-----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, KO0VyTZ+VaLBcyfxSzFUKbknNOOellHxUinK5SG9V2oUxhCDSFNqQYB0fUjhawtn izTxNE73p7WZWyojpYBaJw== 0000927016-97-002330.txt : 19970815 0000927016-97-002330.hdr.sgml : 19970815 ACCESSION NUMBER: 0000927016-97-002330 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE 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: 97660914 BUSINESS ADDRESS: STREET 1: 222 THIRD ST STREET 2: SUITE 3300 CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176210820 MAIL ADDRESS: STREET 1: 222 THIRD STREET STREET 2: SUITE 3300 CITY: CAMBRIDGE STATE: MA ZIP: 02142 10-Q 1 QUARTERLY REPORT 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, 1997 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, 1997: Class Number of Shares Outstanding -------------------------------------- ---------------------------- Common Stock, par value $.01 per share 7,289,547 DATAWARE TECHNOLOGIES, INC. INDEX
PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1997 and 1996 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 2. Changes in Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports Filed on Form 8-K 13 SIGNATURE 14 EXHIBIT INDEX 15
Part 1. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements DATAWARE TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, 1997 DECEMBER 31, (unaudited) 1996 ------------ -------------- ASSETS Current assets: Cash and cash equivalents $ 1,472 $ 2,368 Accounts receivable, less allowance for doubtful accounts of $695 and $934 at June 30, 1997 and December 31, 1996, respectively 9,768 9,271 Prepaid expenses and other current assets 2,054 1,968 ------------ -------------- Total current assets 13,294 13,607 Property and equipment, net 6,284 7,298 Computer software costs, net 2,384 2,239 Goodwill and non-current assets 2,544 2,232 ------------ -------------- Total assets $ 24,506 $ 25,376 ============ ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 1,168 $ 45 Accounts payable 3,038 3,232 Accrued expenses 462 1,377 Accrued litigation and non-recurring charges 697 982 Accrued compensation 1,674 2,046 Income taxes payable 1,162 1,140 Deferred revenue 2,155 2,136 ------------ -------------- Total current liabilities 10,356 10,958 Series B convertible preferred stock, $.01 par value: 3,000 shares authorized and issued; 2,289 shares outstanding at June 30, 1997 2,486 --- (aggregate liquidation preference of $2,311 at June 30, 1997) Stockholders' equity: Common stock, $.01 par value: 14,000,000 shares authorized; 6,974,619 and 6,640,597 shares issued and outstanding at June 30, 1997 and December 31, 1996, respectively 70 66 Additional paid-in capital 39,539 38,473 Accumulated deficit (27,427) (23,756) Cumulative translation adjustment (518) (365) ------------ -------------- Total stockholders' equity 11,664 14,418 ------------ -------------- Total liabilities and stockholders' equity $ 24,506 $ 25,376 ============ ==============
The accompanying notes are an integral part of the consolidated financial statements 3 DATAWARE TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA) (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1997 1996 1997 1996 -------- --------- --------- -------- Revenues: Software license fees $ 5,125 $ 3,502 $ 9,216 $ 6,503 Services 4,882 4,952 10,645 10,302 ---------- ---------- ----------- --------- Total revenues 10,007 8,454 19,861 16,805 Cost of revenues: Software license fees 603 825 1,338 1,680 Write down of intangible assets --- 1,926 --- 1,926 Services 2,897 3,172 5,920 6,376 ---------- --------- ----------- --------- Total cost of revenues 3,500 5,923 7,258 9,982 ---------- --------- ----------- --------- Gross margin 6,507 2,531 12,603 6,823 Operating expenses: Sales and marketing 4,455 4,233 8,921 8,000 Product development 1,384 1,971 3,636 3,772 General and administrative 1,361 1,717 2,737 3,436 Write down of goodwill and other non-recurring charges --- 1,889 --- 1,889 In-process research and development --- --- --- 1,193 ---------- --------- ----------- --------- Total operating expenses 7,200 9,810 15,294 18,290 ---------- --------- ----------- --------- Loss from operations (693) (7,279) (2,691) (11,467) Interest income 7 132 29 306 Interest expense (96) (4) (131) (10) Settlement of litigation --- (4,073) --- (4,073) Other income (expenses), net 10 9 (201) (31) ---------- --------- ----------- --------- Loss before income taxes (772) (11,215) (2,994) (15,275) Benefit from income taxes --- (2,143) --- (3,003) ---------- --------- ----------- --------- Net loss (772) (9,072) (2,994) (12,272) ---------- --------- ----------- --------- Dividends and accretion of preferred stock 677 --- 677 --- ---------- --------- ----------- --------- Net loss to common stockholders $ (1,449) $ (9,072) $ (3,671) $ (12,272) ========== ========= =========== ========= Net loss per common share $ (0.21) $ (1.40) $ (0.53) $ (1.91) ========== ========= =========== ========= Weighted average number of common and common equivalent shares 6,942 6,462 6,879 6,414 ========== ========= =========== =========
The accompanying notes are an integral part of the consolidated financial statements 4 DATAWARE TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (unaudited)
SIX MONTHS ENDED JUNE 30, 1997 1996 --------- ---------- Cash flows used in operating activities: Net loss $ (2,994) $ (12,272) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,143 1,762 Provision for doubtful accounts 216 465 Loss on foreign currency transactions 201 53 Deferred taxes --- (3,003) Non-cash portion of write-down of intangible assets --- 3,180 Charge for in-process research and development --- 1,193 Stock options to consultants 30 151 Changes in operating assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable (1,033) 1,368 Prepaid expenses and other current assets (188) (643) Accounts payable (138) 623 Accrued expenses and compensation (1,176) 399 Accrued litigation and non-recurring charges (285) 5,308 Income taxes payable 29 (28) Deferred revenue 52 76 --------- ---------- Net cash used in operating activities (3,143) (1,368) --------- ---------- 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 (855) (2,351) Acquisition of businesses, net of cash acquired --- (1,498) Additions to capitalized software costs (835) (941) --------- ---------- Net cash used in investing activities (1,690) (964) --------- ---------- Cash flows provided by (used in) financing activities: Proceeds from issuance of common stock and exercise of stock options 103 147 Principal payments on notes, software license payable and capital leases --- (233) Proceeds from issuance of preferred stock 3,000 --- Dividends and issuance costs related to preferred stock (255) --- Increase in short-term borrowings, net 1,143 --- --------- ---------- Net cash provided by (used in) financing activities 3,991 (86) --------- ---------- Effect of exchange rate changes on cash (54) (66) --------- ---------- Net change in cash and cash equivalents (896) (2,484) Cash and cash equivalents at beginning of period 2,368 7,734 --------- ---------- Cash and cash equivalents at end of period $ 1,472 $ 5,250 ========= ========== Supplemental disclosure of non-cash financing transactions: Conversion of preferred stock into common stock $ 853 $ --- ========= ========== Warrants issued in connection with issuance of preferred stock $ 83 $ --- ========= ========== Accretion of preferred stock $ 650 $ --- ========= ========== Investment in Northern Light LLC in exchange for assets $ 512 $ --- ========= ========== Stock and stock warrants issued in connection with acquisitions $ --- $ 238 ========= ==========
The accompanying notes are an integral part of the consolidated financial statements 5 DATAWARE TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. BASIS OF PRESENTATION These consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and the financial statements and footnotes included therein. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the consolidated financial position, results of operations and cash flows of Dataware Technologies, Inc. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 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 year's financial statements to conform to the current presentation. B. DISPOSAL OF PRODUCT DEVELOPMENT PROJECT On April 7, 1997 the Company completed a funding arrangement involving its subsidiary, Northern Light Technology Corporation, which had been developing the next-generation Internet search and guide service for consumers. In the transaction, Northern Light Technology Corporation dissolved, sold substantially all of its assets to a newly formed limited liability company, and terminated operations. The Company received, as a liquidating distribution from Northern Light Technology Corporation, an equity interest in the buyer representing approximately 34% of the buyer in the form of preferred units and a secured note. The Company has a 15% voting interest in the LLC, as amended, and is therefore accounting for its $512,000 investment in the LLC using the cost method. Northern Light Technology Corporation accounted for $729,000 and $1.0 million of the Company's operating expenses in the six months ended June 30, 1996 and 1997, respectively. C. CONVERTIBLE PREFERRED STOCK On April 14, 1997 the Company closed $3 million of new financing through the private placement of Series B Convertible Preferred Stock, as described in detail in Part II, Item 2 of this Form 10-Q. Additional funding may be available from the investor if conditions warrant. D. LINE OF CREDIT On June 23, 1997, the Company entered into a secured, one-year line of credit agreement in the amount of $2,000,000 with a major U.S. bank. Availability under the line is limited by the level of eligible accounts receivable. The Agreement requires compliance with certain financial loan covenants related to tangible net worth, operating profit and certain financial ratios. For the quarter ended June 30, 1997, the Company obtained a waiver of the required minimum leverage ratio, which enabled the Company to comply with the aforementioned bank loan covenants at June 30, 1997. Interest is payable at 1% over the prime rate of interest, or 9 1/2% during the period ended June 30, 1997. As of that date, the Company had borrowed approximately $770,000 against this line of credit. In connection with the line of credit, the Company issued a seven-year warrant as described in detail in Part II, Item 2 of this Form 10-Q. E. NET LOSS PER SHARE Net loss per share was computed on the basis of weighted average common shares outstanding. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share", which is effective for fiscal years ending after December 15, 1997. This Statement replaces the presentation of primary earnings per share ("EPS") with a presentation of basic EPS, which excludes dilutive securities. It also requires a reconciliation of the basic EPS to diluted EPS and dual presentation on the face of the income statement. The impact of the new standard on net loss per common share as reported would be immaterial as the Company sustained losses in all periods reported. 6 DATAWARE TECHNOLOGIES, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: - --------------------- REVENUES The Company's total revenues increased 18% from $8.5 million in the second quarter of 1996 to $10.0 million in the second quarter of 1997. The Company's total revenues increased 18% from $16.8 million in the first six months of 1996 to $19.9 million in the first six months of 1997. Quarter over quarter, software license fees increased 46% from $3.5 million to $5.1 million and services revenues decreased slightly from $5.0 to $4.9 million. For the first six months of 1997, software license fees increased 42% from $6.5 million to $9.2 million, and services revenues increased 3% from $10.3 million to $10.6 million. Revenue growth in the second quarter as well as the first six months of 1997 was primarily due to increased unit volumes throughout the company, in all product areas. The Company also recorded $400,000 under a development percentage of completion contract in the second quarter of 1997. Software revenues increased to 51% of total revenues in the second quarter of 1997, up from 41% in the second quarter of 1996, and services revenues decreased to 49% of total revenues in the second quarter of 1997, down from 59% in the second quarter of 1996. For the first six months of 1997, software license fees increased to 46% of total revenues from 39% in the first six months of 1996 and services revenues decreased to 54% of total revenues from 61% in the first half of 1996. This continuing shift in revenue mix is the result of marketing programs initiated by the Company during 1996. Continued revenue growth will depend in part on the Company's ability to improve the productivity of its sales force while keeping expenses at sustainable levels. Also, 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. COST OF REVENUES Cost of revenues decreased 41% from $5.9 million in the second quarter of 1996 to $3.5 million during the same period in 1997. Cost of revenues decreased 27% from $10.0 million for the six month period ended June 30, 1996 to $7.3 million during the six month period ended June 30, 1997. As a percent of revenues, total cost of revenues decreased from 70% of total revenues for the three months ended June 30, 1996 to 35% for the three months ended June 30, 1997 and from 59% to 37% for the first six months of 1996 compared to the same period in 1997. This decrease 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 to software license fees from our higher cost services business also contributed to the decrease. The cost of software licenses as a percentage of software license fees decreased from 24% during the second quarter of 1996 to 12% during the same period in 1997, and from 26% for the first six months of 1996 to 15% for the first six months of 1997. This decrease was due to the increase in sales volume while fixed costs decreased quarter over quarter and year over year. The decrease in fixed costs is in large part related to the completion of a contractual royalty commitment with a third party in the second quarter of 1996. The cost of services as a percentage of service revenues decreased from 64% for the second quarter of 1996 to 59% during the second quarter of 1997 and from 62% for the first six months of 1996 to 56% for 7 the first six months of 1997. This decrease is primarily due to containing costs as a result of our revitalization programs which began in the third quarter of 1996. Management does not expect significant further productivity growth in the provision of services. GROSS MARGIN Total gross margin was $2.5 million or 30% of total revenues for the second quarter of 1996 and $6.5 million or 65% of total revenues for the second quarter of 1997. For the six month period ended June 30, 1996, total gross margin amounted to $6.8 million as compared with $12.6 million for the same period in 1997, representing 41% and 63% 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 increased total revenue volume, lower costs within each revenue category, and a significant shift in product mix to higher margin software products from relatively lower margin services. Although management anticipates that gross margin as a percentage of revenues will continue to improve in the long run as the Company's revenue base shows further growth and product mix moves more 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 5% from $4.2 million during the second quarter of 1996 to $4.5 million during the same period in 1997. During the six month period ended June 30, 1997, sales and marketing expenses increased 12% to $8.9 million from $8.0 million during the same period a year ago. Sales and marketing expenses decreased as a percentage of revenues from 50% to 45% on a quarter to quarter basis and from 48% to 45% 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. It is anticipated that sales and marketing expenses as a percentage of total revenues will decline in the near and long term as total revenues are expected to increase faster than sales and marketing expenses. This anticipated trend is subject to various factors, including those described under "Gross Margin" above. PRODUCT DEVELOPMENT EXPENSES Product development expenses, which excludes capitalized software costs, decreased 30% from $2.0 million in the second quarter of 1996 to $1.4 million in the second quarter of 1997, and decreased 4% from $3.8 million during the first six months of 1996 to $3.6 million during the same period in 1997. The Company capitalized software development costs in the amount of $422,000 in the second quarter of 1997 as compared to $495,000 in the second quarter of 1996. During the first half of 1997, the Company capitalized $835,000 in software development expenses as compared with $941,000 during the same period in 1996. Product development expenses as a percentage of total revenues decreased from 23% to 14% on a quarter to quarter basis and from 22% to 18% on a year to year basis. The decreased product development expenses quarter over quarter and year over year is due in part to expenses related to Northern Light Technology Corporation, a subsidiary whose assets were sold on April 7, 1997, as described in "Liquidity and Capital Resources" below. These expenses amounted to $438,000 in the quarter ended June 30, 1996 while there were no related expenses in the quarter ended June 30, 1997. For the first six months of 1996, these costs amounted to $729,000 as compared to $735,000 in the first six months of 1997. Product development expenses other than those related to Northern Light Technology Corporation decreased 10% from the second quarter of 1996 to the same quarter in 1997 and 5% from the first six months of 1996 to the first six months of 1997. 8 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses decreased 21% from $1.7 million in the second quarter of 1996 to $1.4 million in the second quarter of 1997, and decreased 20% from $3.4 million during the first six months of 1996 to $2.7 million during the first six months of 1997. This decrease was primarily due to the Company's continued attention to spending levels. General and administrative expenses as a percent of total revenues decreased from 20% to 14% on a quarter to quarter and year to year basis, due to the decrease in expenses while revenues increased during the first half of 1997. PROVISION FOR INCOME TAXES The Company did not record a provision for income taxes for the quarter or six months ended June 30, 1997 as compared with a $2.1 million benefit recorded for the second quarter and a $3.0 million benefit recorded for the first six month period a year ago. A tax provision was not recorded during the first or second quarters because of the losses incurred during the first half of 1997 and the year ended 1996, and the substantial net operating loss carryforward from prior periods. At June 30, 1997, the Company had a net operating loss carryforward of $12.4 million. Use of the Company's net operating loss carryforwards is limited due to changes in ownership of the Company's stock before its initial public offering of stock in July 1993. OTHER For the six months ended June 30, 1997 the Company recorded $201,000 in other expenses compared with $31,000 in the same period in 1996. These amounts consist primarily of foreign exchange losses caused by the effect of declining exchange rates on intercompany balances with the Company's foreign subsidiaries. LIQUIDITY AND CAPITAL RESOURCES: - ------------------------------- As of June 30, 1997, the Company had cash and cash equivalents of approximately $1.5 million and working capital of $2.9 million. Operating activities used $3.1 million of the Company's cash during the first six months of 1997. Days sales outstanding increased from 81 days at March 31, 1997 to 86 days at June 30, 1997. This increase was primarily due to the timing of collections in the Company's Asia/Pacific operations. The Company's investing activities used cash of $1.7 million during the first six months of 1997, consisting of additions to property and equipment of $855,000 and capitalization of $835,000 in software costs. The Company's financing activities provided cash of $4.0 million during the first six months of 1997. The cash consisted primarily of proceeds from the issuance of preferred stock, net of issuance costs and dividends paid, amounting to $2.7 million and short-term borrowings amounting to $1.1 million. Several events took place during the quarter ending June 30, 1997 which had an important impact on the Company's liquidity. On April 7, 1997 the Company completed a funding arrangement involving its subsidiary, Northern Light Technology Corporation, which had been developing the next-generation Internet search and guide service for consumers. In the transaction, Northern Light Technology Corporation dissolved, sold substantially all of its assets to a newly formed limited liability company, and terminated operations. The Company received, as a liquidating distribution from Northern Light Technology Corporation, an equity interest in the buyer representing approximately 34% of the buyer in the form of preferred units and a secured note. The Company has a 15% voting interest in the LLC, as amended, and is therefore accounting for its $512,000 investment in the LLC using the cost method. Northern Light Technology Corporation accounted for $729,000 and $1.0 million of the Company's operating expenses in the six months ended June 30, 1996 and 1997, respectively. 9 On April 14, 1997 the Company closed $3 million of new financing through the private placement of Series B Convertible Preferred Stock, as described in detail in Part II, Item 2 of this Form 10-Q. Additional funding may be available from the investor if conditions warrant. On June 23, 1997, the Company entered into a secured, one-year line of credit agreement in the amount of $2,000,000 with a major U.S. bank. Availability under the line is limited by the level of eligible accounts receivable. The Agreement requires compliance with certain financial loan covenants related to tangible net worth, operating profit and certain financial ratios. For the quarter ended June 30, 1997, the Company obtained a waiver of the required minimum leverage ratio, which enabled the Company to comply with the aforementioned bank loan covenants at June 30, 1997. Interest is payable at 1% over the prime rate of interest, or 9 1/2% during the period ended June 30, 1997. As of that date, the Company had borrowed approximately $770,000 against this line of credit. In connection with the line of credit, the Company issued a seven-year warrant as described in detail in Part II, Item 2 of this Form 10-Q. The Company continues to implement and refine its revitalization programs which are intended to minimize future losses from continuing operations. These programs include cost reductions, higher employee productivity, repositioning of product lines and intensified asset management. In addition, the Company continues to explore a full range of options for raising capital, including additional borrowing arrangements, disposal of assets, or possible sale of equity securities. 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 and possible future acquisitions of businesses and/or product rights. There can be no assurance that the Company may not experience liquidity problems because of adverse market conditions or other unfavorable events, or if the Company does not obtain sufficient additional financing on a timely basis. 10 DATAWARE TECHNOLOGIES, INC. PART II. OTHER INFORMATION Item 2. Changes in Securities --------------------- (a) None. (b) The information required by this item is included in Item 2 on page 10 of the Company's Form 10-Q for the period ended March 31, 1997 and is incorporated herein by reference. (c) (1) On April 14, 1997, the Company issued a five year warrant to purchase 20,000 shares of Common Stock at a purchase price of $4.50 per share. The warrant was issued to a securities firm as consideration for services performed for the Company pursuant to an engagement letter dated as of November 21, 1996 and was issued in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933 based on the non-public nature of the issuance and the qualifications of the recipient. (2) On April 14, 1997, the Company issued to GFL Advantage Fund Limited an aggregate of 3,000 shares of its Series B Convertible Preferred Stock, $.01 par value per share (the "Preferred Stock"), at a price of $1,000.00 per share pursuant to a Subscription Agreement dated April 10, 1997. The aggregate proceeds to the Company (after payment of finders' and escrow fees but before payment of legal expenses and other costs incurred in the placement) were $2,842,500. The shares of Preferred Stock were issued in a transaction exempt from registration under Rule 506 under the Securities Act of 1933. As of August 7, 1997, GFL Advantage Fund Limited has converted 1,340 shares of Preferred Stock into 541,391 shares of Common Stock. The rights, preferences and privileges of the Preferred Stock are set forth in a Certificate of Designations of Series B Convertible Preferred Stock (the "Certificate of Designations") which is part of the Company's Restated Certificate of Incorporation. As described in greater detail below, the shares of Preferred Stock are convertible into shares of Common Stock. Conversion. The shares of Preferred Stock are convertible into shares of Common Stock at the option of the holder at a conversion price equal to the lower of (1) 80% of the average closing bid price for the five days immediately preceding the conversion notice, or (2) $3.99625 (an amount equal to 115% of the average closing bid price for the five days immediately preceding April 14, 1997). No shares of Preferred Stock may be converted into shares of Common Stock if the converting holder and its respective affiliates would beneficially own more than 4.9% of the Company's Common Stock following such conversion (excluding from the calculation any shares of Common Stock issuable upon conversion of Preferred Stock). The conversion factor will be adjusted upon the occurrence of certain circumstances as set forth in the Certificate of Designations. So long as (i) the registration statement registering the shares of Common Stock issuable upon conversion of shares of Preferred Stock is effective and (ii) the Company is in compliance in all material respects with its obligations to the holders of the Preferred Stock, all shares of Preferred Stock outstanding on April 14, 2000 will automatically convert into shares of Common Stock at a conversion price to be calculated pursuant to the optional conversion provisions of the Certificate of Designations. 11 Redemption. So long as the Company is in compliance in all material respects with its obligations to the holders of the Preferred Stock, at any time on or after the date 60 days after which the registration statement will have been declared effective by the SEC, the Company will have the right to redeem any part of the outstanding shares of Preferred Stock (but not less than 200 shares or such less number of shares of Preferred Stock that remain outstanding as of such date) on not less than 20 days' and not more than 30 days' prior written notice to the holders of Preferred Stock, at a price per share (the "Redemption Price") equal to the applicable conversion percentage (initially, 80%) multiplied by the product of the number of shares of Common Stock then issuable upon conversion of the Preferred Stock multiplied by the average market price of the Common Stock on the five trading days prior to the redemption date. The holders of the Preferred Stock have the right to require the Company to redeem all or a portion of the then outstanding shares of Preferred Stock by notice to the Company delivered within 20 days after the occurrence of any of a number of events that may be deemed adverse to the holders' interests (each, an Optional Redemption Event, as defined in the Certificate of Designations) at the Redemption Price calculated with respect to such redemption date. Under no circumstance may the Company issue more than 1,335,256 shares of Common Stock (the "Maximum Share Amount") upon conversion of the Preferred Stock or as dividends, unless the stockholders of the Company vote to approve the issuance of a greater number of shares and the vote approving such issuance complies with Nasdaq National Market requirements concerning below market value financings. If the Company is unable to convert shares of Preferred Stock into shares of Common Stock due to the limitations of the Maximum Share Amount for any ten trading days within a period of 20 consecutive trading days, then the Company is required to provide written notice of such fact to the holders of the Preferred Stock (the "Inconvertibility Notice"). Within ten days after the Company delivers (or is required to deliver) an Inconvertibility Notice, the holders of the Preferred Stock have the right to require the Company to redeem all shares of Preferred Stock that are not convertible into shares of Common Stock on the business day prior to the redemption date at the Redemption Price calculated with respect to such redemption date. (3) In connection with the issuance of the Preferred Stock, the Company issued a five-year warrant to purchase 75,000 shares of Common Stock at a purchase price of $6.00 per share, effective as of April 14, 1997. The warrant was issued to a securities firm as consideration for services performed for the Company and was issued in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933 based on the non-public nature of the issuance and the qualifications of the recipient. (4) On June 23, 1997, in connection with the establishment of a line of credit agreement between the Company and a major U.S. bank, the Company issued a seven-year warrant to purchase 23,391.81 shares of Common Stock at a purchase price of $3.42 per share. Under the terms of the warrant, if at anytime the outstanding loan amount under the credit facility exceeds $1,000,000, the warrant shall be exercisable with respect to an additional 23,391.81 shares of Common Stock at the same purchase price. The warrant was issued in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933 based on the non-public nature of the issuance and the qualifications of the recipient. 12 Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- At the Annual Meeting of Stockholders on May 23, 1997, the Company's shareholders voted as follows: a) To reelect Jochen Tschunke to the Board of Directors for a three-year term. Total Vote For 5,233,615 -------------- Total Vote Withheld 563,092 -------------- b) To amend the Company's 1993 Equity Incentive Plan to increase the total number of shares of Common Stock issuable under the Plan by 500,000 shares. Total Vote for the Proposal 1,912,812 -------------- Total Vote Against the Proposal 1,323,275 -------------- Abstentions 59,362 -------------- Broker Non-votes 2,501,258 -------------- c) To amend the Company's 1993 Director Stock Option Plan to provide for amendments to outstanding options. Total Vote for the Proposal 1,661,561 -------------- Total Vote Against the Proposal 1,353,430 -------------- Abstentions 44,115 -------------- 2,737,601 Broker Non-votes -------------- Item 5. Other Information - ------------------------- Daniel M. Clarke, Vice President - Finance and Administration and chief financial officer, has informed the Company that he will resign his position effective August 22, 1997. The Company is interviewing potential replacements for Mr. Clarke and has hired Michael Gonnerman to serve as acting chief financial officer in the interim. Mr. Gonnerman is an independent financial consultant. Formerly with Arthur Andersen, he has served as chief financial officer or as a consultant with more than 25 software companies. He is currently a director of three technology companies. Item 6. Exhibits and Reports Filed on Form 8-K - ---------------------------------------------- (a) Exhibits. See exhibit list on page 14. (b) Reports on Form 8-K. On April 17, 1997, the Company filed a report on Form 8-K reporting the sale and issuance of 3,000 shares of its Series B Preferred Stock, $.01 par value per share, to GFL Advantage Fund Limited. 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, 1997 By:____________________ Daniel M. Clarke Chief Financial Officer (Principal Financial and Principal Accounting Officer) 14 Exhibit Index 3.1 Restated Certificate of Incorporation, as amended through April 14, 1997. (Filed as Exhibit 3.1 to the Company's Report on Form 8-K filed on April 17, 1997)* 3.2 By-Laws of the Registrant, as amended through May 23, 1997 4.1 Form of Warrant Agreement between the Company and Advest, Inc. 4.2 Warrant Agreement, dated as of April 14, 1997, between the Company and Wharton Capital Partners Ltd. 4.3 Warrant Agreement, dated as of June 23, 1997, between the Company and Imperial Bank. 4.4 Warrant Agreement, dated as of March 31, 1996, between the Company and Entrust Nominees Limited. 4.5 Rights Agreement dated July 8, 1996, by and between American Stock Transfer & Trust Company as Rights Agent and the Registrant (the "Rights Agreement"). (Exhibit to Form 8-K dated July 18, 1996).* 4.6 First Amendment to the Rights Agreement, dated April 14, 1997. (Exhibit to Form 8-K dated April 17, 1997).* 10.1 Subscription Agreement, dated as of April 10, 1997, by and between GFL Advantage Fund Limited and the Registrant. (Exhibit to Form 8-K dated April 17, 1997).* 10.2 Registration Rights Agreement, dated as of April 10, 1997, by and between GFL Advantage Fund Limited and the Registrant. (Exhibit to Form 8-K dated April 17, 1997).* 27.1 Financial Data Schedule. * Incorporated by reference to the filing indicated in parentheses. 15 EX-3.2 2 BY-LAWS OF THE REGISTRANT, AMENDED Exhibit 3.2 As Amended through May 23, 1997 BY-LAWS OF DATAWARE TECHNOLOGIES, INC. ARTICLE I STOCKHOLDERS SECTION 1. Place of Meetings. All meetings of stockholders shall be held ----------------- at the principal office of the corporation or at such other place as may be named in the notice. SECTION 2. Annual Meeting. The annual meeting of stockholders for the -------------- election of directors and the transaction of such other business as may properly come before the meeting shall be held on such date and at such hour and place as the directors or an officer designated by the directors may determine. If the annual meeting is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. SECTION 3. Special Meetings. Special meetings of the stockholders may be ---------------- called at any time by the President, the Chairman of the Board, if any, or the Board of Directors. SECTION 4. Notice of Meetings. Except where some other notice is required ------------------ by law, written notice of each meeting of stockholders, stating the place, date and hour thereof and the purposes for which the meeting is called, shall be given by the Secretary under the direction of the Board of Directors or the President, not less than ten nor more than sixty days before the date fixed for such meeting, to each stockholder of record entitled to vote at such meeting. Notice shall be given personally to each stockholder or left at his or her residence or usual place of business or mailed postage prepaid and addressed to the stockholder at his or her address as it appears upon the records of the corporation. In case of the death, absence, incapacity or refusal of the Secretary, such notice may be given by a person designated either by the Secretary or by the person or persons calling the meeting or by the Board of Directors. A waiver of such notice in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Except as required by statute, notice of any adjourned meeting of the stockholders shall not be required. SECTION 5. Record Date. The Board of Directors may fix in advance a ----------- record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days before any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held, and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. Nomination of Directors. Only persons who are nominated in ----------------------- accordance with the following procedures shall be eligible for election as directors at any annual or special meeting of stockholders. Nominations of persons for election as directors may be made only by or at the direction of the Board of Directors, or by any stockholder entitled to vote for the election of directors at the meeting in compliance with the notice procedures set forth in this Section 6. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Chairman of the Board, if any, the President or the Secretary. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 45 days nor more than 60 days before the meeting; provided, however, that if less than 60 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation that are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of capital stock of the corporation that are beneficially owned by such stockholder. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 7. Advance Notice of Business at Annual Meetings. At any annual --------------------------------------------- meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be brought properly before an annual meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the President or the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be brought properly before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Chairman of the Board, if any, the President or the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 45 days nor more than 60 days before the meeting; provided, however, that if less than 60 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the corporation that are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 7, provided, however, that nothing in this Section 7 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 8. Voting List. The officer who has charge of the stock ledger of ----------- the corporation shall make or have made, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days before the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. SECTION 9. Quorum of Stockholders. At any meeting of the stockholders, ---------------------- the holders of a majority in interest of all stock issued and outstanding and entitled to vote upon a question to be considered at the meeting, present in person or represented by proxy, shall constitute a quorum for the consideration of such question, but in the absence of a quorum a smaller group may adjourn any meeting from time to time. When a quorum is present at any meeting, a majority of the stock represented thereat and entitled to vote shall, except where a larger vote is required by law, by the certificate of incorporation or by these by-laws, decide any question brought before such meeting. Any election by stockholders shall be determined by a plurality of the vote cast by the stockholders entitled to vote at the election. SECTION 10. Proxies and Voting. Unless otherwise provided in the ------------------ Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock held of record by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless said proxy provides for a longer period. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held, and persons whose stock is pledged shall be entitled to vote unless in the transfer by the pledgor on the books of the corporation the pledgee shall have been expressly empowered to vote thereon, in which case only the pledgee or the pledgee's proxy may represent said stock and vote thereon. Shares of the capital stock of the corporation belonging to the corporation or to another corporation, a majority of whose shares entitled to vote in the election of directors is owned by the corporation, shall neither be entitled to vote nor be counted for quorum purposes. SECTION 11. Conduct of Meeting. Meetings of the stockholders shall be ------------------ presided over by one of the following officers in the order of seniority and if present and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, a chairman to be chosen by the stockholders. The Secretary of the corporation, if present, or an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. ARTICLE II DIRECTORS SECTION 1. General Powers. The business and affairs of the corporation -------------- shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation that are not by law required to be exercised by the stockholders. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. SECTION 2. Number; Election; Tenure and Qualification. Subject to any ------------------------------------------ restrictions contained in the Certificate of Incorporation, the number of directors that shall constitute the whole Board shall be fixed by resolution of the Board of Directors but in no event shall be less than one. The directors shall be elected in the manner provided in the Certificate of Incorporation, by such stockholders as have the right to vote thereon. The number of directors may be increased or decreased by action of the Board of Directors. Directors need not be stockholders of the corporation. SECTION 3. Enlargement of the Board. Subject to any restrictions ------------------------ contained in the Certificate of Incorporation, the number of the Board of Directors may be increased at any time, such increase to be effective immediately unless otherwise specified in the resolution, by vote of a majority of the directors then in office. SECTION 4. Vacancies. Unless and until filled by the stockholders and --------- except as otherwise determined by the Board of Directors in establishing a series of Preferred Stock as to directors elected by the holders of such series, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board and an unfilled vacancy resulting from the removal of any director, may be filled by vote of a majority of the directors then in office although less than a quorum, or by the sole remaining director. Each director so chosen to fill a vacancy shall serve for a term determined in the manner provided in the Certificate of Incorporation. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. If at any time there are no directors in office, then an election of directors may be held in accordance with the General Corporation Law of the State of Delaware. SECTION 5. Resignation. Any director may resign at any time upon written ----------- notice to the corporation. Such resignation shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the President or Secretary. SECTION 6. Removal. Except as may otherwise be provided by the General ------- Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, at an annual meeting or at a special meeting called for that purpose, by the holders of a majority of the shares then entitled to vote in an election of directors. The vacancy or vacancies thus created may be filled by the stockholders at the meeting held for the purpose of removal or, if not so filled, by the directors in the manner provided in Section 4 of this Article II. SECTION 7. Committees. The Board of Directors may designate one or more ---------- committees, each committee to consist of one or more directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. The Board of Directors shall have the power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. Any such committee, unless otherwise provided in the resolution of the Board of Directors, or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority denied it by Section 141 of the General Corporation Law of the State of Delaware. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. Each committee shall keep regular minutes of its meetings and make such reports as the Board of Directors may from time to time request. SECTION 8. Meetings of the Board of Directors. Regular meetings of the ---------------------------------- Board of Directors may be held without call or formal notice at such places either within or without the State of Delaware and at such times as the Board may by vote from time to time determine. A regular meeting of the Board of Directors may be held without call or formal notice immediately after and at the same place as the annual meeting of the stockholders, or any special meeting of the stockholders at which a Board of Directors is elected. Special meetings of the Board of Directors may be held at any place either within or without the State of Delaware at any time when called by the Chairman of the Board of Directors, the President, Treasurer, Secretary, or two or more directors. Reasonable notice of the time and place of a special meeting shall be given to each director unless such notice is waived by attendance or by written waiver in the manner provided in these by-laws for waiver of notice by stockholders. Notice may be given by, or by a person designated by, the Secretary, the person or persons calling the meeting, or the Board of Directors. No notice of any adjourned meeting of the Board of Directors shall be required. In any case it shall be deemed sufficient notice to a director to send notice by mail at least seventy-two hours, or by telegram or fax at least forty-eight hours, before the meeting, addressed to such director at his or her usual or last known business or home address. Directors or members of any committee may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. SECTION 9. Quorum and Voting. A majority of the total number of directors ----------------- shall constitute a quorum, except that when a vacancy or vacancies exist in the Board, a majority of the directors then in office (but not less than one-third of the total number of the directors) shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting from time to time. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except where a different vote is required or permitted by law, by the Certificate of Incorporation or by these by-laws. SECTION 10. Compensation. The Board of Directors may fix fees for their ------------ services and for their membership on committees, and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity, as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. Action Without Meeting. Any action required or permitted to ---------------------- be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting and without notice if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee. ARTICLE III OFFICERS SECTION 1. Titles. The officers of the corporation shall consist of a ------ President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, who may include without limitation a Chairman of the Board, a Vice-Chairman of the Board and one or more Vice-Presidents, Assistant Treasurers or Assistant Secretaries. SECTION 2. Election and Term of Office. The officers of the corporation --------------------------- shall be elected annually by the Board of Directors at its first meeting following the annual meeting of the stockholders. Each officer shall hold office until his or her successor is elected and qualified, unless a different term is specified in the vote electing such officer, or until his or her earlier death, resignation or removal. SECTION 3. Qualification. Unless otherwise provided by resolution of the ------------- Board of Directors, no officer, other than the Chairman or Vice-Chairman of the Board, need be a director. No officer need be a stockholder. Any number of offices may be held by the same person, as the directors shall determine. SECTION 4. Removal. Any officer may be removed, with or without cause, at ------- any time, by resolution adopted by the Board of Directors. SECTION 5. Resignation. Any officer may resign by delivering a written ----------- resignation to the corporation at its principal office or to the Chairman of the Board, if any, the President, or the Secretary. Such resignation shall be effective upon receipt or at such later time as may be specified therein. SECTION 6. Vacancies. The Board of Directors may at any time fill any --------- vacancy occurring in any office for the unexpired portion of the term and may leave unfilled for such period as it may determine any office other than those of President, Treasurer and Secretary. SECTION 7. Powers and Duties. The officers of the corporation shall have ----------------- such powers and perform such duties as are specified herein and as may be conferred upon or assigned to them by the Board of Directors and shall have such additional powers and duties as are incident to their office except to the extent that resolutions of the Board of Directors are inconsistent therewith. SECTION 8. President and Vice-Presidents. Except to the extent that such ----------------------------- duties are assigned by the Board of Directors to the Chairman of the Board, or in the absence of the Chairman or in the event of his or her inability or refusal to act, the President shall be the chief executive officer of the corporation and shall have general and active management of the business of the corporation and general supervision of its officers, agents and employees, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall preside at each meeting of the stockholders and the Board of Directors unless a Chairman or Vice-Chairman of the Board is elected by the Board and is present at such meeting. The Board of Directors may assign to any Vice-President the title of Executive Vice-President, Senior Vice-President or any other title selected by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the duties of the President shall be performed by the Executive Vice-President, if any, Senior Vice President, if any, or Vice President, if any, in that order (and, in the event there be more than one person in any such office, in the order of their election), and when so acting, such officer shall have all the powers of and be subject to all the restrictions upon the President. SECTION 9. Secretary and Assistant Secretaries. The Secretary shall ----------------------------------- attend all meetings of the Board of Directors and of the stockholders and record all the proceedings of such meetings in a book to be kept for that purpose, shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, shall maintain a stock ledger and prepare lists of stockholders and their addresses as required and shall have custody of the corporate seal, which the Secretary or any Assistant Secretary shall have authority to affix to any instrument requiring it and attest by any of their signatures. The Board of Directors may give general authority to any other officer to affix and attest the seal of the corporation. Any Assistant Secretary may, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary. SECTION 10. Treasurer and Assistant Treasurers. The Treasurer shall have ---------------------------------- the custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by or pursuant to resolution of the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, the Chairman of the Board, if any, or the President, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President, and the Board of Directors, at its regular meetings or whenever they may require it, an account of all transactions and of the financial condition of the corporation. Any Assistant Treasurer may, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer. SECTION 11. Bonded Officers. The Board of Directors may require any --------------- officer to give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors upon such terms and conditions as the Board of Directors may specify, including without limitation a bond for the faithful performance of the duties of such officer and for the restoration to the corporation of all property in his or her possession or control belonging to the corporation. SECTION 12. Salaries. Officers of the corporation shall be entitled to -------- such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors or any committee thereof appointed for the purpose. ARTICLE IV STOCK SECTION 1. Certificates of Stock. One or more stock certificates, signed --------------------- by the Chairman or Vice-Chairman of the Board of Directors or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by the stockholder in the corporation. Any or all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature shall have been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Each certificate for shares of stock that are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the by-laws, applicable securities laws, or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. SECTION 2. Transfers of Shares of Stock. Subject to the restrictions, if ---------------------------- any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. The corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to that stock, regardless of any transfer, pledge or other disposition of that stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these by- laws. SECTION 3. Lost Certificates. A new stock certificate may be issued in ----------------- the place of any certificate theretofore issued by the corporation and alleged to have been lost, stolen, destroyed or mutilated, upon such terms in conformity with law as the Board of Directors shall prescribe. The directors may, in their discretion, require the owner of the lost, stolen, destroyed or mutilated certificate, or the owner's legal representatives, to give the corporation a bond, in such sum as they may direct, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, destruction or mutilation of any such certificate, or the issuance of any such new certificate. SECTION 4. Fractional Share Interests. The corporation may, but shall not -------------------------- be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (l) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered or bearer form, which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions that the Board of Directors may impose. SECTION 5. Dividends. Subject to the provisions of the Certificate of --------- Incorporation, the Board of Directors may, out of funds legally available therefor, at any regular or special meeting, declare dividends upon the Common Stock of the corporation as and when they deem expedient. ARTICLE V INSURANCE SECTION 1. Insurance. The corporation shall have power to purchase and --------- maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the General Corporation Law of the State of Delaware. ARTICLE VI GENERAL PROVISIONS SECTION 1. Fiscal Year. Except as otherwise designated from time to time ----------- by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January and end on the last day of December. SECTION 2. Corporate Seal. The corporate seal shall be in such form as -------------- shall be approved by the Board of Directors. The Secretary shall be the custodian of the seal, and a duplicate seal may be kept and used by each Assistant Secretary and by any other officer the Board of Directors may authorize. SECTION 3. Certificate of Incorporation. All references in these by-laws ---------------------------- to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as in effect from time to time. SECTION 4. Execution of Instruments. The Chairman and Vice-Chairman of ------------------------ the Board of Directors, if any, the President, and the Treasurer shall have power to execute and deliver on behalf and in the name of the corporation any instrument requiring the signature of an officer of the corporation, including deeds, contracts, mortgages, bonds, notes, debentures, checks, drafts and other orders for the payment of money. In addition, the Board of Directors, the Chairman and Vice Chairman of the Board of Directors, if any, the President, and the Treasurer may expressly delegate such powers to any other officer or agent of the corporation. SECTION 5. Voting of Securities. The Chairman and Vice-Chairman of the -------------------- Board of Directors, if any, the President, the Treasurer, and each other person authorized by the directors, each acting singly, may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization the securities of which may be held by this corporation. In addition, the Board of Directors, the Chairman and Vice Chairman of the Board of Directors, if any, the President, and the Treasurer may expressly delegate such powers to any other officer or agent of the corporation. SECTION 6. Evidence of Authority. A certificate by the Secretary, an --------------------- Assistant Secretary or a temporary secretary as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall, as to all persons who rely on the certificate in good faith, be conclusive evidence of that action. SECTION 7. Transactions with Interested Parties. No contract or ------------------------------------ transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of the directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for that reason or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors that authorizes the contract or transaction or solely because the vote of any such director is counted for such purpose, if: (1) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or such committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair to the corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee of the Board of Directors or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. SECTION 8. Books and Records. The books and records of the corporation ----------------- shall be kept at such places within or without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE VII AMENDMENTS SECTION 1. By the Board of Directors. These by-laws may be altered, ------------------------- amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. SECTION 2. By the Stockholders. These by-laws may be altered, amended or ------------------- repealed or new by-laws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting. EX-4.1 3 WARRANT AGREEMENT WITH ADVEST Exhibit 4.1 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR SUCH SHARES MAY BE TRANSFERRED UNLESS THE WARRANT OR SUCH SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. DATAWARE TECHNOLOGIES, INC. COMMON STOCK PURCHASE WARRANT ( # SHARES) --- Dataware Technologies, Inc., a Delaware corporation (the "Company"), hereby certifies that, for value received, Advest, Inc. ("Advest") or its assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after the date hereof and before 5:00 P.M., Boston time, on the fifth anniversary of the date of initial issuance of this Warrant (the "Termination Date"), up to # fully paid and nonassessable shares of --- common stock, $.01 par value, of the Company ("Common Stock"), at a purchase price per share of $4.50 (such purchase price per share as adjusted from time to time as herein provided is referred to herein as the "Purchase Price"). The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Dataware Technologies, Inc. and any corporation that shall succeed or assume the obligations of the Company hereunder. (b) The terms "Warrant" or "Warrants" mean this Warrant and any other warrant or warrants issued in exchange or substitution for, or upon partial exercise of, this Warrant. 1. EXERCISE OF WARRANT. Subject to Section 10, this Warrant may be exercised ------------------- in full or in part by the holder hereof by surrender of this Warrant to the Company at its principal office, with the subscription form at the end hereof duly executed by such holder, accompanied by payment in cash or by certified or official bank check payable to the order of the Company in the amount of the aggregate Purchase Price for the number of shares of Common Stock designated by the holder in the subscription form. On any partial exercise the Company at its expense will forthwith issue and deliver to or upon the order of the holder hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may request, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock for which this Warrant may still be exercised. 2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as practicable ------------------------------------------------- after the exercise of this Warrant in full or in part, and in any event within 10 days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock to which such holder shall be entitled on such exercise. 3. NOTICE OF RECORD DATE. In case the Company shall take a record of the --------------------- holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, then and in each such case 1 the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right. Such notice shall be mailed at least ten (10) days before the record date or effective date for the event specified in such notice. 4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. ---------------------------------------------------------- 4.1. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be (but not later than the Termination Date), shall receive, in lieu of the Common Stock issuable on exercise before such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in Section 5. 4.2. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the holders of the Warrants after the effective date of such dissolution pursuant to this Section 4 to a bank or trust company having its principal office in Boston, Massachusetts, as trustee for the holder or holders of the Warrants, to be held by such trustee and any successor trustee until the Termination Date or earlier exercise hereof. 4.3. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and effect until the Termination Date and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company. 5. ADJUSTMENT UPON EXTRAORDINARY EVENTS. In the event that the Company shall ------------------------------------ (i) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price. Upon any such adjustment, the holder of this Warrant shall thereafter, upon the exercise hereof as provided in Section 1, be entitled to receive that number of shares of Common Stock determined by multiplying the number of shares of Common Stock issuable upon exercise hereof immediately before such adjustment by a fraction, the numerator of which is the Purchase Price that was in effect immediately before such adjustment, and the denominator of which is the Purchase Price in effect on the date of such exercise. 6. NOTIFICATION AS TO ADJUSTMENTS. In each case of any adjustment or ------------------------------ readjustment in the Purchase Price and shares of Common Stock issuable on the exercise of the Warrants, the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the holder of this Warrant at his or its address registered on the books of the Company, which notice shall state the Purchase Price resulting from such adjustment and the increased or decreased, if any, number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 2 7. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company ------------------------------------------------------------ will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock from time to time issuable upon the exercise of the Warrants. 8. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant, properly -------------------- endorsed, to the Company, the Company at its expense will issue and deliver to or on the order of the holder thereof a new Warrant or Warrants of like tenor, in the name ofsuch holder or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to ----------------------- the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, on delivery of an indemnity agreement or security satisfactory in form and amount to the Company in its sole discretion or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. COMPLIANCE WITH SECURITIES LAWS. This Warrant has been issued in reliance ------------------------------- on the representations and agreements set forth herein and may be exercised, transferred or exchanged only in compliance with the Act. This Warrant may only be exercised by, and Common Stock issued to, a person who provides the Company with confirmation that such person is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. Any holder by accepting this Warrant represents to the Company that the Warrant is acquired without a view to any offering or distribution in violation of applicable securities laws. Each holder of this Warrant agrees that he or it will not offer, sell or otherwise dispose of this Warrant or the shares of Common Stock issuable upon exercise thereof except in circumstances that will not result in a violation of the Act or any applicable laws relating to the sale of securities, and such holder agrees to provide the Company with such documentation as the Company shall deem necessary to demonstrate that such offer, sale or disposition will comply with applicable securities laws. This provision shall similarly apply to subsequent transferees of this Warrant. 11. TRANSFERS. This Warrant is issued upon the following terms, to all of --------- which each holder or owner hereof by acceptance hereof consents and agrees. 11.1. This Warrant may not be transferred or subdivided into warrants to purchase fewer than 1,000 shares of Common Stock (as adjusted from time to time pursuant to Section 5). 11.2. Subject to Section 10, title to this Warrant may be transferred by endorsement (by the holder hereof executing the form of assignment at the end hereof) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery. 11.3. Subject to Section 10, any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of each such bona fide purchaser, and each such bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. 11.4. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 12. REGISTRATION OF THE SHARES. -------------------------- 12.1. If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders, other than a registration relating solely to employee benefit plans, or a registration relating solely to a Rule 145 transaction, or a registration on any registration form which does not permit secondary sales, the Company will: (i) promptly give to the holder hereof ("Holder") written notice thereof (which shall include a list of the jurisdictions in 3 which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities law); and (ii) use its best efforts to include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all shares of Common Stock issued upon exercise of this Warrant (the "Registrable Shares") and specified in a written request or requests, made by Holder within fifteen (15) days after receipt of the written notice from the Company described in clause (i) above, subject to any limitations on the number of shares as set forth below. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise Holder as part of the written notice given pursuant to clause (i) above. In such event, the right of Holder to registration pursuant to this Section 12.1 shall be conditioned upon Holder's participation in such underwriting and the inclusion of the Registrable Shares in the underwriting to the extent provided herein. Notwithstanding any other provision of this Section 12.1, the Company shall not be obligated to keep any such registration statement in effect beyond the earlier of the date on which all other shares covered thereby are sold or the date on which the Company is no longer obligated by agreement with the party who initiated the registration to maintain such effectiveness. 12.2. At any time after the Company becomes eligible to file a registration statement on Form S-3, a Holder or Holders may request the Company, in writing, to effect a registration on Form S-3 of Registrable Shares having an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $100,000. Upon receipt of any such request, the Company shall: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) subject to the provisions of this Section 12.2, use its best efforts to effect such a registration as soon as practicable and in any event to file within thirty (30) days of the receipt of such request a registration statement under the Act covering all Registrable Shares that the Holders request in writing (within ten (10) days of receipt of such notice given by the Company) to be registered and to use its best efforts to have such registration statement become effective. The Company shall not be obligated to effect any such registration pursuant to this Section 12.2 if the Company furnishes to the Holders a certificate signed by the Chief Executive Officer of the Company stating that the Company has fixed plans to engage within thirty (30) days of the date of the request in a registered public offering as to which Holders may include Registrable Shares pursuant to Section 12.1 hereof or that, in the good faith judgment of the Board of Directors of the Company, it would bedetrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 12.2; provided, that the Company shall not utilize this right more than once in any twelve-month period. The Company shall not be obligated to effect more than one registration pursuant to this Section 12.2 with respect to all shares issued upon exercise of this Warrant (as it may be subdivided from time to time pursuant to Section 11 hereof); provided that the Company shall effect one additional registration pursuant to this Section if the Holders requesting such registration agree to pay the registration expenses described in Section hereof in connection therewith. 12.3. Whenever required under Section 12.1 or 12.2 to effect the registration of any Registrable Shares, the Company shall, as expeditiously as reasonably possible: (a) prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 for the sale of the Registrable Shares by Holder from time to time on the Nasdaq National Market or the facilities of any national securities exchange on which the Common Stock is then traded or in privately- negotiated transactions; 4 (b) use its best efforts, subject to receipt of necessary information from Holder, to cause such registration statement to become effective; (c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until all the Registrable Shares have been sold pursuant thereto or until, by reason of Rule 144(k) of the Commission under the Securities Act of 1933, as amended (the "Securities Act"), or any other rule of similar effect, the Registrable Shares held by non-affiliates of the Company are no longer required to be registered for the sale thereof by Holder; (d) furnish to Holder with respect to the Registrable Shares registered under such registration statement (and to each underwriter, if any, of such Registrable Shares) such number of copies of prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as Holder may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Shares by Holder; and (e) file documents required of the Company for normal blue sky clearance in states specified in writing by Holder; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; provided, however, that the Company shall be under no obligation to complete any offering of securities it proposes to make and shall incur no liability to any Holder for its failure to do so. 12.4. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 12 with respect to the Registrable Shares of any selling Holder that such Holder shall furnish to the Company such information regarding him or itself, the Registrable Shares held by him or it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Shares. (b) If the Company has delivered preliminary or final prospectuses to the selling Holders and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Holders and, if requested, the selling Holders shall immediately cease making offers or sales of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide the selling Holders with revised prospectuses and, following receipt of the revised prospectuses, the selling Holders shall be free to resume making offers and sales of the Registrable Shares. 12.5. The Company shall bear and pay all expenses, other than underwriting discounts and commissions or other selling expenses of any Holder, incurred in connection with any registration, filing orqualification pursuant to this Section 12, including without limitation all registration, filing, and qualification fees, printing costs, accounting fees and fees and disbursements of counsel for the Company; provided, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 12.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Shares to be registered (other than as a result of a material adverse change in the prospects, business or condition of the Company that was unknown to the Holders of a majority of the Registrable Shares at the time of their request), in which case all Holders requesting such withdrawal shall bear such expenses. 12.6. The following provisions shall apply to any registration described in Section 12.1 or 12.2 above that is a registered public offering involving an underwriting: (a) All stockholders proposing to distribute their shares of Common Stock through such underwriting shall (together with the Company, directors and officers and the other shareholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for underwriting by the Company; (b) Notwithstanding any other provision of this Section 12, if the underwriter determines that 5 marketing factors require a limitation on the number of shares of Common Stock to be underwritten, the underwriter may exclude from such registration and underwriting some or all of the shares of Common Stock which would otherwise be underwritten pursuant hereto. The Company shall so advise Holder and the number of Registrable Shares that are entitled to be included in the registration and underwriting shall be allowed among Holder, directors and officers and other stockholders distributing securities through such underwriting in proportion, as nearly as practicable, to the respective amounts of securities which they had requested to be included in such registration at the time of filing the registration statement, subject in the case of a registration described in Section 12.1, to any superior rights of any holder of demand registration rights. If Holder or any officer, director or other stockholder distributing securities through such underwriting disapproves of the terms of any such underwriting, he or it may elect to withdraw therefrom by written notice to the Company and the underwriter. Anysecurities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 12.7. For the purpose of this Section 12.7: (a) the term "Selling Shareholder" shall mean Holder and any officer, director, employee, agent, affiliate or person deemed to be in control of Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended; (b) the term "Registration Statement" shall mean the registration statement referred to in Section 12.1 or 12.2 and any final prospectus, exhibit, supplement or amendment included therein or relating thereto; and (c) the term "untrue statement" shall mean any untrue statement or alleged untrue statement of, or any omission or alleged omission to state in the Registration Statement, a material fact required to be stated herein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to indemnify and hold harmless each Selling Shareholder from and against any losses, claims, damages or liabilities to which such Selling Shareholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement of a material fact contained in the Registration Statement on the effective date thereof, or arise out of any failure by the Company to fulfill any undertaking included in the Registration Statement and the Company will reimburse such Selling Shareholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, any untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Shareholder specifically for use in preparation of the Registration Statement, or the failure of such Selling Shareholder to comply with the covenants and agreementscontained in Section hereof or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Selling Shareholder prior to the pertinent sale or sales by the Selling Shareholder. The Selling Shareholder agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any failure to comply with the covenants and agreements contained in Section hereof, or any untrue statement of a material fact contained in the Registration Statement on the effective date thereof if such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Selling Shareholder specifically for use in preparation of the Registration Statement, and the 6 Selling Shareholder will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending, or preparing to defend any such action, proceeding or claim; provided, however, that the liability and obligations of each Selling Shareholder hereunder shall be several and not joint and shall be limited to the net proceeds received by such Selling Shareholder upon the sale of such Selling Shareholder's Registrable Shares. Promptly after receipt by any indemnified person of a notice of a claim or the commencement of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 12.7, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person and such indemnifying person shall have been notified thereof, such indemnifying person shall, at its expense, be entitled to participate therein, and, to the extent it shall wish, to assume at its expense the defense thereof, with counsel reasonably satisfactory to such indemnified person. No indemnifying party, in the defense or settlement of any such claim or litigation shall, except with the consent of eachindemnified party, consent to entry of any judgment or settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that the indemnified party may participate in such defense at its expense, and provided further that, if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any officer, director, employee, agent, affiliate or person deemed to be in control of such indemnifying person within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person. It is understood, however, that the Company shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits, or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties not having actual or potential differing interests with the Company or among themselves. If the indemnification provided for in this Section 12.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the events giving rise to the claim that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided that the liability of any Selling Shareholder in respect of any such contribution obligation shall not exceed the amount of the proceeds to such SellingShareholder, net of selling discounts and commissions, from the disposition of the Registrable Shares pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue statement relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in any underwriting agreement entered into by any Selling Shareholder in connection with an underwritten public offering of Registrable Shares conflict with the foregoing provisions, the provisions in the underwriting agreement shall control with respect to the obligations of the Selling Shareholders to the underwriters thereunder. 7 The obligations of the Company and the Selling Shareholders under this Section 12.7 shall survive the completion of any offering of Registrable Shares in a registration statement hereunder or otherwise. 13. NO RIGHTS AS A STOCKHOLDER. Until the exercise of this Warrant, the holder -------------------------- hereof shall have only the rights provided herein and shall not by virtue hereof have or exercise any voting or other rights as a stockholder of the Company. 14. NOTICES, ETC. All notices and other communications from the Company to the ------------ holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such holder or, until any such holder furnishes to the Company an address, then to, and at the address of, the last holder of this Warrant who has so furnished an address to the Company. 15. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, ------------- discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of anyprovision hereof shall in no way affect the validity or enforceability of any other provision. Dated as of [Date] DATAWARE TECHNOLOGIES, INC. By: ---------------------- Kurt Mueller Chairman and CEO Schedule of Warrants Issued to Advest, Inc.
Date Issued No. of Shares Covered By Warrant ----------- -------------------------------- November 21, 1996 30,000 April 14, 1997 20,000
8 FORM OF SUBSCRIPTION (To be signed only on exercise of Warrant) TO DATAWARE TECHNOLOGIES, INC.: The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant for, and to purchase thereunder, _______________ shares of Common Stock of Dataware Technologies, Inc. and herewith makes payment of $__________ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to ________________________________________________________________, whose address is ________________________________________________________________________. The undersigned confirms that he or it is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. Dated: _______________ ................................................. (Signature must conform to the name of holder as specified on the face of the Warrant) .................................................. (Address) ____________________ FORM OF ASSIGNMENT (To be signed only on transfer of Warrant) For value received, the undersigned hereby sells, assigns, and transfers unto __________________________________________ the right represented by the within Warrant to purchase ______________________ [not less than 1,000 shares without the Company's prior written consent] shares of Common Stock of Dataware Technologies, Inc. to which the within Warrant relates, and appoints ___________________________________ attorney to transfer such right on the books of Dataware Technologies, Inc. with full power of substitution in the premises. Dated: _______________ ................................................. (Signature must conform to name of the holder as specified on the face of the Warrant) Signed in the presence of: ............................. ................................. (Address) 9 EX-4.2 4 WARRANT AGREEMENT WITH WHARTON DATED 14-APR-1997 Exhibit 4.2 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR SUCH SHARES MAY BE TRANSFERRED UNLESS THE WARRANT OR SUCH SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. DATAWARE TECHNOLOGIES, INC. COMMON STOCK PURCHASE WARRANT (75,000 SHARES) Dataware Technologies, Inc., a Delaware corporation (the "Company"), hereby certifies that, for value received, Wharton Capital Partners Ltd. or its assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after the date hereof and before 5:00 P.M., Boston time, on the fifth anniversary of the date of initial issuance of this Warrant (the "Termination Date"), up to Seventy-Five Thousand (75,000) fully paid and nonassessable shares of common stock, $.01 par value, of the Company ("Common Stock"), at a purchase price per share of $6.00 (such purchase price per share as adjusted from time to time as herein provided is referred to herein as the "Purchase Price"). The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Dataware Technologies, Inc. and any corporation that shall succeed or assume the obligations of the Company hereunder. (b) The terms "Warrant" or "Warrants" mean this Warrant and any other warrant or warrants issued in exchange or substitution for, or upon partial exercise of, this Warrant. 1. EXERCISE OF WARRANT. Subject to Section 10, this Warrant may be exercised ------------------- in full or in part by the holder hereof by surrender of this Warrant to the Company at its principal office, with the subscription form at the end hereof duly executed by such holder, accompanied by payment in cash or by certified or official bank check payable to the order of the Company in the amount of the aggregate Purchase Price for the number of shares of Common Stock designated by the holder in the subscription form. On any partial exercise the Company at its expense will forthwith issue and deliver to or upon the order of the holder hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may request, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock for which this Warrant may still be exercised. 2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as practicable ------------------------------------------------- after the exercise of this Warrant in full or in part, and in any event within 10 days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock to which such holder shall be entitled on such exercise. 3. NOTICE OF RECORD DATE. In case the Company shall take a record of the --------------------- holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, then and in each such case the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right. Such notice shall be mailed at least ten (10) days before the record date or effective date for the event specified in such notice. 4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. ---------------------------------------------------------- 4.1. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be (but not later than the Termination Date), shall receive, in lieu of the Common Stock issuable on exercise before such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in Section 5. 4.2. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the holders of the Warrants after the effective date of such dissolution pursuant to this Section 4 to a bank or trust company having its principal office in Boston, Massachusetts, as trustee for the holder or holders of the Warrants, to be held by such trustee and any successor trustee until the Termination Date or earlier exercise hereof. 4.3. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and effect until the Termination Date and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company. 5. ADJUSTMENT UPON EXTRAORDINARY EVENTS. In the event that the Company shall ------------------------------------ (i) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price. Upon any such adjustment, the holder of this Warrant shall thereafter, upon the exercise hereof as provided in Section 1, be entitled to receive that number of shares of Common Stock determined by multiplying the number of shares of Common Stock issuable upon exercise hereof immediately before such adjustment by a fraction, the numerator of which is the Purchase Price that was in effect immediately before such adjustment, and the denominator of which is the Purchase Price in effect on the date of such exercise. 6. NOTIFICATION AS TO ADJUSTMENTS. In each case of any adjustment or ------------------------------ readjustment in the Purchase Price and shares of Common Stock issuable on the exercise of the Warrants, the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the holder of this Warrant at his or its address registered on the books of the Company, which notice shall state the Purchase Price resulting from such adjustment and the increased or decreased, if any, number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 2 7. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company ------------------------------------------------------------ will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock from time to time issuable upon the exercise of the Warrants. 8. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant, properly -------------------- endorsed, to the Company, the Company at its expense will issue and deliver to or on the order of the holder thereof a new Warrant or Warrants of like tenor, in the name ofsuch holder or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to ----------------------- the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, on delivery of an indemnity agreement or security satisfactory in form and amount to the Company in its sole discretion or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. COMPLIANCE WITH SECURITIES LAWS. This Warrant has been issued in reliance ------------------------------- on the representations and agreements set forth herein and may be exercised, transferred or exchanged only in compliance with the Act. This Warrant may only be exercised by, and Common Stock issued to, a person who provides the Company with confirmation that such person is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. Any holder by accepting this Warrant represents to the Company that the Warrant is acquired without a view to any offering or distribution in violation of applicable securities laws. Each holder of this Warrant agrees that he or it will not offer, sell or otherwise dispose of this Warrant or the shares of Common Stock issuable upon exercise thereof except in circumstances that will not result in a violation of the Act or any applicable laws relating to the sale of securities, and such holder agrees to provide the Company with such documentation as the Company shall deem necessary to demonstrate that such offer, sale or disposition will comply with applicable securities laws. This provision shall similarly apply to subsequent transferees of this Warrant. 11. TRANSFERS. This Warrant is issued upon the following terms, to all of --------- which each holder or owner hereof by acceptance hereof consents and agrees. 11.1. This Warrant may not be transferred or subdivided into warrants to purchase fewer than 1,000 shares of Common Stock (as adjusted from time to time pursuant to Section 5). 11.2. Subject to Section 10, title to this Warrant may be transferred by endorsement (by the holder hereof executing the form of assignment at the end hereof) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery. 11.3. Subject to Section 10, any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of each such bona fide purchaser, and each such bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. 11.4. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 12. REGISTRATION OF THE SHARES. -------------------------- 12.1. If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders, other than a registration relating solely to employee benefit plans, or a registration relating solely to a Rule 145 transaction, or a registration on any registration form which does not permit secondary sales, the Company will: (i) promptly give to the holder hereof ("Holder") written notice thereof (which shall include a list of the jurisdictions in 3 which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities law); and (ii) use its best efforts to include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all shares of Common Stock issued upon exercise of this Warrant (the "Registrable Shares") and specified in a written request or requests, made by Holder within fifteen (15) days after receipt of the written notice from the Company described in clause (i) above, subject to any limitations on the number of shares as set forth below. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise Holder as part of the written notice given pursuant to clause (i) above. In such event, the right of Holder to registration pursuant to this Section 12.1 shall be conditioned upon Holder's participation in such underwriting and the inclusion of the Registrable Shares in the underwriting to the extent provided herein. Notwithstanding any other provision of this Section 12.1, the Company shall not be obligated to keep any such registration statement in effect beyond the earlier of the date on which all other shares covered thereby are sold or the date on which the Company is no longer obligated by agreement with the party who initiated the registration to maintain such effectiveness. 12.2. At any time after the Company becomes eligible to file a registration statement on Form S-3, a Holder or Holders may request the Company, in writing, to effect a registration on Form S-3 of Registrable Shares having an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $100,000. Upon receipt of any such request, the Company shall: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) subject to the provisions of this Section 12.2, use its best efforts to effect such a registration as soon as practicable and in any event to file within thirty (30) days of the receipt of such request a registration statement under the Act covering all Registrable Shares that the Holders request in writing (within ten (10) days of receipt of such notice given by the Company) to be registered and to use its best efforts to have such registration statement become effective. The Company shall not be obligated to effect any such registration pursuant to this Section 12.2 if the Company furnishes to the Holders a certificate signed by the Chief Executive Officer of the Company stating that the Company has fixed plans to engage within thirty (30) days of the date of the request in a registered public offering as to which Holders may include Registrable Shares pursuant to Section 12.1 hereof or that, in the good faith judgment of the Board of Directors of the Company, it would bedetrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 12.2; provided, that the Company shall not utilize this right more than once in any twelve-month period. The Company shall not be obligated to effect more than one registration pursuant to this Section 12.2 with respect to all shares issued upon exercise of this Warrant (as it may be subdivided from time to time pursuant to Section 11 hereof); provided that the Company shall effect one additional registration pursuant to this Section if the Holders requesting such registration agree to pay the registration expenses described in Section hereof in connection therewith. 12.3. Whenever required under Section 12.1 or 12.2 to effect the registration of any Registrable Shares, the Company shall, as expeditiously as reasonably possible: (a) prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 for the sale of the Registrable Shares by Holder from time to time on the Nasdaq National Market or the facilities of any national securities exchange on which the Common Stock is then traded or in privately- negotiated transactions; 4 (b) use its best efforts, subject to receipt of necessary information from Holder, to cause such registration statement to become effective; (c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until all the Registrable Shares have been sold pursuant thereto or until, by reason of Rule 144(k) of the Commission under the Securities Act of 1933, as amended (the "Securities Act"), or any other rule of similar effect, the Registrable Shares held by non-affiliates of the Company are no longer required to be registered for the sale thereof by Holder; (d) furnish to Holder with respect to the Registrable Shares registered under such registration statement (and to each underwriter, if any, of such Registrable Shares) such number of copies of prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as Holder may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Shares by Holder; and (e) file documents required of the Company for normal blue sky clearance in states specified in writing by Holder; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; provided, however, that the Company shall be under no obligation to complete any offering of securities it proposes to make and shall incur no liability to any Holder for its failure to do so. 12.4. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 12 with respect to the Registrable Shares of any selling Holder that such Holder shall furnish to the Company such information regarding him or itself, the Registrable Shares held by him or it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Shares. (b) If the Company has delivered preliminary or final prospectuses to the selling Holders and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Holders and, if requested, the selling Holders shall immediately cease making offers or sales of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide the selling Holders with revised prospectuses and, following receipt of the revised prospectuses, the selling Holders shall be free to resume making offers and sales of the Registrable Shares. 12.5. The Company shall bear and pay all expenses, other than underwriting discounts and commissions or other selling expenses of any Holder, incurred in connection with any registration, filing orqualification pursuant to this Section 12, including without limitation all registration, filing, and qualification fees, printing costs, accounting fees and fees and disbursements of counsel for the Company; provided, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 12.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Shares to be registered (other than as a result of a material adverse change in the prospects, business or condition of the Company that was unknown to the Holders of a majority of the Registrable Shares at the time of their request), in which case all Holders requesting such withdrawal shall bear such expenses. 12.6. The following provisions shall apply to any registration described in Section 12.1 or 12.2 above that is a registered public offering involving an underwriting: (a) All stockholders proposing to distribute their shares of Common Stock through such underwriting shall (together with the Company, directors and officers and the other shareholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for underwriting by the Company; (b) Notwithstanding any other provision of this Section 12, if the underwriter determines that 5 marketing factors require a limitation on the number of shares of Common Stock to be underwritten, the underwriter may exclude from such registration and underwriting some or all of the shares of Common Stock which would otherwise be underwritten pursuant hereto. The Company shall so advise Holder and the number of Registrable Shares that are entitled to be included in the registration and underwriting shall be allowed among Holder, directors and officers and other stockholders distributing securities through such underwriting in proportion, as nearly as practicable, to the respective amounts of securities which they had requested to be included in such registration at the time of filing the registration statement, subject in the case of a registration described in Section 12.1, to any superior rights of any holder of demand registration rights. If Holder or any officer, director or other stockholder distributing securities through such underwriting disapproves of the terms of any such underwriting, he or it may elect to withdraw therefrom by written notice to the Company and the underwriter. Anysecurities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 12.7. For the purpose of this Section 12.7: (a) the term "Selling Shareholder" shall mean Holder and any officer, director, employee, agent, affiliate or person deemed to be in control of Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended; (b) the term "Registration Statement" shall mean the registration statement referred to in Section 12.1 or 12.2 and any final prospectus, exhibit, supplement or amendment included therein or relating thereto; and (c) the term "untrue statement" shall mean any untrue statement or alleged untrue statement of, or any omission or alleged omission to state in the Registration Statement, a material fact required to be stated herein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to indemnify and hold harmless each Selling Shareholder from and against any losses, claims, damages or liabilities to which such Selling Shareholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement of a material fact contained in the Registration Statement on the effective date thereof, or arise out of any failure by the Company to fulfill any undertaking included in the Registration Statement and the Company will reimburse such Selling Shareholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, any untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Shareholder specifically for use in preparation of the Registration Statement, or the failure of such Selling Shareholder to comply with the covenants and agreementscontained in Section hereof or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Selling Shareholder prior to the pertinent sale or sales by the Selling Shareholder. The Selling Shareholder agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any failure to comply with the covenants and agreements contained in Section hereof, or any untrue statement of a material fact contained in the Registration Statement on the effective date thereof if such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Selling Shareholder specifically for use in preparation of the Registration Statement, and the 6 Selling Shareholder will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending, or preparing to defend any such action, proceeding or claim; provided, however, that the liability and obligations of each Selling Shareholder hereunder shall be several and not joint and shall be limited to the net proceeds received by such Selling Shareholder upon the sale of such Selling Shareholder's Registrable Shares. Promptly after receipt by any indemnified person of a notice of a claim or the commencement of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 12.7, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person and such indemnifying person shall have been notified thereof, such indemnifying person shall, at its expense, be entitled to participate therein, and, to the extent it shall wish, to assume at its expense the defense thereof, with counsel reasonably satisfactory to such indemnified person. No indemnifying party, in the defense or settlement of any such claim or litigation shall, except with the consent of eachindemnified party, consent to entry of any judgment or settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that the indemnified party may participate in such defense at its expense, and provided further that, if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any officer, director, employee, agent, affiliate or person deemed to be in control of such indemnifying person within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person. It is understood, however, that the Company shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits, or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties not having actual or potential differing interests with the Company or among themselves. If the indemnification provided for in this Section 12.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the events giving rise to the claim that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided that the liability of any Selling Shareholder in respect of any such contribution obligation shall not exceed the amount of the proceeds to such SellingShareholder, net of selling discounts and commissions, from the disposition of the Registrable Shares pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue statement relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in any underwriting agreement entered into by any Selling Shareholder in connection with an underwritten public offering of Registrable Shares conflict with the foregoing provisions, the provisions in the underwriting agreement shall control with respect to the obligations of the Selling Shareholders to the underwriters thereunder. 7 The obligations of the Company and the Selling Shareholders under this Section 12.7 shall survive the completion of any offering of Registrable Shares in a registration statement hereunder or otherwise. 13. NO RIGHTS AS A STOCKHOLDER. Until the exercise of this Warrant, the holder -------------------------- hereof shall have only the rights provided herein and shall not by virtue hereof have or exercise any voting or other rights as a stockholder of the Company. 14. NOTICES, ETC. All notices and other communications from the Company to the ------------ holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such holder or, until any such holder furnishes to the Company an address, then to, and at the address of, the last holder of this Warrant who has so furnished an address to the Company. 15. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, ------------- discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of anyprovision hereof shall in no way affect the validity or enforceability of any other provision. Dated as of April 14, 1997 DATAWARE TECHNOLOGIES, INC. By: ---------------------- Kurt Mueller Chairman and CEO FORM OF SUBSCRIPTION (To be signed only on exercise of Warrant) TO DATAWARE TECHNOLOGIES, INC.: 8 The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant for, and to purchase thereunder, _______________ shares of Common Stock of Dataware Technologies, Inc. and herewith makes payment of $__________ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to ________________________________________________________________, whose address is ________________________________________________________________________. The undersigned confirms that he or it is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. Dated: _______________ ................................................ (Signature must conform to the name of holder as specified on the face of the Warrant) ................................................ (Address) ____________________ FORM OF ASSIGNMENT (To be signed only on transfer of Warrant) For value received, the undersigned hereby sells, assigns, and transfers unto __________________________________________ the right represented by the within Warrant to purchase ______________________ [not less than 1,000 shares without the Company's prior written consent] shares of Common Stock of Dataware Technologies, Inc. to which the within Warrant relates, and appoints ___________________________________ attorney to transfer such right on the books of Dataware Technologies, Inc. with full power of substitution in the premises. Dated: _______________ ................................................ (Signature must conform to name of the holder as specified on the face of the Warrant) Signed in the presence of: ................................................ (Address) .......................... 9 EX-4.3 5 WARRANT AGREEMENT DATED 14-APR-1997 EXHIBIT 4.3 THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH HEREIN OR WITH THE WRITTEN CONSENT OF THE COMPANY Warrant for The Purchase of Certain Securities of DATAWARE TECHNOLOGIES, INC. (A Delaware Corporation) Original Issue Date: June 23, 1997 Dataware Technologies, Inc., a Delaware corporation (the "Company"), hereby certifies that Imperial Bank, a California banking corporation, or registered assigns permitted hereunder (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at any time or from time to time during the Warrant Exercise Period (as hereinafter defined), that number of shares of the Company's Common Stock, $.01 par value per share ("Common Stock") as shall be equal to the Warrant Number (as hereinafter defined), at that price per share of Common Stock as shall be equal to the Purchase Price (as hereinafter defined). 1. Definitions For the purposes of this Warrant: "Account Balance" is defined in the Factoring Agreement. "Credit Facility" means the revolving credit facility and factoring arrangement being provided pursuant to the Loan Agreement and the Factoring Agreement. "Factoring Agreement" means the Agreement for Purchase of Receivables, dated as of June 23, 1997, between the Company and Imperial Bank. "Fair Market Value" means the average of the closing sale prices (if listed on a stock exchange or quoted on the Nasdaq National Market System or any successor thereto) or the average of the mean between the closing bid and asked prices (if quoted on NASDAQ or otherwise publicly traded) of the Common Stock on each of the five (5) trading days prior to the date of exercise. "Loan Agreement" means the Security and Loan Agreement, dated June 23, 1997, between the Company and Imperial Bank, as amended and in effect from time to time. "Maximum Loan Amount" means the maximum principal amount of loans made by Imperial Bank to the Company pursuant to the Loan Agreement that shall be outstanding at any time after the original issue date of this Warrant, without regard to any subsequent repayment or prepayment of such loans. "Purchase Price" means, initially $3.42, subject to adjustment in accordance with Section 3. "Termination Date" is defined in Section 7. "Warrant Exercise Period" means the period commencing with the original issue date of this Warrant and ending on the Termination Date. "Warrant Number" means, the number (calculated to the nearest 1/100th of a share of Common Stock) equal to the quotient of (a) the Warrant Value, divided by (b) the initial Purchase Price. The Warrant Number shall be subject to adjustment in accordance with Section 3. "Warrant Value" means (a) initially, $80,000, and (b) if at any time the sum of the Maximum Loan Amount at such time, plus the Account Balance at such time, exceeds $1,000,000, the Warrant Value in effect prior to such time, plus $80,000. The Warrant Value shall be reduced by any portion of this Warrant (i) that shall be exercised, or (ii) for which the Holder shall have elected the provisions of subsection 2(c) hereof. 2. Exercise (a) This Warrant may be exercised by the Holder, in whole or in part, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by such Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full by bank or certified check in lawful money of the United States, of the Purchase Price payable in respect of the number of shares of Common Stock purchased upon such exercise. (b) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in subsection 2(a) above. At such time, the person or persons in whose name or names any certificates for or other instruments evidencing shares of Common Stock shall be issuable upon such exercise as provided in subsection 2(d) below shall be deemed to have become the holder or holders of record of the Common Stock represented by such certificates or other instruments. 2 (c) (i) The Holder may at its sole option and in lieu of paying the Purchase Price pursuant to subsection 2(a) hereof, exchange this Warrant in whole or in part for a number of shares of Common Stock as determined below. Such shares of Common Stock shall be issued by the Company to the Holder without payment by the Holder of any exercise price or any cash or other consideration. The number of shares of Common Stock to be so issued to the Holder shall be equal to the quotient obtained by dividing (A) the Surrendered Value (as defined below) on the date of surrender of this Warrant pursuant to subsection 2(a) by (B) the Fair Market Value on the Exchange Date of one share of Common Stock. (ii) For the purposes of this subsection 2(c), the "Surrendered Value" of a portion of this Warrant on a given date shall be deemed to be the difference between (A) the aggregate Fair Market Value of the number of shares of Common Stock otherwise issuable upon exercise of such portion of the Warrant, minus (B) the aggregate Purchase Price of such number of shares of Common Stock. (d) As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Holder, or, subject to the terms and conditions hereof, as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of full shares of Common Stock to which such Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof, and (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment therein) to the Warrant Number minus the number of such shares of Common Stock purchased by the Holder upon such exercise. 3. Adjustments, Fractional Securities (a) If, at any time after the original issue date of this Warrant, the outstanding Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Purchase Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately and equitably reduced. If, at any time after the original issue date of this Warrant, the outstanding Common Stock 3 shall be combined into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately and equitably increased. When any adjustment is required to be made in the Purchase Price, the number of shares of Common Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares of Common Stock issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. (b) If, at any time after the original issue date of this Warrant, there shall occur any capital reorganization or reclassification of the Common Stock (other than a change in par value or a subdivision or combination as provided for in subsection 3(a) above), or any consolidation or merger of the Company with or into another corporation, or a transfer of all or substantially all of the assets of the Company, or the payment of a liquidating distribution, then, as part of any such reorganization, reclassification, consolidation, merger, sale, automatic conversion or liquidating distribution, lawful provision shall be made so that the Holder of this Warrant shall have the right thereafter to receive upon the exercise hereof (to the extent, if any, still exercisable) the kind and amount of shares of stock or other securities or property which such Holder would have been entitled to receive if, immediately prior to any such reorganization, reclassification, consolidation, merger, sale, automatic conversion or liquidating distribution, as the case may be, such Holder had held the number of shares of Common Stock which were then purchasable upon the exercise of this Warrant. In any such case, appropriate adjustment (as reasonably determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder of this Warrant such that the provisions set forth in this Section 3 (including provisions with respect to adjustment of the Purchase Price) shall thereafter be applicable, as nearly as is reasonably practicable, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of this Warrant. (c) In any case in which this Section 3 shall require that any adjustment in the number of shares of Common Stock or other property for which this Warrant may be exercised be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the Holder with respect to the exercise of this Warrant after that record date the Common Stock and other property, if any, issuable upon exercise over and above the Common Stock and other property, if any, issuable upon exercise of this Warrant as in effect prior to such adjustment, provided, however, that upon request the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares or property upon the occurrence of the event requiring such adjustment. (d) When any adjustment is required to be made in the Purchase Price, the Company shall promptly mail to the Holder a certificate setting forth the Purchase Price and the Warrant Number after such adjustment, and setting forth a brief 4 statement of the facts requiring such adjustment. Such certificate shall also set forth the kind and amount of stock or other securities or property into which this Warrant shall be exercisable following the occurrence of any of the events specified in subsection 3(a) or (b) above. (e) The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall make an adjustment therefore in cash on the basis of the Fair Market Value of the Common Stock. 4. Limitation on Sales, etc. The Holder, and each subsequent holder of this Warrant, if any, acknowledges that this Warrant and the underlying shares of Common Stock have not been registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Common Stock issued upon its exercise in the absence of (a) an effective registration statement under the Act as to this Warrant or such underlying shares of Common Stock and registration or qualification of this Warrant or such underlying shares of Common Stock under any applicable Blue Sky or state securities laws then in effect, or (b) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Without limiting the generality of the foregoing, unless the offering and sale of the Common Stock to be issued upon the particular exercise of the Warrant shall have been effectively registered under the Act, the Company shall be under no obligation to issue the shares covered by such exercise unless and until the registered Holder shall have executed an investment letter in form and substance reasonably satisfactory to the Company, including a warranty at the time of such exercise that it is acquiring such shares for its own account, for investment and not with a view to, or for sale in connection with, the distribution of any such shares, in which event the registered Holder shall be bound by the provisions of a legend to such effect on the certificate(s) representing the Common Stock. In addition, without limiting the generality of the foregoing, the Company may delay issuance of the Common Stock hereunder until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws), provided that the Company shall be using all reasonable efforts in good faith to diligently pursue completion of such action or the receipt of such consent. 5. Notices of Record Date, etc. In case: (a) the Company shall take a record of the holders of Common Stock for the purpose of entitling or enabling them to receive any dividend or other distribution, or to 5 receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or (b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any transfer of all or substantially all of the assets of the Company, or (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least twenty (20) days prior to the record date or effective date for the event specified in such notice, provided that the failure to so mail such notice shall not affect the legality or validity of any such action. 6. Reservation of Stock, etc. (a) The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such stock and other property as from time to time shall be issuable upon the exercise of this Warrant. (b) The Company further covenants that it will, at its expense, prior to the issuance of any Common Stock upon exercise of this Warrant, procure the listing on all stock exchanges (if any) on which the Common Stock is then listed of all such shares of Common Stock. (c) The Company will not, by amendment of its Certificate of Incorporation or through reorganization, consolidation, merger, dissolution, issuance of capital stock or sale of treasury stock (otherwise than upon exercise of this Warrant) or sale of assets, or by any other act or deed, avoid or seek to avoid the material performance or observance of any of the covenants, stipulations or conditions in this Warrant to be observed or performed by the Company. The Company will at all times in good faith assist, insofar as it is able, in the carrying out of all of the provisions of this Warrant in a reasonable manner and in the taking of all other action which may be necessary in order to protect the rights hereunder of the Holder of this Warrant. (d) The Company will maintain an office where presentations and demands to or upon the Company in respect of this Warrant may be made. The Company 6 will give notice in writing to the Holder, at the address of the Holder appearing on the books of the Company, of each change in the location of such office. 7. Termination This Warrant shall terminate and no longer be exercisable as of 5:00 p.m., Boston time, on June 23, 2004 (the "Termination Date"). 8. Transfers, etc. (a) The Company will maintain a register containing the names and addresses of the Holders of this Warrant. The Holder may change its, his or her address as shown on the warrant register by written notice to the Company requesting such change. (b) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes. 9. Replacement of Warrants Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 10. Mailing of Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be mailed by first-class certified or registered mail, postage prepaid, to the address furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an address to the Company in writing. All notices and other communications from the Holder of this Warrant or in connection herewith to the Company shall be mailed by first-class certified or registered mail, postage prepaid, to the Company at its principal executive offices, or such other address as the Company shall so notify the Holder. 11. No Rights as Stockholder Until the exercise of this Warrant, the Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company. 7 12. Change or Waiver Any term of this Warrant may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. 13. Headings The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant. 14. Governing Law. The validity, construction and performance of this Warrant will be governed by and construed in accordance with the laws of The State of Delaware applicable to contracts executed in and performed entirely within such State, without reference to any choice of law principles of such State. With respect to any suit, action or other proceeding arising out of this Agreement, or any other transaction contemplated thereby, the parties hereto expressly waive any right they may have to a jury trial and agree that any proceeding hereunder shall be tried by a judge without a jury. DATAWARE TECHNOLOGIES, INC. By:_______________________ [Corporate Seal] ATTEST: 8 EXHIBIT A PURCHASE FORM To: The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects either (i) to purchase shares of Common Stock covered by such Warrant and herewith makes payment of $ , representing the full purchase price for such shares at the Purchase Price per share provided for in such Warrant, or (ii) to surrender $_________________ of the current Warrant Value of such Warrant in exchange for the number of shares of Common Stock determined pursuant to Section 2(c) thereof. By:______________________________ Dated: 9 EXHIBIT B ASSIGNMENT FORM For Value Received, the undersigned hereby sells, assigns and transfers unto: the right to purchase Common Stock represented by this Warrant to the extent of shares, and does hereby irrevocably constitute and appoint , attorney-in-fact to transfer the same on the books of the Company with power of substitution in the premises. By:_____________________ Dated: 10 EX-4.4 6 WARRANT AGREEMENT DATED 31-MARCH-1996 Exhibit 4.4 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO A "U.S. PERSON" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE WARRANT OR SUCH SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. DATAWARE TECHNOLOGIES, INC. COMMON STOCK PURCHASE WARRANT (40,000 SHARES) Dataware Technologies, Inc., a Delaware corporation (the "Company"), hereby certifies that, for value received, Entrust Nominees Limited ("Entrust") or its assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after the date hereof and before 5:00 P.M., Boston time, on the third anniversary of the date of initial issuance of this Warrant (the "Termination Date"), up to Forty Thousand (40,000) fully paid and nonassessable shares of common stock, $.01 par value, of the Company ("Common Stock"), at a purchase price per share of $10.00 (such purchase price per share as adjusted from time to time as herein provided is referred to herein as the "Purchase Price"). The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. This Warrant is issued pursuant to a certain Agreement-Sale of Shares of even date herewith, between the Company and Entrust. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Dataware Technologies, Inc. and any corporation that shall succeed or assume the obligations of the Company hereunder. (b) The terms "Warrant" or "Warrants" mean this Warrant and any other warrant or warrants issued in exchange or substitution for, or upon partial exercise of, this Warrant. 1. EXERCISE OF WARRANT. ------------------- 1.1. Subject to Section 1.2, this Warrant may be exercised in full or in part by the holder hereof by surrender of this Warrant, with the subscription form at the end hereof duly executed by such holder, to the Company at its principal office, accompanied by payment in cash or by certified or official bank check payable to the order of the Company in the amount of the aggregate Purchase Price for the number of shares of Common Stock designated by the holder in the subscription form. On any partial exercise the Company at its expense will forthwith issue and deliver to or upon the order of the holder hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof or as such holder (upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may request, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock for which this Warrant may still be exercised. 1.2. This Warrant may only be exercised by, and Common Stock issued to, a person who (a) is outside the United States at the time of exercise and who provides the Company with written certification that such person is not a U.S. Person and this Warrant is not being exercised on behalf of a U.S. Person or a written opinion of counsel in form and substance satisfactory to the Company to the effect that the issuance of Common Stock upon exercise hereof will be exempt from registration under the Act, and (b) provides the Company with confirmation that such person is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. 2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as practicable ------------------------------------------------- after the exercise of this Warrant in full or in part, and in any event within 10 days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon upon compliance with Sections 10 and 11 and payment by such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock to which such holder shall be entitled on such exercise. 3. NOTICE OF RECORD DATE. In case the Company shall take a record of the --------------------- holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, then and in each such case the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right. Such notice shall be mailed at least ten (10) days before the record date or effective date for the event specified in such notice. 4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. ---------------------------------------------------------- 4.1. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be (but not later than the Termination Date), shall receive, in lieu of the Common Stock issuable on exercise before such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in Section 5. 4.2. In the event of any dissolution of the Company following the transfer of all or substantially all of its -2- properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the holders of the Warrants after the effective date of such dissolution pursuant to this Section 4 to a bank or trust company having its principal office in Boston, Massachusetts, as trustee for the holder or holders of the Warrants, to be held by such trustee and any successor trustee until the Termination Date or earlier exercise hereof. 4.3. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and effect until the Termination Date and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company. 5. ADJUSTMENT UPON EXTRAORDINARY EVENTS. In the event that the Company shall ------------------------------------ (i) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price. Upon any such adjustment, the holder of this Warrant shall thereafter, upon the exercise hereof as provided in Section 1, be entitled to receive that number of shares of Common Stock determined by multiplying the number of shares of Common Stock issuable upon exercise hereof immediately before such adjustment by a fraction, the numerator of which is the Purchase Price that was in effect immediately before such adjustment, and the denominator of which is the Purchase Price in effect on the date of such exercise. 6. NOTIFICATION AS TO ADJUSTMENTS. In each case of any adjustment or ------------------------------ readjustment in the Purchase Price and shares of Common Stock issuable on the exercise of the Warrants, the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the holder of this Warrant at his or its address registered on the books of the Company, which notice shall state the Purchase Price resulting from such adjustment and the increased or decreased, if any, number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 7. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company ------------------------------------------------------------ will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock from time to time issuable upon the exercise of the Warrants. 8. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant, properly -------------------- endorsed, to the Company, the Company at its expense will issue and deliver to or on the order of the holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (on payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered, provided, however, that the Company shall not be obligated to issue such replacement Warrant or Warrants and record such transfer in the Company's records unless the transfer is in accordance with all of the terms and conditions of this Warrant and the Agreement-Sale of Shares executed by the original holder hereof. 9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to ----------------------- the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, on delivery of an indemnity agreement or security satisfactory in form and amount to the Company in its sole discretion or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. COMPLIANCE WITH SECURITIES LAWS. This Warrant has been issued in reliance ------------------------------- on the representations made by the original holder hereof and may be exercised, transferred or exchanged only in compliance with the Act, including Regulation S promulgated thereunder. Any holder by accepting this Warrant represents to the Company that the Warrant is acquired without a view to any offering or distribution in violation of applicable securities laws. Such holder of this Warrant agrees that he or it will not offer, sell or otherwise dispose of this Warrant or the shares of Common Stock issuable upon exercise thereof except in circumstances that will not result in a violation of the Act, including Regulation S promulgated under the Act, or any applicable laws relating to the sale of securities, and such holder agrees to provide the Company with such documentation as the Company shall deem necessary -3- to demonstrate that such offer, sale or disposition complied with applicable securities laws. This provision shall similarly apply to subsequent transferees of this Warrant. 11. TRANSFERS. This Warrant is issued upon the following terms, to all of which --------- each holder or owner hereof by acceptance hereof consents and agrees. 11.1. Neither this Warrant nor any shares of Common Stock issuable upon exercise hereof may be offered for sale or sold to any party until after the 40- day period beginning on the date of original issuance of this Warrant. 11.2. This Warrant may not be transferred or subdivided into warrants to purchase fewer than 1,000 shares of Common Stock (as adjusted pursuant to Section 5). 11.3. Subject to the provisions of applicable U.S. securities laws, title to this Warrant may be transferred by endorsement (by the holder hereof executing the form of assignment at the end hereof) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery. 11.4. Any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of each such bona fide purchaser, and each such bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. 11.5. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 12. NO RIGHTS AS A STOCKHOLDER. Until the exercise of this Warrant, the holder -------------------------- hereof shall have only the rights provided herein and shall not by virtue hereof have or exercise any voting or other rights as a stockholder of the Company. 13. NOTICES, ETC. All notices and other communications from the Company to the ------------ holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such holder or, until any such holder furnishes to the Company an address, then to, and at the address of, the last holder of this Warrant who has so furnished an address to the Company. 14. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, ------------- discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. -4- Dated as of March __, 1996 DATAWARE TECHNOLOGIES, INC. - ------------------------------ Name: Title: -5- FORM OF SUBSCRIPTION (To be signed only on exercise of Warrant) TO DATAWARE TECHNOLOGIES, INC.: The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant for, and to purchase thereunder, _______________ shares of Common Stock of Dataware Technologies, Inc. and herewith makes payment of $____________ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to _____________________________________________________________________, whose address is ______________________________________________________________. The undersigned (a) certifies to the Company that he or it is not a U.S. Person (as defined in Regulation S under the U.S. Securities Act of 1933) and this Warrant is not being exercised on behalf of a U.S. Person, and (b) confirms that he or it is not acquiring such Common Stock with a view to any offering or distribution thereof in violation of applicable securities laws. ................................................. Dated: _______________ (Signature must conform to the name of holder as specified on the face of the Warrant) ................................................. (Address) ____________________ FORM OF ASSIGNMENT (To be signed only on transfer of Warrant) For value received, the undersigned hereby sells, assigns, and transfers unto __________________________________________ the right represented by the within Warrant to purchase ______________________ [not less than 1,000 shares without the Company's prior written consent] shares of Common Stock of Dataware Technologies, Inc. to which the within Warrant relates, and appoints ___________________________________ attorney to transfer such right on the books of Dataware Technologies, Inc. with full power of substitution in the premises. ................................................. Dated: _______________ (Signature must conform to name of the holder as specified on the face of the Warrant) Signed in the presence of: ................................................. (Address) ....................... -6- EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1,472 0 10,463 695 93 13,294 13,834 7,550 24,506 10,356 0 0 2,486 70 11,594 24,506 19,861 19,861 7,258 7,258 15,294 0 131 (2,994) 0 (2,994) 0 0 0 (2,994) (.53) (.53)
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