executives who are in the
best position to contribute to the development and success of the
Company by providing the flexibility to compensate individual
performance; and
(3) directly align the interests of the executives with the long-term
interest of the shareholders and the Company through compensation
opportunities in the form of share option grants vesting over a
three-year period.
These objectives are met through a combination of base salary, annual cash
incentive awards based upon the annual operating performance of the Company, and
long-term incentive opportunities which, to date, have been in the form of
incentive share option grants.
Salary
The Committee considers, on an annual basis, salary for the Company's
executive officers, including those named in the Summary Compensation Table.
Any salary adjustments are designed to reflect internal comparability and
organizational considerations, as well as competitive data provided by
independent external information.
Incentive Awards
Executive officers are eligible for cash awards annually based upon
financial and non-financial results. For the year ended December 31, 1998, no
cash incentive awards were granted. Any cash incentive awards during 1999 will
be based upon pre-established performance targets and objectives.
Share Option Grants
Executive officers may receive grants of options pursuant to the Company's
Employee Share Option Plan (1995), described earlier in this proxy statement.
See "PROPOSAL 4: FOR AN INCREASE
23
IN THE TOTAL NUMBER OF OPTIONS TO PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED
UNDER THE COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)".
Share Option Repricing
In May 1998 in recognition of service to the Company during a period of
financial hardship, all outstanding options previously granted under the
Employee Share Option Plan (1995) to all persons who were currently employed by
the Company were repriced to the then existing market price of $0.34 per share.
Vesting periods and length of option terms remained substantially unchanged from
the original grants.
Chief Executive Officer Compensation
During 1998, Todd Oseth received annual compensation as President and Chief
Executive Officer, pursuant to the terms of an employment agreement, as set
forth in the Summary Compensation Table.
THE COMPENSATION AND SHARE OPTION COMMITTEE
Esther Dyson (Chairperson)
Bob Kutnick
Compensation Committee Interlocks and Insider Participation
Ms. Dyson and Mr. Kutnick each served as a member of the Compensation and
Share Option Committee. Neither Ms. Dyson nor Bob Kutnick served as a member of
the compensation committee of another entity so as to create any compensation
committee interlock or served as an officer of the Company or any of its
subsidiaries so as to create any insider participation.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10% beneficial
shareholders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers,
directors and greater than 10% beneficial shareholders, the Company believes
that during the year ended December 31, 1998, all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a timely
basis.
Shareholder Return Performance Graph*
The following graph compares the cumulative total shareholder return of the
Ordinary Shares against the cumulative total return of the Russell 2000 Index
and the Russell 2000 Technology Index for the period commencing as of the close
of trading on July 20, 1995 (the effective date of the registration of the
Ordinary Shares under Section 12 of the Exchange Act). As the Ordinary Shares
began trading on July 21, 1995, the price of the Ordinary Shares in the graph
below as of the close of trading on July 20, 1995 is assumed to be the initial
public offering price.
- ------------------
24
The graph assumes that $100 was invested July 20, 1995 in each of the
Ordinary Shares, the Russell 2000 Index and the Russell 2000 Technology Index
and that all dividends, if any, were reinvested. Figures for the Company have
been restated to show the effect of the 3 for 2 stock split in June, 1996.
Comparison of Total Return of Accent, Russell 2000 Index and Russell 2000
Technology Index
[THE FOLLOWING DATA WAS REPRESENTED BY A LINE GRAPH]
Index Index Month Closing Closing Closing
Accent Russell Russell Ended Stock Russell Russell
2000 Technology (not beg. mo) Price 2000 Tech.
7/20/95 $ 5.17 295.00 115.47 7/20/95 100.00 100.00 100.00
7/31/95 $ 6.00 299.72 122.92 7/31/95 116.13 101.60 106.45
8/31/95 $ 6.33 305.31 124.95 8/31/95 122.58 103.49 108.21
9/30/95 $ 7.00 310.38 129.88 9/30/95 135.48 105.21 112.48
10/31/95 $ 6.45 296.25 123.06 10/31/95 124.77 100.42 106.57
11/30/95 $11.67 308.58 130.90 11/30/95 225.81 104.60 113.36
12/31/95 $10.45 315.97 122.65 12/31/95 202.19 107.11 106.22
1/31/96 $10.67 315.38 116.29 1/31/96 206.45 106.91 100.71
2/28/96 $15.11 324.93 127.52 2/28/96 292.52 110.15 110.44
3/31/96 $17.11 330.77 124.94 3/31/96 331.23 112.13 108.20
4/30/96 $19.55 348.28 142.64 4/30/96 378.45 118.06 123.53
5/31/96 $21.17 361.85 153.99 5/31/96 409.68 122.66 133.36
6/30/96 $20.50 346.61 132.10 6/30/96 396.77 117.49 114.40
7/31/96 $15.38 316.00 112.21 7/31/96 297.58 107.12 97.18
8/31/96 $12.88 333.88 121.40 8/31/96 249.19 113.18 105.14
9/30/96 $13.75 346.39 133.19 9/30/96 266.13 117.42 115.35
10/31/96 $ 7.88 340.57 129.14 10/31/96 152.42 115.45 111.84
11/30/96 $ 8.13 354.11 137.17 11/30/96 157.26 120.04 118.79
12/31/96 $ 6.38 362.61 138.89 12/31/96 123.39 122.92 120.28
1/31/97 $ 7.44 369.45 143.80 1/31/97 143.95 125.24 124.53
2/28/97 $ 4.13 360.05 126.23 2/28/97 79.84 122.05 109.32
3/31/97 $ 2.19 342.56 111.32 3/31/97 42.34 116.12 96.41
4/30/97 $ 1.88 343.00 112.65 4/30/97 36.29 116.27 97.56
5/31/97 $ 2.06 380.76 137.02 5/31/97 39.92 129.07 118.66
6/30/97 $ 1.72 396.37 138.13 6/30/97 33.27 134.36 119.62
7/31/97 $ 1.56 414.48 152.98 7/31/97 30.24 140.50 132.48
8/31/97 $ 2.50 423.43 159.68 8/31/97 48.39 143.54 138.29
9/30/97 $ 2.66 453.82 166.15 9/30/97 51.41 153.84 143.89
10/31/97 $ 2.34 433.26 148.83 10/31/97 45.36 146.87 128.89
11/30/97 $ 1.72 429.92 144.45 11/30/97 33.27 145.74 125.10
12/31/97 $ 0.44 437.02 140.26 12/31/97 8.47 148.14 121.47
1/31/98 $ 0.45 430.05 139.89 1/31/98 8.77 145.78 121.15
2/28/98 $ 0.66 461.83 153.03 2/28/98 12.70 156.55 132.53
3/31/98 $ 0.59 480.68 154.97 3/31/98 11.49 162.94 134.21
4/30/98 $ 0.47 482.89 159.92 4/30/98 9.07 163.69 138.49
5/31/98 $ 0.44 456.62 144.03 5/31/98 8.47 154.79 124.73
6/30/98 $ 0.50 457.39 147.20 6/30/98 9.68 155.05 127.48
7/31/98 $ 0.44 419.75 133.07 7/31/98 8.47 142.29 115.24
8/31/98 $ 0.22 337.95 102.79 8/31/98 4.23 114.56 89.02
9/30/98 $ 0.28 363.59 117.04 9/30/98 5.44 123.25 101.36
10/31/98 $ 0.28 378.16 126.10 10/31/98 5.44 128.19 109.21
11/30/98 $ 0.19 397.75 141.92 11/30/98 3.63 134.83 122.91
12/31/98 $ 0.16 421.96 157.04 12/31/98 3.02 143.04 136.00
1/31/99 $ 0.25 427.22 1/31/99 4.84 144.82
2/28/99 $ 0.25 392.26 2/28/99 4.84 132.97
3/31/99 $ 0.18 397.63 3/31/99 3.48 134.79
4/30/99
5/31/99
6/30/99
7/31/99
8/31/99
9/30/99
10/31/99
11/30/99
12/31/99
The chart is presented in accordance with the requirements of the U.S.
securities laws. Shareholders are cautioned against drawing any conclusion from
the data contained therein, as past results are not necessarily indicative of
future performance. This chart in no way reflects the Company's forecast of
future financial performance.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders is being furnished to
shareholders on or about May 13, 1999, with this Proxy Statement.
PROPOSALS BY SHAREHOLDERS
Proposals that Shareholders wish to include in the Company's Proxy
Statement and form of proxy for presentation at the Company's 2000 Annual
Meeting of Shareholders that meet the requirements of the Securities and
Exchange Commission relating to shareholders' proposals must be received by the
Company at 2864 S. Circle Dr., Suite 500, Colorado Springs, CO 80906,
Attention: Todd Oseth, President, no later than December 31, 1999.
By Order of the Board of Directors
Todd A. Oseth
President
25
ANNEX A
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").
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.
26
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 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
27
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
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
28
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 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
29
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 without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to the Grantee.
30
ANNEX B
AMENDMENT TO THE COMPANY'S ARTICLES OF ASSOCIATION
Note: This proposed amendment assumes that Proposal No. 2 (CAPITALIZATION
AMENDMENT) shall be approved by the shareholders.
1. Articles 5(a) and 5(b) shall be deleted in their entirety and replaced with
the following:
"(a) The capital of the Company is NIS 1,300,000, divided into 130,000,000
(one hundred thirty million) Ordinary Shares with a nominal value of NIS
0.01 each and 10,000,000 (ten million) Series C Preferred Shares with a
nominal value of NIS 0.01 each. The Series C Preferred Shares shall have
the preferences and rights set forth in the Certificate of Designations,
Preferences and Rights of Series C Preferred Shares."
"(b) Except as otherwise set forth in these Articles, each one of the
Ordinary Shares shall entitle its owner to receive notices of and to attend
general meetings and to one vote at the general meeting, and each Series C
Preferred Shares shall entitle its owner to receive notices of and to
attend general meetings and to one vote for each Ordinary Share into which
such Series C Preferred Shares would then be convertible at the general
meeting."
2. The following shall be added as Article 5(e):
"(e) Notwithstanding anything in these Articles to the contrary, as long
as the original holders hold all or part of the Series C Preferred Shares
or at least 25% of the Ordinary Shares issued upon conversion of the Series
C Preferred Shares , the holders of Series C Preferred Shares shall be
entitled to elect, voting as a separate class, one (1) individual to the
Board of Directors. The holders of Series C Preferred Shares shall not be
entitled to vote or participate on an as converted basis in the vote on the
election of any other directors. Any vacancies on the Board of Directors
shall be filled only by the holders of the share capital of the class
originally electing the directors whose seat is vacant."
31
REVOCABLE PROXY
ACCENT SOFTWARE INTERNATIONAL, LTD.
Solicited by the Board of Directors for
Annual General and Extraordinary Meeting of Shareholders
June 25, 1999
The undersigned holder of ordinary shares of Accent Software International,
Ltd., an Israel corporation (the "Company"), acknowledges receipt of a copy of
the Notice of Annual General and Extraordinary Meeting of Shareholders dated May
13, 1999, and, revoking any proxy heretofore given, hereby appoints Todd A.
Oseth and Robert Antionazzi, and each of them, with full power to each of
substitution as attorneys and proxies to appear and vote all shares of ordinary
shares of the Company registered in the name(s) of the undersigned and held by
the undersigned of record as of May 3, 1999, at the Annual General and
Extraordinary Meeting of Shareholders of the Company to be held at the Sheraton
Colorado Springs Hotel, 2886 S. Circle Drive, Colorado Springs, Colorado,
U.S.A., on June 25, 1999, at 10:00 a.m., and at any postponements and
adjournments thereof, upon the following items as set forth in the Notice of
Annual Meeting and to vote according to their discretion on all other matters
which may be properly presented for action at the meeting. All properly
executed proxies will be voted as indicated.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING ITEMS:
(1) To elect as directors the nominees listed below.
____ FOR ALL nominees listed below (except as marked to the
contrary).
____ WITHHOLD AUTHORITY to vote for all nominees listed below.
Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Todd A. Oseth, Esther Dyson, Kaija Proysti, Francis
Vanderhoydonck, Chantal Mestdagh
(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
authorized Ordinary Shares shall be 130,000,000 by approving a
corresponding amendment to the Company's Memorandum of Association
and Articles of Association.
____ FOR ____ AGAINST ____ ABSTAIN
(3) (i) 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 ____ AGAINST ____ ABSTAIN
(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 ____ AGAINST ____ ABSTAIN
(5) To approve the adoption of the CEO Share Option Plan (1999) and the
grant of certain options pursuant thereto.
____ FOR ____ AGAINST ____ ABSTAIN
(6) To approve an amendment to the Company's Articles of Association that
will (i) authorize the holders of Series C Preferred Shares to elect,
voting as a separate class, one (1) individual to the Board of
Directors while allowing holders of Ordinary Shares to elect
remaining directors voting as a separate class from Series C
Preferred; (ii) require any vacancies on the Board of Directors to be
filled only by the holders of the capital stock of the class
originally electing the directors whose seat is vacant, and (iii)
reflect that the right of the holders of the Series C Preferred to
elect one director shall continue for as long as the holders hold all
or part of the Series C Preferred or at least 25% of the Ordinary
Shares issued upon conversion of the Series C Preferred.
____ FOR ____ AGAINST ____ ABSTAIN
(7) 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 ____ AGAINST ____ ABSTAIN
(8) To appoint Luboshitz, Kasierer & Co., a member firm of Arthur
Andersen, as independent auditors, and to authorize the Board of
Directors to determine their level of compensation.
____ FOR ____ AGAINST ____ ABSTAIN
(9) In their discretion, the proxy holders are authorized to vote upon
such other business as may properly come before the meeting or
matters incidental to the conduct of the meeting.
____ FOR ____ AGAINST ____ ABSTAIN
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 THROUGH 9. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE IT WILL BE
VOTED "FOR" PROPOSALS 1 THROUGH 9.
WITNESS my hand this _______ day of ____________________, 1999.
Name and Address of (Please sign exactly as name appears hereon.
Company Shareholder(s) When signing as attorney, executor,
administrator, trustee or guardian, give full
title as such. If a corporation, please
affix corporate seal. If a partnership,
please sign in partnership name by authorized
persons. If joint tenants, each joint tenant
should sign.)
----------------------------------------------
----------------------------------------------
Signature of Shareholder(s)
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY BY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
I/WE DO ____ DO NOT ___ EXPECT TO ATTEND THIS ANNUAL MEETING OF SHAREHOLDERS.