-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MXKhDF2HsZ0nfivbZZA5l8EMx10Iqq+7tTQhX5NqEU2Mr3ry4Zb7B92tcXhbzCt1 h+uBY9sFcOgy1NzBHmgWyw== 0000927016-96-000850.txt : 19960816 0000927016-96-000850.hdr.sgml : 19960816 ACCESSION NUMBER: 0000927016-96-000850 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATAWARE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000875942 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 061232140 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21860 FILM NUMBER: 96612913 BUSINESS ADDRESS: STREET 1: 222 THIRD ST CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176210820 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1996 Commission File Number 0-21860 DATAWARE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1232140 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 222 Third Street 02142 Suite 3300 (Zip Code) Cambridge, MA (Address of principal executive offices) 617-621-0820 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares outstanding of the issuer's classes of common stock as of July 31, 1996: Class Number of Shares Outstanding -------------------------------------- ---------------------------- Common Stock, par value $.01 per share 6,498,869 Total number of pages 48 DATAWARE TECHNOLOGIES, INC. INDEX PAGE NUMBER ------------ PART I. FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements Consolidated Condensed Balance Sheets as of June 30, 1996 and December 31,1995 3 Consolidated Condensed Statements of operations for the Three and Six Months Ended June 30, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 5 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 SIGNATURE 14 EXHIBIT INDEX 15 2 Part I. FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements Dataware Technologies, Inc. Consolidated Condensed Balance Sheets (In thousands, except share data)
June 30, December 31, 1996 1995 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 5,250 $ 7,734 Accounts receivable, less allowance for doubtful accounts of $745 and $610 8,520 10,063 Prepaid expenses and other current assets 2,922 2,734 Deferred taxes 336 336 -------------- -------------- Total current assets 17,028 20,867 Property and equipment, net 6,932 5,543 Computer software costs, net 1,977 3,002 Marketable securities 5,031 8,908 Deferred taxes 3,287 284 Intangible assets 2,456 3,362 -------------- -------------- Total assets $ 36,711 $ 41,966 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of notes, software license payable and capital leases $ 10 $ 189 Demand note payable to related party --- 50 Accounts payable 2,716 1,963 Accrued expenses 2,031 1,396 Accrued litigation and non-recurring charges 5,308 --- Accrued compensation 1,803 1,690 Income taxes payable 1,867 1,928 Deferred revenue 2,614 2,530 -------------- -------------- Total current liabilities 16,349 9,746 Notes, software license payable, and capital leases --- 4 Stockholders' equity: Preferred stock, $.01 par value, 8,000,000 shares authorized, none issued --- --- Common stock, $.01 par value: 14,000,000 shares authorized; 6,383,960, and 6,239,123 shares issued and outstanding at June 30, 1996 and December 31, 1995, respectively 64 62 Additional paid-in capital 37,316 36,782 Accumulated deficit (16,717) (4,445) Cumulative translation adjustment (275) (209) Unrealized gain (loss) on marketable securities (26) 26 -------------- -------------- Total stockholders' equity 20,362 32,216 -------------- -------------- Total liabilities and stockholders' equity $ 36,711 $ 41,966 ============== ==============
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 Dataware Technologies, Inc. Consolidated Condensed Statements of Operations (In thousands except per share data)
Three months ended Six months ended June 30, June 30, 1996 1995 1996 1995 ------------ ----------- ------------ ----------- Revenues: Software license fees $ 3,502 $ 4,927 $ 6,503 $ 9,205 Services 4,952 5,401 10,302 10,784 ------------ ----------- ------------ ----------- Total revenues 8,454 10,328 16,805 19,989 Cost of revenues: Software license fees 825 791 1,680 1,337 Write down of intangible assets 1,926 ---- 1,926 ---- Services 3,172 2,930 6,376 5,883 ------------ ----------- ------------ ----------- Total cost of revenues 5,923 3,721 9,982 7,220 ------------ ----------- ------------ ----------- Gross margin 2,531 6,607 6,823 12,769 Operating expenses: Sales and marketing 4,233 3,359 8,000 6,517 Product development 1,971 1,230 3,772 2,465 General and administrative 1,717 1,314 3,436 2,593 Write down of goodwill and other non-recurring charges 1,889 ---- 1,889 ---- Acquired research and development ---- ---- 1,193 ---- ------------ ----------- ------------ ----------- Total operating expenses 9,810 5,903 18,290 11,575 ------------ ----------- ------------ ----------- Income (loss) from operations (7,279) 704 (11,467) 1,194 Interest income, net 128 142 296 267 Settlement of litigation (4,073) ---- (4,073) ---- Other income (expenses), net 9 20 (31) 54 ------------ ----------- ------------ ----------- Income (loss) before income taxes (11,215) 866 (15,275) 1,515 Provision (benefit) for income taxes (2,143) 251 (3,003) 455 ------------ ----------- ------------ ----------- Net income (loss) $ (9,072) $ 615 $ (12,272) $ 1,060 ============ =========== ============ =========== Net income (loss) per common share $ (1.40) $ 0.09 $ (1.91) $ 0.16 ============ =========== ============ =========== Weighted average number of common and common equivalent shares 6,462 6,687 6,414 6,588 ============ =========== ============ ===========
The accompanying notes are an integral part of the consolidated condensed financial statements 4 Dataware Technologies, Inc. Consolidated Condensed Statements of Cash Flows (In thousands)
Six Months Ended June 30, 1996 1995 ----------- ----------- Cash flows provided by (used in) operating activities: Net income (loss) $ (12,272) $ 1,044 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,762 1,573 Loss (gain) on foreign currency transactions 53 (48) Deferred taxes (3,003) --- Non-cash portion of write-down of intangible assets 3,180 --- Charge for acquired research and development 1,193 --- Other adjustments 151 --- Changes in operating assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable 2,098 (176) Prepaid expenses and other current assets (643) (184) Accounts payable 623 (610) Accrued expenses and compensation 399 349 Accrued litigation and non-recurring charges 5,308 --- Income taxes payable (28) 484 Deferred revenue (189) 332 ----------- ----------- Net cash provided by (used in) operating activities (1,368) 2,764 ----------- ----------- Cash flows used in investing activities: Purchase of marketable securities (8,205) --- Proceeds from sales and maturities of marketable securities 12,031 --- Additions to property and equipment (2,351) (1,665) Acquisition of businesses, net of cash acquired (1,498) --- Additions to capitalized software costs (941) (836) ----------- ----------- Net cash used in investing activities (964) (2,501) ----------- ----------- Cash flows provided by (used in) financing activities: Proceeds from issuance of common stock and exercise of stock options 147 1,090 Principal payments on notes, software license payable and capital leases (233) (242) ----------- ----------- Net cash provided by (used in) financing activities (86) 848 ----------- ----------- Effect of exchange rate changes on cash (66) 7 ----------- ----------- Net change in cash and cash equivalents (2,484) 1,118 Cash and cash equivalents at beginning of period 7,734 4,642 ----------- ----------- Cash and cash equivalents at end of period $ 5,250 $ 5,760 =========== =========== Supplemental disclosure of non-cash financing transactions: Stock and stock warrants issued in connection with acquisitions $ 238 $ --- =========== ===========
The accompanying notes are an integral part of the consolidated condensed financial statements 5 DATAWARE TECHNOLOGIES, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS A. Basis of Presentation These consolidated financial statements should be read in conjunction with portions of the Company's Annual Report incorporated by reference in Form 10-K for the fiscal year ended December 31, 1995 and the financial statements and footnotes included therein. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of normal recurring accruals and non-recurring charges, necessary to present fairly the consolidated financial position, results of operations and cash flows of Dataware Technologies, Inc. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. Certain reclassifications have been made to the prior years' financial statements to conform to the current presentation. B. Computer Software Costs During the six month period ended June 30, 1996, the Company capitalized approximately $941,000 of internally developed software costs and capitalized $731,000 during the same period in 1995. For the three month period ended June 30, 1996, the Company capitalized approximately $495,000 of these costs as compared to $355,000 during the same period in 1995. These costs, net of accumulated amortization, amounted to $1,548,000 at June 30, 1996. Amortization expense related to internally developed software was $455,000 and $300,000 for the six month periods ended June 30, 1996 and 1995, respectively. For the three month periods ended June 30, 1996 and June 30, 1995, amortization expense related to internally developed software was $129,000 and $153,000, respectively. The Company also recorded a $1,180,000 one-time charge during the three month period ended June 30, 1996 for the write-down of less productive internally developed software assets to their net realizable value. During the six month period ended June 30, 1996, the Company capitalized approximately $175,000 of purchased software costs related to the acquisition of Status/IQ Ltd. The cost of capitalized software purchased, net of accumulated amortization, amounted to $429,000 at June 30, 1996. Amortization expense for computer software purchased was $101,000 and $122,000 for the six months ended June 30, 1996 and 1995, respectively. For the three month periods ended June 30, 1996 and June 30, 1995, amortization expense related to computer software purchased was $42,000 and $68,000, respectively. During the three months ended June 30, 1996 the Company recorded a one-time charge for the write-down of less productive purchased software assets to their net realizable value in the amount of $405,000. C. Accounting for Goodwill The company periodically reviews and evaluates the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company's assessment of impairment considers the expected future operating income of the acquired entity. During the three month period ended June 30, 1996, the Company recorded a $905,000 one- time charge for the write-down of goodwill to fair value, primarily related to the acquisition of PCD-Consult AB in Skovde, Sweden. D. Acquisitions On March 29, 1996 the Company completed the acquisition of all of the outstanding shares of Status/IQ Ltd. ("Status"), located in the United Kingdom, in exchange for approximately $1,394,000 (including acquisition expenses), consisting of cash, common stock of the Company, and warrants to purchase additional common stock of the Company. The acquisition has been accounted for as a purchase and, accordingly, the assets, liabilities and results of operations are included in the financial statements from the acquisition date. Because Status was acquired on the last business day of the quarter, the results of operations in the first quarter were not affected by the acquisition other than a one-time charge of $1,193,000 for purchased research and development. In addition, $175,000 of the purchase price has been allocated to computer software costs and is being amortized over a one year period. On May 15, 1996 the Company completed the acquisition of substantially all of the assets and assumed the liabilities of S Cube srl of Milan ("S Cube") for approximately $425,000 including acquisition-related expenses. The acquisition has been accounted for as a purchase and, accordingly, the assets, liabilities and results of operations have been included in the financial statements from the acquisition date. The purchase price has been allocated to the assets and liabilities of S Cube based on their estimated respective fair values. The excess purchase price over the fair value of net assets acquired, totaling $191,000, is included in intangible assets and is being amortized over a five year period. 6 E. Write-Down of Intangible Assets, Goodwill, and Other Non-recurring Charges The Company continually evaluates the future benefit of its capitalized costs. Due to recent changes in the markets it serves, the Company provided for write- downs of certain of these assets and for related charges to refocus certain areas of its operations. Accordingly, during the three month period ended June 30, 1996 the Company recorded a one-time charge, which was included in cost of revenues in the consolidated statements of operations, in the amount of $1,926,000 for the write-down, to their net realizable value, of less productive software assets, prepaid royalties and inventory. In addition, the Company recorded write-downs of goodwill, facilities consolidations, and smaller amounts relating to severance and miscellaneous items amounting to $1,889,000 which was included in operating expenses in the consolidated statements of operations. F. Litigation Settlement On July 18, 1996, the Company announced terms of a proposed settlement with the plaintiffs in a securities class-action lawsuit pending against the Company and certain of its current and former directors and officers since November 1994. The terms of this settlement are subject to approval by the Court. The Company will distribute approximately $1.7 million in cash and 250,000 shares of its common stock in exchange for a full release of all claims against the Company and its current and former directors and officers. The Company's insurance carrier will contribute $1.0 million in cash towards the proposed settlement and associated legal fees. The Company reported an expense of $4,073,000 in the consolidated statements of operations for the three month period ended June 30, 1996 to reflect the Company's best current estimate of the anticipated cost of the proposed settlement. The final cost of the proposed settlement will be based on the closing price of the Company's common stock 30 days after final court approval of the settlement agreement. G. Subsequent Event On July 31, 1996 the Company acquired Ntergaid, Inc. of Milford, CT through the merger of a wholly-owned subsidiary with Ntergaid for a cost of approximately $650,000 (including acquisition-related expenses), consisting of cash and common stock of the Company. The acquisition is being accounted for as a purchase and, accordingly, the assets, liabilities and results of operations will be included in the financial statements from the acquisition date. It is anticipated that a material portion of the purchase price will be allocated to acquired research and development. H. Income Taxes The Company recorded a tax benefit of $2,143,000 for the second quarter of 1996 reflecting a 30% tax rate (before settlement of litigation) as compared to a $251,000 tax provision for the same period a year ago, reflecting a 29% tax rate. For the six month period ended June 30, 1996, the Company recorded a tax benefit of $3,003,000 (a 30% tax rate before the charge for acquired research and development and the settlement of litigation). The effective tax rate for the second quarter of 1996 (including settlement of litigation) was 19%, and for the six month period ended June 30, 1996 (including the charge for acquired research and development and the settlement of litigation) was 20%. Management continues to evaluate the realizability of its $3.6 million deferred tax asset and believes that it is more likely than not, based on the weight of available evidence, that these deferred tax assets will be realizable. However, there can be no assurances that a reduction of this deferred tax asset will not be required in the near term pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". 7 Dataware Technologies, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS: - ---------------------- The Company's results for the three month and six month periods ended June 30, 1995 have been restated to include the operations of Ledge Multimedia, Inc., which was acquired on December 30, 1995 in a pooling transaction. Additionally, the former systems integration category has been combined with the services category in the revenues and cost of revenues sections in the statements of operations for all periods shown. On May 15, 1996 the Company completed the acquisition of substantially all of the assets and assumed the liabilities of S Cube srl of Milan ("S Cube") for approximately $425,000 including acquisition-related expenses. The acquisition has been accounted for as a purchase and, accordingly, the assets, liabilities and results of operations have been included in the financial statements from the acquisition date. The purchase price has been allocated to the assets and liabilities of S Cube based on their estimated respective fair values. The excess purchase price over the fair value of net assets acquired, totaling $191,000, is included in intangible assets and is being amortized over a five year period. On July 31, 1996 the Company acquired Ntergaid, Inc. of Milford, CT through the merger of a wholly-owned subsidiary with Ntergaid for a cost of approximately $650,000 (including acquisition-related expenses), consisting of cash and common stock of the Company. The acquisition is being accounted for as a purchase and, accordingly, the assets, liabilities and results of operations will be included in the financial statements from the acquisition date. Since the acquisition was not completed until July, the results of operations in the second quarter are not affected by the transaction. It is anticipated that a material portion of the purchase price will be allocated to acquired research and development. Revenues The Company's total revenues decreased 18% from $10.3 million in the second quarter of 1995 to $8.5 million in the second quarter of 1996. The Company's total revenues decreased 16% from $20.0 million in the first six months of 1995 to $16.8 million in the first six months of 1996. Quarter over quarter, software license fees decreased 29% from $4.9 million to $3.5 million and services revenues decreased 8% from $5.4 to $5.0 million. For the first six months of 1996, software license fees decreased 29% from $9.2 million to $6.5 million, and services revenues declined 4% from $10.8 million to $10.3 million. These decreases in software license revenues during the second quarter as well as the first six months of 1996 reflect continuing softness in the government sector, particularly in North America, as well as increased competition in the industry. Software revenues decreased to 41% of total revenues in the second quarter of 1996, down from 48% in the second quarter of 1995, and services revenues increased to 59% of total revenues in the second quarter of 1996, up from 52% in the second quarter of 1995. For the first six months of 1996, software license fees decreased to 39% of total revenues from 46% in the first six months of 1995 and services revenues increased to 61% of total revenues from 54% in the first half of 1995. Consistent with past experience, a higher percentage of the Company's revenues are expected to be realized in the third month of each fiscal quarter and tend to be concentrated in the latter half of that month. The Company's orders early in a quarter will not generally be large enough to assure that it will meet its revenue targets for any particular quarter. Accordingly, the Company's quarterly results will be difficult to predict until the end of the quarter, and a shortfall in shipments or contract orders at the end of any particular quarter may cause the results for that quarter to fall short of anticipated levels. 8 Cost of Revenues Cost of revenues increased 59% from $3.7 million in the second quarter of 1995 to $5.9 million during the same period in 1996. Cost of revenues increased 38% from $7.2 million for the six month period ended June 30, 1995 to $10.0 million during the six month period ended June 30, 1996. As a percent of revenues, total cost of revenues increased from 36% of total revenues for the three months ended June 30, 1995 to 70% for the three months ended June 30, 1996 and from 36% to 59% for the first six months of 1995 compared to the same period in 1996. This increase is largely due to a $1.9 million one-time charge that was recorded in the second quarter of 1996 for the write-down of less productive software assets to their net realizable value. A continuing shift in product mix from software license fees to our higher cost services business, as well as increased fixed costs, also contributed to the increase. The cost of software licenses as a percentage of software license fees increased from 16% during the second quarter of 1995 to 24% during the same period in 1996, and from 15% for the first six months of 1995 to 26% for the first six months of 1996. This increase was due to the decrease in sales volume while fixed costs, primarily amortization of capitalized software, increased quarter over quarter and year over year. The cost of services as a percentage of service revenues increased from 54% for the second quarter of 1995 to 64% during the second quarter of 1996 and from 55% for the first six months of 1995 to 62% for the first six months of 1996. This increase primarily reflects higher direct and indirect expenses for services projects. Gross Margin Total gross margin was $6.6 million or 64% of total revenues for the second quarter of 1995 and $2.5 million or 30% of total revenues for the second quarter of 1996. For the six month period ended June 30, 1995, total gross margin amounted to $12.8 million as compared with $6.8 million for the same period in 1996, representing 64% and 41% of total revenues, respectively. In addition to the one-time charge mentioned previously, changes in total gross margin from period to period have resulted from lower total revenue volume, higher costs within each revenue category, and a significant shift in product mix from higher margin software products to relatively lower margin services. Although management anticipates that gross margin as a percentage of revenues will improve in the long run as the Company's revenue base grows and the Company shifts product mix toward higher margin software, there are a number of important factors that could adversely affect the Company's future gross margins resulting in higher than anticipated costs and/or lower than anticipated revenues. These factors include: the existence of strong competition for the Company's products and services, including the introduction of new products from competitors, the timing of which cannot be foreseen by the Company; the inherent risks of new product introductions, including uncertainty of customer acceptance; and the Company's reliance on third parties for supply of certain product components. Sales and Marketing Expenses Sales and marketing expenses increased 26% from $3.4 million during the second quarter of 1995 to $4.2 million during the same period in 1996. During the six month period ended June 30, 1996, sales and marketing expenses increased 23% to $8.0 million from $6.5 million during the same period a year ago. Sales and marketing expenses increased as a percentage of revenues from 33% to 50% on a quarter to quarter basis and from 33% to 48% year over year. The increase in sales and marketing expenses reflects the Company's continuing investment in its distribution channels and strengthening the Company's marketing capabilities. 9 Product Development Expenses Product development expenses, which excludes capitalized software costs, increased 60% from $1.2 million in the second quarter of 1995 to $2.0 million in the second quarter of 1996, and increased 53% from $2.5 million during the first six months of 1995 to $3.8 million during the same period in 1996. The Company capitalized software development costs in the amount of $495,000 in the second quarter of 1996 as compared to $355,000 in the second quarter of 1995. During the first half of 1996, the Company capitalized $941,000 in software development expenses as compared with $731,000 during the same period in 1995. Product development expenses as a percentage of total revenues increased from 12% to 23% on a quarter to quarter basis and from 12% to 22% on a year to year basis. The increased product development expenses in terms of real dollars as well as in relation to total revenues reflects the Company's continuing investment in internet-related and other projects, compounded by the decline in revenue during the first half of 1996. General and Administrative Expenses General and administrative expenses increased 31% from $1.3 million in the second quarter of 1995 to $1.7 million in the second quarter of 1996, and increased 33% from $2.6 million during the first six months of 1995 to $3.4 million during the first six months of 1996. This increase was primarily due to the build-up of the Company's financial and administrative infrastructure, both systems and personnel, during the second half of 1995. General and administrative expenses as a percent of total revenues increased from 13% to 20% on a quarter to quarter and year to year basis, due to increased fixed costs while revenues declined during the first half of 1996. Write-Down of Goodwill and Other Non-Recurring Charges During the three month period ended June 30, 1996 the Company recorded a one- time charge, which was included in cost of revenues in the consolidated statements of operations, in the amount of $1,926,000 for the write-down, to their net realizable value, of less productive software assets, prepaid royalties and inventory. In addition, the Company recorded write-downs of goodwill, facilities consolidations, and smaller amounts for severance and miscellaneous items amounting to $1,889,000 which was included in operating expenses in the consolidated statements of operations. Charge for Acquired Research and Development In conjunction with the acquisition of Status/IQ Ltd. in March 1996, the Company acquired certain technologies under development that the Company hopes will prove valuable to the future growth of the Company. Such technology, valued at approximately $1.2 million, was charged to operations during the first quarter of 1996 as acquired research and development. Settlement of Litigation On July 18, 1996, the Company announced terms of a proposed settlement with the plaintiffs in a securities class-action lawsuit pending against the Company and certain of its current and former directors and officers since November 1994. The terms of this settlement are subject to approval by the Court. The Company will distribute approximately $1.7 million in cash and 250,000 shares of its common stock in exchange for a full release of all claims against the Company and its current and former directors and officers. The Company's insurance carrier will contribute $1.0 million in cash towards the proposed settlement and associated legal fees. The Company reported an expense of $4,073,000 in the consolidated statements of operations for the three month period ended June 30, 1996 to reflect the Company's best current estimate of the anticipated cost of the proposed settlement. The final cost of the proposed settlement will be based on the closing price of the Company's common stock 30 days after final court approval of the settlement agreement. 10 Provision for Income Taxes The Company recorded a tax benefit of $2,143,000 for the second quarter of 1996 reflecting a 30% tax rate (before settlement of litigation) as compared to a $251,000 tax provision for the same period a year ago, reflecting a 29% tax rate. For the six month period ended June 30, 1996, the Company recorded a tax benefit of $3,003,000 (a 30% tax rate before the charge for acquired research and development and the settlement of litigation). The effective tax rate for the second quarter of 1996 (including settlement of litigation) was 19%, and for the six month period ended June 30, 1996 (including the charge for acquired research and development and the settlement of litigation) was 20%. The tax rate of 30% expected in 1996 is consistent with the rate for the full year in 1995. Management continues to evaluate the realizability of its $3.6 million deferred tax asset and believes that it is more likely than not, based on the weight of available evidence, that these deferred tax assets will be realizable. However, there can be no assurances that a reduction of this deferred tax asset will not be required in the near term pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". LIQUIDITY AND CAPITAL RESOURCES: - -------------------------------- As of June 30, 1996, the Company had cash, cash equivalents, and marketable securities of approximately $10.3 million. Operating activities used $1.4 million of the Company's cash during the first six months of 1996 primarily due to operating losses. Days sales outstanding decreased from 85 days at March 31, 1996 to 79 days at June 30, 1996. The Company's investing activities used cash of $1.0 million during the first six months of 1996, consisting of additions to property and equipment of $2.4 million, $1.5 million to fund the acquisition of Status/IQ Ltd. and S Cube and capitalization of $941,000 in software costs. These outlays of cash were partially offset by net sales and maturities of marketable securities, amounting to $3.8 million. The Company's financing activities used cash of $86,000 during the first six months of 1996. Cash of $147,000 from proceeds received from the issuance of stock and exercise of stock options partially offset the paydown of $233,000 in debt. The Company currently has higher than usual cash requirements due to the proposed settlement of litigation and certain product development investments. However, the Company believes that its cash, cash equivalents, and marketable securities, together with anticipated cash from operations, will be sufficient to meet its liquidity needs for the foreseeable future. Working capital and other capital requirements may change because of unanticipated changes in business conditions or delays in market acceptance of new products, in addition to such other considerations as expansion of operations or research and development activities, competitive and technological developments, costs associated with litigation, and possible future acquisitions of businesses and/or product rights. 11 DATAWARE TECHNOLOGIES, INC. PART II. OTHER INFORMATION Rider 1 Item 6. Exhibits and Reports Filed on Form 8-K. - ----------------------------------------------- (a) Exhibits. See exhibit list on page 15. (b) Reports on Form 8-K. On April 11, 1996, the Company filed a report on Form 8-K reporting the acquisition of Status/IQ Ltd. and on June 11, 1996, the Company filed an amendment to the Form 8-K to include the required financial information. 12 Rider 1 - ------- Item 1. Legal Proceedings On July 18, 1996, the Company announced that it had agreed on the terms of a proposed settlement with the plaintiffs in the securities class action lawsuit pending in the United States District Court for Massachusetts. The lawsuit, under which several separate actions filed on November 14, 1994, by Oscar Haskell, Kent Hiser, Jonathan and Jacklyn Brinlee, and Jon Engdahl were consolidated, will be resolved by the payment of approximately $1.7 million in cash and 250,000 shares of the Company's common stock, subject to court approval of the settlement. The actual amounts will be based in part on the market value of the common stock at the time the settlement becomes effective. Information about the impact of the proposed settlement on the Company's financial results is contained in the Management's Discussion and Analysis section and in the Notes to the financial statements. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders on May 23, 1996, the Company's shareholders voted as follows: a) To reelect David Dominik, William R. Lonergan, and Jeffrey O. Nyweide to the Board of Directors for three-year terms.
Total Vote for Total Vote Withheld Each Nominee From Each Nominee -------------- ------------------- David Dominik 4,622,254 254,884 William R. Lonergan 4,622,254 254,884 Jeffrey O. Nyweide 4,622,254 254,884
b) To amend the Company's 1993 Equity Incentive Plan to limit the number of shares of Common Stock that may be granted annually to any individual to 250,000. Total Vote for the Proposal 4,766,892 Total Vote Against the Proposal 81,941 Abstentions 28,305 Broker Non-votes 2,000
c) To amend the Company's 1993 Director Stock Option Plan to increase the total number of shares of Common Stock issuable under the Plan from 60,000 shares to 130,000 shares. Total Vote for the Proposal 4,253,922 Total Vote Against the Proposal 576,117 Abstentions 47,099 Broker Non-votes 2,000
d) To amend the Company's 1993 Director Stock Option Plan to increase the number of shares of Common Stock subject to automatic annual grants under the Plan from 4,000 shares to 6,000 shares. Total Vote for the Proposal 4,423,937 Total Vote Against the Proposal 415,146 Abstentions 38,055 Broker Non-votes 2,000
13 DATAWARE TECHNOLOGIES, INC. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATAWARE TECHNOLOGIES, INC. (Registrant) Date: August 14, 1996 By: /s/ Daniel M. Clarke ------------------------------------------ Daniel M. Clarke Chief Financial Officer (Principal Financial and Principal Accounting Officer) 14 Exhibit Index 3.1 Restated Certificate of Incorporation, as amended July 2, 1996. 10.1 1993 Equity Incentive Plan, as amended May 23, 1996.* 10.2 1993 Director Stock Option Plan, as amended May 23, 1996.* 10.3 Form of stock option agreement terms (executive officers).* 10.4 Form of stock option agreement terms (Kurt Mueller, Jeffrey O. Nyweide).* 27.1 Financial Data Schedule. * Denotes management contracts and compensation plans. EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF DATAWARE TECHNOLOGIES, INC. Incorporated Pursuant to an Original Certificate of Incorporation filed with the Secretary of State of Delaware on March 16, 1988 ----------------------------- We, the undersigned, for the purpose of amending and restating the Restated Certificate of Incorporation of Dataware Technologies, Inc. (the "Corporation") under the laws of the State of Delaware hereby certify as follows: FIRST: The name of the Corporation is Dataware Technologies, Inc. ----- SECOND: The registered office of the Corporation in the State of Delaware ------ is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is the Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or ----- activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The Corporation shall be authorized to issue Twenty-two Million ------ (22,000,000) shares of capital stock, which shall be divided into Fourteen Million (14,000,000) shares of Common Stock with a par value of one cent ($.01) per share and Eight Million (8,000,000) shares of Preferred Stock with a par value of one cent ($.01) per share. The following is a statement of the designations, preferences, voting powers, qualifications, special or relative rights and privileges in respect of the authorized capital stock of the Corporation. Preferred Stock --------------- The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide by resolution for the issuance of the shares of Preferred Stock in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -1- The authority of the Board with respect to each series shall include, but shall not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate, if any, on the shares of that series, whether dividends shall be cumulative, and if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of the series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable, and if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; (h) Any other relative rights, preferences and limitations of that series. Common Stock ------------ The Common Stock is subject to the rights and preferences of the Preferred Stock as hereinbefore set forth or authorized. Subject to the provisions of any applicable law or of the by-laws of the Corporation, as from time to time amended, with respect to the fixing of a record date for the determination of stockholders entitled to vote, and except as otherwise provided herein or by law or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall have exclusive voting rights for the election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in his name on the books of the Corporation. -2- Subject to the rights of any one or more series of Preferred Stock, the holders of Common Stock shall be entitled to receive such dividends from time to time as may be declared by the Board of Directors out of any funds of the Corporation legally available for the payment of such dividends. In the event of the liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to the holders of the Preferred Stock of the full amount to which they are entitled, the holders of Common Stock shall be entitled to share ratably according to the number of shares of Common Stock held by them in all remaining assets of the Corporation available for distribution to its stockholders. Issuance -------- Subject to the provisions of this Certificate of Incorporation and except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine. FIFTH: The following provisions are inserted for the management of the ----- business and for the conduct of the affairs of the Corporation: 1. Any vote or votes authorizing liquidation of the Corporation or proceedings for its dissolution may provide, subject to the rights of creditors and the rights expressly provided for particular classes or series of stock, for the distribution among the stockholders of the Corporation of the assets of the Corporation as provided herein, wholly or in part or in kind, whether such assets be in cash or other property, and may authorize the Board of Directors of the Corporation to determine the valuation of the different assets of the Corporation for the purpose of such liquidation and may divide or authorize the Board of Directors to divide such assets or any part thereof among the stockholders of the Corporation, in such manner that every stockholder will receive a proportionate amount in value (determined as provided herein) of cash or property of the Corporation upon such liquidation or dissolution even though each stockholder may not receive a strictly proportionate part of each such asset. 2. The directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the entire Board permits, with the term of office of one class expiring each year. The initial Class I directors shall be Messrs. Barton L. Faber and James F. Morgan and shall hold office for a term expiring at the 1994 annual meeting of stockholders; the initial Class II directors shall be Messrs. Stephen H. Beach and Kurt Mueller and shall hold office for a term expiring at the 1995 annual meeting of stockholders; and the initial Class III directors shall be Messrs. David Dominik, William R. Lonergan, and Jeffrey O. Nyweide and shall hold office for a term expiring at the 1996 annual meeting of stockholders. At each such annual meeting of stockholders and at each annual meeting thereafter, successors to the class of directors whose term expires at that -3- meeting shall be elected for a term expiring at the third annual meeting following their election and until their successors shall be elected and qualified, subject to prior death, resignation, retirement or removal. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no event will a decrease in the number of directors shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the election, terms of office and other features of such directorships shall be governed by the terms of the vote establishing such series, and such directors so elected shall not be divided into classes pursuant to this Article FIFTH unless expressly provided by such terms. 3. Each director chosen to fill a vacancy in the Board of Directors shall be elected to complete the term of office of the director who is being succeeded. In the case of any election of a new director to fill a directorship created by an enlargement of the Board, the Board shall in such election assign the class of directors to which such additional director is being elected, and each director so elected shall hold office for the same term as the other members of the class to which the director is assigned. 4. Elections of directors need not be by ballot. 5. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the by-laws of the Corporation. 6. The Corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom. Indemnification shall include payment by the Corporation of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification under this Article, which undertaking shall be accepted without reference to the financial ability of such person to make such repayments. -4- The Corporation shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved or ratified by the Board of Directors of the Corporation. The indemnification rights provided in this Article (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of such persons. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. Any person seeking indemnification under this Article shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any amendment or repeal of the provisions of this Article shall not adversely affect any right or protection of a director or officer of this Corporation with respect to any act or omission of such director or officer occurring before such amendment or repeal. 7. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article FIFTH to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time. Any repeal or modification of this Article FIFTH shall not increase the personal liability of any director of this Corporation for any act or occurrence taking place before such repeal or modification, nor otherwise adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. SIXTH: No action required to be taken or that may be taken at any annual ----- or special meeting of stockholders of the Corporation may be taken by written consent without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SEVENTH: The Corporation reserves the right to amend, alter, change or ------- repeal any provisions contained in this Restated Certificate of Incorporation in the manner now or -5- hereafter prescribed by statute, and all rights conferred upon stockholders are granted subject to this reservation. The amendments and the restatement of the Restated Certificate of Incorporation herein certified have been duly adopted by written consent of the stockholders in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware and written notice of the adoption of this Restated Certificate of Incorporation has been given as provided by Section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice. The undersigned, hereby declaring and certifying that the facts stated in this Restated Certificate of Incorporation are true, hereunto set their hands and seals this 26th day of July, 1993. /s/ Kurt Mueller ----------------------- Kurt Mueller, President ATTESTED: /s/ Peter Wirth - ----------------------------------- Peter Wirth, Assistant Secretary -6- CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF DATAWARE TECHNOLOGIES, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, the Chairman of the Board and the Assistant Secretary of Dataware Technologies, Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, do hereby certify that, pursuant to authority conferred on the Board of Directors of the Corporation by the Restated Certificate of Incorporation of the Corporation and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation, by vote of its members, duly adopted the following resolution: Series A Junior Participating Preferred Stock - --------------------------------------------- RESOLVED: That, pursuant to the authority vested in the Board of Directors of the Company by Article Fourth of its Restated Certificate of Incorporation, as amended, a series of Preferred Stock of the Company be and it hereby is created, and the designations, powers, preferences and rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: 1. Authorized Amount and Designation. The shares of such series shall be --------------------------------- designated as "Series A Junior Participating Preferred Stock" (the "Junior Preferred Stock"). The number of shares constituting such series shall be 300,000 shares and the par value shall be $0.01 per share. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Junior Preferred - -------- Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Junior Preferred Stock. 2. Dividends and Distributions. ---------------------------- (A) Subject to the prior and superior rights of the holders of any shares of any series of preferred stock (collectively, the "Preferred Stock") ranking prior and superior to the Junior Preferred Stock with respect to dividends, the holders of shares of Junior Preferred Stock, in preference to the holders of Common Stock of the Company (the "Common Stock"), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each such case, the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a -2- Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Junior Preferred Stock shall ------------- have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Junior Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Restated Certificate of Incorporation, in any other Resolution of the Board of Directors of the Company creating a series of Preferred Stock, or by law, the holders of shares of Junior Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as set forth herein or as otherwise provided by law, holders of Junior Preferred Stock shall have no voting rights. 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock, as provided in Section 2 of this vote, are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on -3- shares of Junior Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire, for consideration, shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or (iv) redeem, purchase or otherwise acquire, for consideration, any shares of Junior Preferred Stock, or any shares of stock ranking on a parity with the Junior Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire, for consideration, any shares of stock of the Company unless the Company could, under paragraph (A) of this section 4 purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or ----------------- otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall, upon their cancellation, become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein, in the Company's Restated Certificate of Incorporation, in any other Resolution of the Board of Directors of the Company creating a series of Preferred Stock, or as otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, -------------------------------------- dissolution or winding up of the Company, no distribution shall be made (1) to the holders of shares of -4- stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Junior Preferred Stock shall be entitled to receive, to the extent greater than the foregoing, an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except distributions made ratably on the Junior Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall, at any time, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each such case, the aggregate amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. Consolidation, Merger, etc. In case the Company shall enter into any --------------------------- consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall, at any time, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each such case, the amount set forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. Redemption. The shares of Junior Preferred Stock shall not be ---------- redeemable. -5- 9. Rank. The Junior Preferred Stock shall rank junior with respect to the ---- payment of dividends and the distribution of assets to all series of the Company's Preferred Stock that specifically provide that they shall rank prior to the Junior Preferred Stock. Nothing herein shall preclude the Board from creating any series of Preferred Stock ranking on a parity with or prior to the Junior Preferred Stock as to the payment of dividends or the distribution of assets. 10. Amendment. The Restated Certificate of Incorporation of the Company --------- shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding Junior Preferred Stock, voting together as a single series. 11. Fractional Shares. The Junior Preferred Stock may be issued in ----------------- fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of the Junior Preferred Stock. IN WITNESS WHEREOF, this Certificate is executed and attested on behalf of the Corporation by the undersigned as of the 28th day of June, 1996. /s/ Kurt Mueller ------------------- Chairman of the Board and Attest Chief Executive Officer /s/ Matthew C. Dallett - ------------------------ Assistant Secretary -6- EX-10.1 3 1993 EQUITY INCENTIVE PLAN Exhibit 10.1 DATAWARE TECHNOLOGIES, INC. 1993 EQUITY INCENTIVE PLAN Section 1. Purpose ------- The purpose of the Dataware Technologies, Inc. 1993 Equity Incentive Plan (the "Plan") is to attract and retain key employees and directors and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company. The Plan constitutes an amendment and restatement of the Dataware Technologies, Inc. 1988 Stock Option Plan (the "1988 Plan"), which is hereby merged with and into the Plan, and the separate existence of the 1988 Plan shall terminate on the Effective Date. The rights and privileges of holders of outstanding options or rights under the 1988 Plan shall not be adversely affected by the foregoing action. Section 2. Definitions ----------- "Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. "Award" means any Option, Stock Appreciation Right, Performance Share, Restricted Stock, Stock Unit or Other Stock-Based Award awarded under the Plan. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor to such Code. "Committee" means a committee of not less than three members of the Board appointed by the Board to administer the Plan, each of whom is a "disinterested person" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 or any successor provision, as applicable to the Company at the time ("Rule 16b-3"). "Common Stock" or "Stock" means the Common Stock, $0.01 par value, of the Company. "Company" means Dataware Technologies, Inc. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, "Designated Beneficiary" shall mean the Participant's estate. -1- "Effective Date" means May 19, 1993. "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time. "Incentive Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 that is intended to meet the requirements of Section 422 of the Code or any successor provision. "Nonstatutory Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 that is not intended to be an Incentive Stock Option. "Option" means an Incentive Stock Option or a Nonstatutory Stock Option. "Other Stock-Based Award" means an Award, other than an Option, Stock Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a Common Stock element and awarded to a Participant under Section 11. "Participant" means a person selected by the Committee to receive an Award under the Plan. "Performance Cycle" or "Cycle" means the period of time selected by the Committee during which performance is measured for the purpose of determining the extent to which an award of Performance Shares has been earned. "Performance Shares" mean shares of Common Stock, which may be earned by the achievement of performance goals, awarded to a Participant under Section 8. "Reporting Person" means a person subject to Section 16 of the Securities Exchange Act of 1934 or any successor provision. "Restricted Period" means the period of time during which an Award may be forfeited to the Company pursuant to the terms and conditions of such Award. "Restricted Stock" means shares of Common Stock subject to forfeiture awarded to a Participant under Section 9. "Stock Appreciation Right" or "SAR" means a right to receive any excess in value of shares of Common Stock over the exercise price awarded to a Participant under Section 7. "Stock Unit" means an award of Common Stock or units that are valued in whole or in part by reference to, or otherwise based on, the value of Common Stock, awarded to a Participant under Section 10. -2- Section 3. Administration -------------- The Plan shall be administered by the Committee. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not Reporting Persons and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for all such Participants and a maximum for any one Participant. Section 4. Eligibility ----------- All employees and, in the case of Awards other than Incentive Stock Options, directors and consultants of the Company or any Affiliate, capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not to be eligible and other than members of the Committee during their service as such and for such additional periods as are required to ensure that they are "disinterested persons" under Rule 16b-3 with respect to such service, are eligible to be Participants in the Plan. Incentive Stock Options may be awarded only to persons eligible to receive such Options under the Code. Section 5. Stock Available for Awards -------------------------- (a) Subject to adjustment under subsection (b), Awards may be made under the Plan for up to 2,500,000 shares of Common Stock (after giving effect to the 3:1 reverse stock split approved by the Board on the Effective Date). If any Award in respect of shares of Common Stock expires or is terminated unexercised or is forfeited without the Participant having had the benefits of ownership (other than voting rights), the shares subject to such Award, to the extent of such expiration, termination or forfeiture, shall again be available for award under the Plan. Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event that the Committee determines that any stock dividend, extraordinary cash dividend, creation of a class of equity securities, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee (subject, in the case of Incentive Stock Options, to any limitation required under the Code) shall equitably adjust any or all of (i) the number -3- and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the award, exercise or conversion price with respect to any of the foregoing, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number. Section 6. Stock Options ------------- (a) Subject to the provisions of the Plan, the Committee may award Incentive Stock Options and Nonstatutory Stock Options and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code or any successor provision and any regulations thereunder, and no Incentive Stock Option may be granted hereunder more than ten years after the Effective Date. (b) The Committee shall establish the option price at the time each Option is awarded, which price shall not be less than 100% of the Fair Market Value of the Common Stock on the date of award with respect to Incentive Stock Options. Nonstatutory Stock Options may be granted at such prices as the Committee may determine. (c) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable Award or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (d) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the award of the Option, by delivery of a note or shares of Common Stock owned by the optionee, including Restricted Stock, or by retaining shares otherwise issuable pursuant to the Option, in each case valued at their Fair Market Value on the date of delivery or retention, or such other lawful consideration as the Committee may determine. (e) The Committee may provide that, subject to such conditions as it considers appropriate, upon the delivery or retention of shares to the Company in payment of an Option, the Participant automatically be awarded an Option for up to the number of shares so delivered. Section 7. Stock Appreciation Rights ------------------------- (a) Subject to the provisions of the Plan, the Committee may award SARs in tandem with an Option (at or after the award of the Option), or alone and unrelated to an -4- Option. SARs in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem SARs are exercised. SARs granted in tandem with Options shall have an exercise price not less than the exercise price of the related Option. SARs granted alone and unrelated to an Option may be granted at such exercise prices as the Committee may determine. (b) An SAR related to an Option, which SAR can only be exercised upon or during limited periods following a change in control of the Company, may entitle the Participant to receive an amount based upon the highest price paid or offered for Common Stock in any transaction relating to the change in control or paid during the thirty-day period immediately preceding the occurrence of the change in control in any transaction reported in the stock market in which the Common Stock is normally traded. Section 8. Performance Shares ------------------ (a) Subject to the provisions of the Plan, the Committee may award Performance Shares and determine the number of such shares for each Performance Cycle and the duration of each Performance Cycle. There may be more than one Performance Cycle in existence at any one time, and the duration of Performance Cycles may differ from each other. The payment value of Performance Shares shall be equal to the Fair Market Value of the Common Stock on the date the Performance Shares are earned or, in the discretion of the Committee, on the date the Committee determines that the Performance Shares have been earned. (b) The committee shall establish performance goals for each Cycle, for the purpose of determining the extent to which Performance Shares awarded for such Cycle are earned, on the basis of such criteria and to accomplish such objectives as the Committee may from time to time select. During any Cycle, the Committee may adjust the performance goals for such Cycle as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine. (c) As soon as practicable after the end of a Performance Cycle, the Committee shall determine the number of Performance Shares that have been earned on the basis of performance in relation to the established performance goals. The payment values of earned Performance Shares shall be distributed to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary, as soon as practicable thereafter. The Committee shall determine, at or after the time of award, whether payment values will be settled in whole or in part in cash or other property, including Common Stock or Awards. Section 9. Restricted Stock ---------------- (a) Subject to the provisions of the Plan, the Committee may award shares of Restricted Stock and determine the duration of the Restricted Period during which, and the -5- conditions under which, the shares may be forfeited to the Company and the other terms and conditions of such Awards. Shares of Restricted Stock may be issued for no cash consideration or such minimum consideration as may be required by applicable law. (b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Committee, during the Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Committee may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and unless otherwise determined by the Committee, deposited by the Participant, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or if the Participant has died, to the Participant's Designated Beneficiary. Section 10. Stock Units ----------- (a) Subject to the provisions of the Plan, the Committee may award Stock Units subject to such terms, restrictions, conditions, performance criteria, vesting requirements and payment rules as the Committee shall determine. (b) Shares of Common Stock awarded in connection with a Stock Unit Award shall be issued for no cash consideration or such minimum consideration as may be required by applicable law. Section 11. Other Stock-Based Awards ------------------------ (a) Subject to the provisions of the Plan, the Committee may make other awards of Common Stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, Common Stock, including without limitation convertible preferred stock, convertible debentures, exchangeable securities and Common Stock awards or options. Other Stock-Based Awards may be granted either alone or in tandem with other Awards granted under the Plan and/or cash awards made outside of the Plan. (b) The Committee may establish performance goals, which may be based on performance goals related to book value, subsidiary performance or such other criteria as the Committee may determine, Restricted Periods, Performance Cycles, conversion prices, maturities and security, if any, for any Other Stock-Based Award. Other Stock-Based Awards may be sold to Participants at the face value thereof or any discount therefrom or awarded for no consideration or such minimum consideration as may be required by applicable law. Section 12. General Provisions Applicable to Awards --------------------------------------- -6- (a) Limitations on Grants of Options and SARs. Subject to adjustment under Section 5(b), the number of shares subject to Options and SARs granted to any one individual during any fiscal year may not exceed 250,000 shares of Common Stock. (b) Reporting Person Limitations. Notwithstanding any other provision of the Plan, to the extent required to qualify for the exemption provided by Rule 16b-3, Awards made to a Reporting Person shall not be transferable by such person other than by will or the laws of descent and distribution or, if then permitted by Rule 16b-3, pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder. (c) Documentation. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles. (d) Committee Discretion. Each type of Award may be made alone, in addition to or in relation to any other type of Award. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of award or at any time thereafter. (e) Settlement. The Committee shall determine whether Awards are settled in whole or in part in cash, Common Stock, other securities of the Company, Awards or other property. The Committee may permit a Participant to defer all or any portion of a payment under the Plan, including the crediting of interest on deferred amounts denominated in cash and dividend equivalents on amounts denominated in Common Stock. (f) Dividends and Cash Awards. In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable currently or deferred with or without interest, and (ii) cash payments in lieu of or in addition to an Award. (g) Termination of Employment. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (h) Change in Control. In order to preserve a Participant's rights under an Award in the event of a Change in Control (as defined below), the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or -7- realization of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the Change in Control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable and in the best interests of the Company. As used herein, a "Change in Control" of the Company shall be deemed to have occurred upon the occurrence of any of the following: (A) Any transaction or series of transactions, as a result of which any "person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) (a "Person") is or becomes a "beneficial owner" (as defined in Rule 13d-3 under such act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding voting securities (the "Company's Outstanding Voting Securities"); provided, however, that a Change in Control shall not be deemed to have occurred solely because of the acquisition of securities of the Company by (1) one or more employee benefit plans or related trusts established for the benefit of the employees of the Company or any Affiliate of the Company; or (2) any Person when such acquisition (a) is effected primarily to prevent the Company from being declared insolvent and (b) is approved by the Board of Directors of the Company (the "Board"). (B) Any change in the membership of the Board such that individuals who are Incumbent Directors (as defined herein) cease for any reason to constitute at least a majority of the Board. The Incumbent Directors shall be (1) those members of the Board who were Directors as of April 15, 1996 and who have served continuously as Directors since such date, and (2) any other member of the Board who subsequently became a Director and whose election or nomination for election by the Company's stockholders at the beginning of his or her current tenure was approved by a vote of at least a majority of the Directors who were then Incumbent Directors, except that no individual shall be an Incumbent Director if such individual's initial assumption of office as a Director occurred as a result of an actual or threatened election contest with respect to the election or removal of Directors, or other actual or threatened solicitation of proxies or consents, by, or on behalf of, a Person other than the Board. -8- (C) The consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of the Company, or similar transaction (a "Business Combination"), unless all of the following conditions are met: (1) the individuals and entities who are the beneficial owners of the Company's Outstanding Voting Securities immediately before the consummation of the Business Combination would beneficially own, directly or indirectly, securities representing more than 50% of the outstanding combined voting power of the voting securities that would be outstanding and entitled to vote generally in the election of the governing body of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity that as a result of such transaction would own the Company or all or substantially all of the Company's assets, either directly or through one or more subsidiaries) (the "Resulting Entity"), and the securities of the Resulting Entity that would be owned by such beneficial owners of the Company's Outstanding Voting Securities would be owned by them in substantially the same proportions as they own the Company's Outstanding Voting Securities; (2) no Person (excluding any corporation or other entity resulting from such Business Combination, and excluding any employee benefit plan or related trust of the Company or of such corporation or other entity resulting from such Business Combination) would beneficially own, directly or indirectly, 30% or more of the combined voting power of the outstanding voting securities of the Resulting Entity except to the extent that such ownership existed before the Business Combination; and (3) at least a majority of the members of the board of directors of the Resulting Entity would be persons who were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination. (D) Approval by the Company's stockholders of a liquidation or dissolution of the Company (unless the liquidation or dissolution is part of a Business Combination excepted from clause (C) above). (E) The close of business on the latest of the following dates: (1) the date that a tender or exchange offer by any Person (other than the Company, any Affiliate of the Company, or any employee benefit plan or related trust established for the benefit -9- of the employees of the Company or any Affiliate of the Company) that, if consummated, would result in such Person becoming a "beneficial owner" (as defined in clause (A) above), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding voting securities, is first published or sent or given within the meaning of Rule 14d-2(a) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder; (2) the date upon which all regulatory approvals required for the acquisition of securities pursuant to the tender or exchange offer referred to in clause (1) have been obtained or waived; or (3) the date upon which any approval of the security holders of the Person publishing or sending or giving the tender or exchange offer referred to in clause (1) required for the acquisition of securities pursuant to such tender or exchange offer is obtained or waived." (i) Loans. The Committee may authorize the making of loans or cash payments to Participants in connection with any Award under the Plan, which loans may be secured by any security, including Common Stock, underlying or related to such Award (provided that such Loan shall not exceed the Fair Market Value of the security subject to such Award), and which may be forgiven upon such terms and conditions as the Committee may establish at the time of such loan or at any time thereafter. (j) Withholding Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. (k) Foreign Nationals. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws. (l) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. -10- Section 13. Miscellaneous ------------- (a) No Right To Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award. (c) Effective Date. Subject to the approval of the stockholders of the Company, the Plan shall be effective on the Effective Date. Before such approval, Awards may be made under the Plan expressly subject to such approval. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, subject to any stockholder approval that the Board determines to be necessary or advisable. (e) Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of Delaware. ____________________________________________ . Plan adopted by the Board of Directors on May 19, 1993. . Plan approved by the stockholders on May 19, 1993. . Amendments adopted by the Board of Directors April 15, 1994 and approved by the Shareholders May 25, 1994. . Amendments adopted by the Board of Directors April 15, 1996 and approved by the Shareholders May 23, 1996. -11- EX-10.2 4 1993 DIRECTOR STOCK OPTION PLAN Exhibit 10.2 As amended through May 23, 1996. DATAWARE TECHNOLOGIES, INC. 1993 Director Stock Option Plan ------------------------------- The purpose of this 1993 Director Stock Option Plan (the "Plan") of Dataware Technologies, Inc. (the "Company") is to attract and retain highly qualified non-employee directors of the Company and to encourage ownership of stock of the Company by such Directors so as to provide additional incentives to promote the success of the Company. 1. Administration of the Plan. Grants of stock options under the Plan shall be automatic as provided in Section 6. However, all questions of interpretation with respect to the Plan and options granted under it shall be determined by the Board of Directors of the Company (the "Board") or by a committee consisting of one or more directors appointed by the Board, and such determination shall be final and binding upon all persons having an interest in the Plan. 2. Persons Eligible to Participate in the Plan. All directors of the Company who are not employees of the Company or of any subsidiary of the Company shall be eligible to participate in the Plan, unless such director irrevocably elects not to participate. 3. Shares Subject to the Plan. (a) The aggregate number of shares of the Company's Common Stock, $.01 par value (the "Common Stock"), that may be optioned under this Plan is 130,000 shares. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event of a stock dividend, split-up, combination or reclassification of shares, recapitalization or other similar capital change relating to the Company's Common Stock, the maximum aggregate number and kind of shares or securities of the Company as to which options may be granted under this Plan and as to which options then outstanding shall be exercisable, and the option price of such options shall be appropriately adjusted so that the proportionate number of shares or other securities as to which options may be granted and the proportionate interest of holders of outstanding options shall be maintained as before the occurrence of such event. (c) In the event of a consolidation or merger of the Company with another corporation following which the Company's stockholders do not own a majority in interest of the surviving or resulting corporation, or the sale or exchange of all or substantially all of the assets of the Company, or a reorganization or liquidation of the Company, any deferred exercise period shall be automatically accelerated and each holder of an outstanding option -1- shall be entitled to receive upon exercise and payment in accordance with the terms of the option the same shares, securities or property as he would have been entitled to receive upon the occurrence of such event if he had been, immediately prior to such event, the holder of the number of shares of Common Stock purchasable under his or her option; provided, however, that in lieu of the foregoing the Board may upon written notice to each holder of an outstanding option or right under the Plan, provide that such option or right shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. (d) Whenever options under this Plan lapse or terminate or otherwise become unexercisable the shares of Common Stock that were subject to such options shall again be subjected to options under this Plan. The Company shall at all times while this Plan is in force reserve such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Plan. 4. Non-Statutory Stock Options. All options granted under this Plan shall be non-statutory options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 5. Form of Options. Options granted hereunder shall be in substantially the form of the attached Exhibit A or in such other form as the Board or any committee appointed --------- pursuant to Section 1 above may from time to time determine. 6. Grant of Options and Option Terms. (a) Automatic Grant of Options. (i) Immediately following the annual meeting of stockholders each year, each non-employee director of the Company newly elected at or continuing in office after such meeting shall automatically be granted options to purchase 6,000 shares of Common Stock. (ii) Immediately following his or her election, each non-employee director of the Company newly elected to the Board of Directors at any point during the year between annual meetings of stockholders shall automatically be granted options to purchase 1,500 shares of Common Stock for each calendar quarter beginning before the date of the next annual meeting of stockholders (for which purpose the next annual meeting shall be deemed to be held on the same calendar date as the preceding annual meeting). No options shall be granted hereunder after ten years from the date on which this Plan was initially approved and adopted by the Board. (b) Date of Grant. The "Date of Grant" for options granted under this Plan shall be (i) the date of the respective annual meeting of stockholders, for each grant pursuant to clause (i) of subsection (a) and (ii) the date of the respective director's election, for each grant pursuant to clause (ii) of subsection (a). (c) Option Price. The option price for each option granted under this Plan shall be the current fair market value of a share of Common Stock of the Company, which, for this -2- purpose, shall be (i) the initial public offering price of the Common Stock to be sold pursuant to the Registration Statement, for the initial grants, and (ii) the last sale price for the Company's Common Stock as reported by the National Association of Securities Dealers Automated Quotations National Market System, or the principal exchange on which the Common Stock is then traded, as the case may be, for the business day immediately preceding the Date of Grant, for each subsequent grant. (d) Term of Option. The term of each option granted under this Plan shall be ten years from the Date of Grant. (e) Exercisability of Options. Options granted under this Plan shall become exercisable, during the optionholder's term in office, with respect to 1,500 shares at the beginning of each calendar quarter following the Date of Grant. (f) General Exercise Terms. Directors holding exercisable options under this Plan who cease to serve as members of the Board may, during their lifetime, exercise the rights they had under such options at the time they ceased being a director for the full unexpired term of such option. Any rights that have not yet become exercisable shall terminate upon cessation of membership on the Board. Upon the death of a director, those entitled to do so shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the director at the time of his or her death. The rights of the option holder may be exercised by the holder's guardian or legal representative in the case of disability and by the beneficiary designated by the holder in writing delivered to the Company or, if none has been designated, by the holder's estate or his or her transferee on death in accordance with this Plan, in the case of death. Options granted under the Plan shall terminate, and no rights thereunder may be exercised, after the expiration of the applicable exercise period. Notwithstanding the foregoing provisions of this section, no rights under any options may be exercised after the expiration of ten years from their Date of Grant. (g) Method of Exercise and Payment. Options may be exercised only by written notice to the Company at its head office accompanied by payment of the full option price for the shares of Common Stock as to which they are exercised. The option price shall be paid in cash or by check or in shares of Common Stock of the Company surrendered or withheld from the shares otherwise issuable upon exercise, or in any combination thereof. Outstanding shares of Common Stock surrendered in payment of the option price shall have been held by the person exercising the option for at least six months, unless otherwise permitted by the Board. The value of shares surrendered or withheld in payment of the option price shall be their fair market value, as determined in accordance with Section 6(c) above, as of the date of exercise. Upon receipt of such notice and payment, the Company shall promptly issue and deliver to the optionee (or other person entitled to exercise the option) a certificate or certificates for the number of shares as to which the exercise is made. (h) Non-transferability. Options granted under this Plan shall not be transferable by the holder thereof otherwise than by will or the laws of descent and distribution or as permitted by Rule 16b-3 (or any successor provision) under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). -3- 7. Limitation of Rights. (a) No Right to Continue as a Director. Neither the Plan, nor the granting of an option or any other action taken pursuant to the Plan, shall constitute an agreement or understanding, express or implied, that the Company will retain an option holder as a director for any period of time or at any particular rate of compensation. (b) No Stockholders' Rights for Options. A director shall have no rights as a stockholder with respect to the shares covered by options until the date the director exercises such options and pays the option price to the Company, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such option is exercised and paid for. 8. Amendment or Termination. The Board may amend or terminate this Plan at any time, provided that, to the extent necessary to comply with Rule 16b-3, this Plan shall not be amended more than once every six months, other than to comport with changes in the Code, ERISA or the rules thereunder. 9. Stockholder Approval. This Plan is subject to approval by the stockholders of the Company by the affirmative vote of the holders of a majority of the shares of Common Stock of the Company present, or represented and entitled to vote, at a meeting duly held in accordance with the laws of the State of Delaware. In the event such approval is not obtained, all options granted under this Plan shall be void and without effect. 10. Governing Law. This Plan shall be governed by and interpreted in accordance with the laws of the State of Delaware. ________________________ . Initially adopted by Board of Directors May 19, 1993. . Initially approved by Shareholders May 19, 1993. . Amendments adopted by the Board of Directors April 3, 1995 and approved by the Shareholders May 17, 1995. . Amendments adopted by the Board of Directors April 15, 1996 and approved by the Shareholders May 23, 1996. -4- EX-10.3 5 DATAWARE TECHNOLOGIES INC 1993 EQUITY Exhibit 10.3 DATAWARE TECHNOLOGIES, INC. 1993 EQUITY INCENTIVE PLAN Incentive Stock Option Terms And Conditions ------------------------------------------- (Executive Officers) 1. Plan Incorporated by Reference. This Option is issued pursuant to the ------------------------------ terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Company. 2. Option Price. The price to be paid for each share of Common Stock ------------ issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate. 3. Exercisability Schedule. This Option may be exercised at any time and ----------------------- from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the Expiration Date. 4. Method of Exercise. To exercise this Option, the Optionholder shall ------------------ deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Committee may at the time of exercise approve. Promptly following such notice, the Company will deliver to the Optionholder a certificate representing the number of shares with respect to which the Option is being exercised. 5. Rights as a Stockholder or Employee. The Optionholder shall not have ----------------------------------- any rights in respect of shares to which the Option shall not have been exercised and payment made as provided above. The Optionholder shall not have any rights to continued employment by the Company or its Affiliates by virtue of the grant of this Option. 6. Recapitalization, Mergers, Etc. As provided in the Plan, in the event ------------------------------ of corporate transactions affecting the Company's outstanding Common Stock, the Committee shall equitably adjust the number and kind of shares subject to this Option and the exercise price hereunder or make provision for a cash payment. If such transaction involves a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, then in lieu of the foregoing, the Committee may upon written notice to the Optionholder provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period. In any such event, the Optionholder shall have the following rights in addition to those provided -1- elsewhere in these terms and conditions: (i) to exercise the rights available hereunder at the time of termination of the Optionholder's employment at any time until the close of business on the 30th day after the last day of any period during which the Optionholder is prevented from selling shares of Common Stock by securities or accounting rules applicable to such corporate transaction (but not beyond the Expiration Date), and (ii) during such period, to pay the Option Price for exercise of this Option in whole or in part in shares of Common Stock (including shares of any successor corporation that have been substituted or exchanged for the Common Stock), which may be previously owned shares or shares retained from the shares otherwise issuable upon such exercise, valued at their Fair Market Value on the date of delivery or retention. 7. Option Not Transferable. This Option is not transferable by the ----------------------- Optionholder otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionholder's lifetime, only by the Optionholder. The naming of a Designated Beneficiary does not constitute a transfer. 8. Exercise of Option After Termination of Employment. If the -------------------------------------------------- Optionholder's employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) or death, the Optionholder may exercise the rights which were available to the Optionholder at the time of such termination only within three months from the date of termination. If Optionholder's employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination. Upon the death of the Optionholder, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Optionholder at the time of death. Notwithstanding the foregoing, no rights under this Option may be exercised after the Expiration Date. 9. Compliance with Securities Laws. It shall be a condition to the ------------------------------- Optionholder's right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionholder shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionholder, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law. -2- 10. Payment of Taxes. The Optionholder shall pay to the Company, or make ---------------- provision satisfactory to the Company for payment of, any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other Federal or state taxes imposed on the sale of the shares to be paid by the Optionholder. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionholder. 11. Notice of Sale of Shares Required. The Optionholder agrees to notify --------------------------------- the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase. Approved 4-15-96 -3- EX-10.4 6 INCENTIVE STOCK OPTION TERMS AND COND. Exhibit 10.4 DATAWARE TECHNOLOGIES, INC. 1993 EQUITY INCENTIVE PLAN Incentive Stock Option Terms And Conditions ------------------------------------------- (Kurt Mueller; Jeffrey O. Nyweide) 1. Plan Incorporated by Reference. This Option is issued pursuant to the ------------------------------ terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Company. 2. Option Price. The price to be paid for each share of Common Stock ------------ issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate. 3. Exercisability Schedule. This Option may be exercised at any time and ----------------------- from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the Expiration Date. 4. Method of Exercise. To exercise this Option, the Optionholder shall ------------------ deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Committee may at the time of exercise approve. Promptly following such notice, the Company will deliver to the Optionholder a certificate representing the number of shares with respect to which the Option is being exercised. 5. Rights as a Stockholder or Employee. The Optionholder shall not have ----------------------------------- any rights in respect of shares to which the Option shall not have been exercised and payment made as provided above. The Optionholder shall not have any rights to continued employment by the Company or its Affiliates by virtue of the grant of this Option. 6. Recapitalization, Mergers, Etc. As provided in the Plan, in the event ------------------------------ of corporate transactions affecting the Company's outstanding Common Stock, the Committee shall equitably adjust the number and kind of shares subject to this Option and the exercise price hereunder or make provision for a cash payment. If such transaction involves a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, then in lieu of the foregoing, the Committee may upon written notice to the Optionholder provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period. In any such event, the Optionholder shall have the following rights in addition to those provided elsewhere in these terms and conditions: (i) to -1- exercise the rights available hereunder at the time of termination of the Optionholder's employment at any time until the close of business on the 30th day after the last day of any period during which the Optionholder is prevented from selling shares of Common Stock by securities or accounting rules applicable to such corporate transaction (but not beyond the Expiration Date), and (ii) during such period, to pay the Option Price for exercise of this Option in whole or in part in shares of Common Stock (including shares of any successor corporation that have been substituted or exchanged for the Common Stock), which may be previously owned shares or shares retained from the shares otherwise issuable upon such exercise, valued at their Fair Market Value on the date of delivery or retention. Upon a Change in Control of the Company (as defined in the Plan), this Option shall become exercisable in full, notwithstanding the other terms hereof; provided that no rights hereunder may be exercised after the Expiration Date. 7. Option Not Transferable. This Option is not transferable by the ----------------------- Optionholder otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionholder's lifetime, only by the Optionholder. The naming of a Designated Beneficiary does not constitute a transfer. 8. Exercise of Option After Termination of Employment. If the -------------------------------------------------- Optionholder's employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) or death, the Optionholder may exercise the rights which were available to the Optionholder at the time of such termination only within three months from the date of termination. If Optionholder's employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination. Upon the death of the Optionholder, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Optionholder at the time of death. Notwithstanding the foregoing, no rights under this Option may be exercised after the Expiration Date. 9. Compliance with Securities Laws. It shall be a condition to the ------------------------------- Optionholder's right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionholder shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionholder, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law. -2- 10. Payment of Taxes. The Optionholder shall pay to the Company, or make ---------------- provision satisfactory to the Company for payment of, any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other Federal or state taxes imposed on the sale of the shares to be paid by the Optionholder. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionholder. 11. Notice of Sale of Shares Required. The Optionholder agrees to notify --------------------------------- the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase. Approved 4-15-96 -3- EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 5,250 5,031 9,265 745 138 17,028 12,304 5,372 36,711 16,349 0 0 0 37,380 (17,018) 36,711 16,805 16,805 9,982 9,982 18,290 0 10 (15,275) (3,003) (12,272) 0 0 0 (12,272) (1.91) (1.91)
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