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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 14, 1997
________________________________________________________________________________
DATAWARE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21860 06-1232140
(State of (Commission File (IRS Employer
incorporation) Number) Identification No.)
________________________________________________________________________________
222 THIRD STREET, CAMBRIDGE, MASSACHUSETTS 02142
(Address of principal executive offices and zip code)
(617) 621-0820
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On April 14, 1997, Dataware Technologies, Inc. ("Dataware" or the
"Registrant") 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, which is filed as Exhibit 10.1 hereto. 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.
As described in greater detail below, the shares of Preferred Stock are
convertible into shares of Common Stock of Registrant. In addition, pursuant to
a Registration Rights Agreement filed as Exhibit 10.2 hereto, the holders of the
Preferred Stock were granted registration rights for the resale of the
underlying 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 Registrant's Restated
Certificate of Incorporation filed as Exhibit 3.1 hereto and summarized below:
Dividends. The holders of the Preferred Stock are entitled to receive
cumulative dividends at the rate of 4.5% per annum, payable quarterly in cash
or, at the option of the Registrant, shares of Common Stock, except when the
number of shares of Common Stock to be so issued would cause the holders of the
Preferred Stock to beneficially own in excess of 4.9% of the Registrant's
outstanding Common Stock.
Conversion. The shares of Preferred Stock are convertible into shares of
Common Stock at the option of the holder commencing on the earlier of (i) July
13, 1997 or (ii) the date on which a registration statement registering for
resale the shares of Common Stock issuable upon conversion of the Preferred
Stock is declared effective by the Securities and Exchange Commission (the
"SEC"), 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) the greater of (but in no event greater than $6.00): (a) $3.99625 (an
amount equal to 115% of the average closing bid price for the five days
immediately preceding April 14, 1997) or (ii) the average closing bid price for
the five days immediately preceding July 13, 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 Registrant's
Common Stock following such conversion (excluding from the calculation any
shares of Common Stock issuable upon conversion of Preferred Stock). If the
registration statement registering for resale the shares of Common Stock
issuable upon conversion of the Preferred Stock is not declared effective by the
SEC on or before July 13, 1997, the initial conversion price conversion factor
of 80% decreases (and therefore the 20% discount increases) at the rate of two
and one half percentage points for every 30 days of delay. The conversion
factor may also decrease in other circumstances as set forth in the Certificate
of Designations.
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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 Registrant is in compliance in all material respects with its
obligations to the holders of the Preferred Stock, including all obligations
under the Registration Rights Agreement and the Certificate of Designations, 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.
Redemption. So long as the Registrant is in compliance in all material
respects with its obligations to the holders of the Preferred Stock, including
all obligations under the Registration Rights Agreement and the Certificate of
Designations, at any time on or after the date 60 days after which the
registration statement will have been declared effective by the SEC, the
Registrant will have to right to redeem any part of the outstanding shares of
Preferred Stock (but not lesser 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 Registrant
to redeem all or a portion of the then outstanding shares of Preferred Stock by
notice to Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant is required to provide written notice of such fact to the holders
of the Preferred Stock (the "Inconvertibility Notice"). Within ten days of
after the Registrant delivers (or is required to deliver) an Inconvertibility
Notice, the holders of the Preferred Stock have the right to require the
Registrant 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.
Liquidation Preference. In liquidation, the holders of the Preferred Stock
are entitled to receive an amount equal to the sum of the original purchase
price, plus accrued and unpaid dividends, plus accrued and unpaid interest on
dividends in arrears prior to the
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distribution of any cash or assets of the Registrant to the holders of shares of
Common Stock.
Merger. In the event of a merger or consolidation of the Registrant or the
sale, transfer or exchange of shares of Common Stock, the holders of Preferred
Stock are entitled to convert all outstanding shares of Preferred Stock into the
shares of stock, other securities and property to be received by the holders of
shares of Common Stock.
Voting Rights. Except as required by law or as provided in the Certificate
of Designations, the holders of shares of Preferred Stock shall not be entitled
to vote on any matter.
Additional Series of Preferred Stock. The Registrant may authorize the
issuance of one or more series of preferred stock provided that the Preferred
Stock shall rank senior to or on a parity with any such series of preferred
stock with respect to dividend and liquidation rights.
Amendment of Terms of the Preferred Stock. The affirmative vote of the
holders of a majority of the outstanding shares of Preferred Stock is required
to approve any amendment, alteration or repeal of the Registrant's Restated
Certificate of Incorporation that materially and adversely affects the Preferred
Stock.
In connection with the sale of shares of Series B Convertible Preferred
Stock, the Rights Agreement, dated July 8, 1996, by and between American Stock
Transfer & Trust Company, as Rights Agent, and the Registrant was amended by the
First Amendment to the Rights Agreement, dated April 14, 1997 to include in the
definition of Common Stock contained in the Rights Agreement the shares of
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock. Such First Amendment is filed as Exhibit 4.1 hereto.
Dataware will hold its 1997 Annual Meeting of Stockholders at the M.I.T.
Faculty Club, Sloan School of Management, 50 Memorial Drive, Cambridge,
Massachusetts, at 10:00 a.m. on Friday, May 23, 1997.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS:
(c) Exhibits:
Number and Description of Exhibit
---------------------------------
3.1 Restated Certificate of Incorporation, as amended, of the Registrant.
4.1 First Amendment to the Rights Agreement, dated April 14, 1997,
amending the Rights Agreement, dated July 8, 1996, by and between
American Stock Transfer & Trust Company as Rights Agent and the
Registrant.
10.1 Subscription Agreement, dated as of April 10, 1997, by and between GFL
Advantage Fund Limited and the Registrant.
10.2 Registration Rights Agreement, dated as of April 10, 1997, by and
between GFL Advantage Fund Limited and the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereto duly authorized.
DATAWARE TECHNOLOGIES, INC.
Dated: April 17, 1997 By: /s/ Daniel M. Clarke
-------------------------------
Daniel M. Clarke
Vice President - Finance
and Administration
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EXHIBIT INDEX
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Exhibit Number Description
- -------------- -----------
3.1 Restated Certificate of Incorporation, as amended, of the
Registrant.
4.1 First Amendment to the Rights Agreement, dated April 14,
1997, amending the Rights Agreement, dated July 8, 1996, by
and between American Stock Transfer & Trust Company as
Rights Agent and the Registrant.
10.1 Subscription Agreement, dated as of April 10, 1997, by and
between GFL Advantage Fund Limited and the Registrant.
10.2 Registration Rights Agreement, dated as of April 10, 1997,
by and between GFL Advantage Fund Limited and the
Registrant.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAWARE TECHNOLOGIES, INC.
Incorporated Pursuant to an Original
Certificate of Incorporation
filed with the Secretary of State
of Delaware on March 16, 1988
-----------------------------
We, the undersigned, for the purpose of amending and restating the Restated
Certificate of Incorporation of Dataware Technologies, Inc. (the "Corporation")
under the laws of the State of Delaware hereby certify as follows:
FIRST: The name of the Corporation is Dataware Technologies, Inc.
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SECOND: The registered office of the Corporation in the State of Delaware
------
is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is the Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation shall be authorized to issue Twenty-two Million
------
(22,000,000) shares of capital stock, which shall be divided into Fourteen
Million (14,000,000) shares of Common Stock with a par value of one cent ($.01)
per share and Eight Million (8,000,000) shares of Preferred Stock with a par
value of one cent ($.01) per share.
The following is a statement of the designations, preferences, voting
powers, qualifications, special or relative rights and privileges in respect of
the authorized capital stock of the Corporation.
PREFERRED STOCK
---------------
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article FOURTH, to provide by resolution for the
issuance of the shares of Preferred Stock in one or more series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
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The authority of the Board with respect to each series shall include, but
shall not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of the
series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
COMMON STOCK
------------
The Common Stock is subject to the rights and preferences of the Preferred
Stock as hereinbefore set forth or authorized.
Subject to the provisions of any applicable law or of the by-laws of the
Corporation, as from time to time amended, with respect to the fixing of a
record date for the determination of stockholders entitled to vote, and except
as otherwise provided herein or by law or by the resolution or resolutions
providing for the issue of any series of Preferred Stock, the holders of
outstanding shares of Common Stock shall have exclusive voting rights for the
election of directors and for all other purposes, each holder of record of
shares of Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
Subject to the rights of any one or more series of Preferred Stock, the
holders of Common Stock shall be entitled to receive such dividends from time to
time as may be
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declared by the Board of Directors out of any funds of the Corporation legally
available for the payment of such dividends.
In the event of the liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, after payment shall have been
made to the holders of the Preferred Stock of the full amount to which they are
entitled, the holders of Common Stock shall be entitled to share ratably
according to the number of shares of Common Stock held by them in all remaining
assets of the Corporation available for distribution to its stockholders.
ISSUANCE
--------
Subject to the provisions of this Certificate of Incorporation and except
as otherwise provided by law, the shares of stock of the Corporation, regardless
of class, may be issued for such consideration and for such corporate purposes
as the Board of Directors may from time to time determine.
FIFTH: The following provisions are inserted for the management of the
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business and for the conduct of the affairs of the Corporation:
1. Any vote or votes authorizing liquidation of the Corporation or
proceedings for its dissolution may provide, subject to the rights of creditors
and the rights expressly provided for particular classes or series of stock, for
the distribution among the stockholders of the Corporation of the assets of the
Corporation as provided herein, wholly or in part or in kind, whether such
assets be in cash or other property, and may authorize the Board of Directors of
the Corporation to determine the valuation of the different assets of the
Corporation for the purpose of such liquidation and may divide or authorize the
Board of Directors to divide such assets or any part thereof among the
stockholders of the Corporation, in such manner that every stockholder will
receive a proportionate amount in value (determined as provided herein) of cash
or property of the Corporation upon such liquidation or dissolution even though
each stockholder may not receive a strictly proportionate part of each such
asset.
2. The directors shall be divided into three classes, as nearly equal in
number as the then total number of directors constituting the entire Board
permits, with the term of office of one class expiring each year. The initial
Class I directors shall be Messrs. Barton L. Faber and James F. Morgan and shall
hold office for a term expiring at the 1994 annual meeting of stockholders; the
initial Class II directors shall be Messrs. Stephen H. Beach and Kurt Mueller
and shall hold office for a term expiring at the 1995 annual meeting of
stockholders; and the initial Class III directors shall be Messrs. David
Dominik, William R. Lonergan, and Jeffrey O. Nyweide and shall hold office for a
term expiring at the 1996 annual meeting of stockholders. At each such annual
meeting of stockholders and at each annual meeting thereafter, successors to the
class of directors whose term expires at that meeting shall be elected for a
term expiring at the third annual meeting following their election and until
their successors shall be elected and qualified, subject to prior death,
resignation, retirement or removal. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, but in no
event will a decrease in the number of
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directors shorten the term of any incumbent director. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of any
one or more series of Preferred Stock shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the election, terms
of office and other features of such directorships shall be governed by the
terms of the vote establishing such series, and such directors so elected shall
not be divided into classes pursuant to this Article FIFTH unless expressly
provided by such terms.
3. Each director chosen to fill a vacancy in the Board of Directors shall
be elected to complete the term of office of the director who is being
succeeded. In the case of any election of a new director to fill a directorship
created by an enlargement of the Board, the Board shall in such election assign
the class of directors to which such additional director is being elected, and
each director so elected shall hold office for the same term as the other
members of the class to which the director is assigned.
4. Elections of directors need not be by ballot.
5. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the by-laws of the Corporation.
6. The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
Indemnification shall include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking shall be
accepted without reference to the financial ability of such person to make such
repayments.
The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved or ratified by the Board of Directors
of the Corporation.
The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the
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extent authorized from time to time by its Board of Directors, grant
indemnification rights to other employees or agents of the Corporation or other
persons serving the Corporation and such rights may be equivalent to, or greater
or less than, those set forth in this Article.
Any person seeking indemnification under this Article shall be deemed to
have met the standard of conduct required for such indemnification unless the
contrary shall be established.
Any amendment or repeal of the provisions of this Article shall not
adversely affect any right or protection of a director or officer of this
Corporation with respect to any act or omission of such director or officer
occurring before such amendment or repeal.
7. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article FIFTH to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended
from time to time.
Any repeal or modification of this Article FIFTH shall not increase the
personal liability of any director of this Corporation for any act or occurrence
taking place before such repeal or modification, nor otherwise adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
SIXTH: No action required to be taken or that may be taken at any annual
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or special meeting of stockholders of the Corporation may be taken by written
consent without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
SEVENTH: The Corporation reserves the right to amend, alter, change or
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repeal any provisions contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders are granted subject to this reservation.
The amendments and the restatement of the Restated Certificate of
Incorporation herein certified have been duly adopted by written consent of the
stockholders in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware and written notice of the
adoption of this Restated Certificate of Incorporation has been given as
provided by Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.
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<PAGE>
The undersigned, hereby declaring and certifying that the facts stated in
this Restated Certificate of Incorporation are true, hereunto set their hands
and seals this 26th day of July, 1993.
/s/ Kurt Mueller
------------------------------
Kurt Mueller, President
ATTESTED:
/s/ Peter Wirth
- -----------------------------------
Peter Wirth, Assistant Secretary
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<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
DATAWARE TECHNOLOGIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the Chairman of the Board and the Assistant Secretary of Dataware
Technologies, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, do hereby certify that, pursuant to
authority conferred on the Board of Directors of the Corporation by the Restated
Certificate of Incorporation of the Corporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation, by vote of its members,
duly adopted the following resolution:
Series A Junior Participating Preferred Stock
- ---------------------------------------------
RESOLVED: That, pursuant to the authority vested in the Board of Directors of
the Company by Article Fourth of its Restated Certificate of
Incorporation, as amended, a series of Preferred Stock of the Company
be and it hereby is created, and the designations, powers, preferences
and rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
1. Authorized Amount and Designation. The shares of such series shall be
---------------------------------
designated as "Series A Junior Participating Preferred Stock" (the "Junior
Preferred Stock"). The number of shares constituting such series shall be
300,000 shares and the par value shall be $0.01 per share. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior Preferred
- --------
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Company convertible into Junior Preferred Stock.
<PAGE>
2. Dividends and Distributions.
----------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of preferred stock (collectively, the "Preferred Stock")
ranking prior and superior to the Junior Preferred Stock with respect to
dividends, the holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock of the Company (the "Common Stock"), and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Junior Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Junior Preferred Stock. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case, the amount to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Company shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Junior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Junior Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin
<PAGE>
to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares of
Junior Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares of
Junior Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Junior Preferred Stock shall
-------------
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Company. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Company's Restated
Certificate of Incorporation, in any other Resolution of the Board of Directors
of the Company creating a series of Preferred Stock, or by law, the holders of
shares of Junior Preferred Stock and the holders of shares of Common Stock and
any other capital stock of the Company having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of the
Company.
(C) Except as set forth herein or as otherwise provided by law,
holders of Junior Preferred Stock shall have no voting rights.
4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock, as provided in Section 2 of this vote,
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock;
<PAGE>
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred Stock, except
dividends paid ratably on the Junior Preferred Stock and all such parity stock
on which dividends are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire, for
consideration, shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock,
provided that the Company may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of the
Company ranking junior (either as to dividends or upon dissolution, liquidation
or winding up) to the Junior Preferred Stock; or
(iv) redeem, purchase or otherwise acquire, for consideration,
any shares of Junior Preferred Stock, or any shares of stock ranking on a parity
with the Junior Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire, for consideration, any shares of stock of the
Company unless the Company could, under paragraph (A) of this section 4 purchase
or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or
-----------------
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall, upon
their cancellation, become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock, subject to the
conditions and restrictions on issuance set forth herein, in the Company's
Restated Certificate of Incorporation, in any other Resolution of the Board of
Directors of the Company creating a series of Preferred Stock, or as otherwise
required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Company, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock unless,
prior thereto, the holders of shares of Junior Preferred Stock shall have
received $100.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Junior Preferred Stock shall be entitled
to receive, to the extent greater than the foregoing, an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except distributions made ratably on the Junior
Preferred
<PAGE>
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall, at any time, declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case, the aggregate amount to which holders of shares
of Junior Preferred Stock were entitled immediately prior to such event under
the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Company shall enter into any
---------------------------
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Junior Preferred
Stock shall at the same time be similarly exchanged or changed into an amount
per share (subject to the provision for adjustment hereinafter set forth) equal
to 100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company shall,
at any time, declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
8. Redemption. The shares of Junior Preferred Stock shall not be
----------
redeemable.
9. Rank. The Junior Preferred Stock shall rank junior with respect to the
----
payment of dividends and the distribution of assets to all series of the
Company's Preferred Stock that specifically provide that they shall rank prior
to the Junior Preferred Stock. Nothing herein shall preclude the Board from
creating any series of Preferred Stock ranking on a parity with or prior to the
Junior Preferred Stock as to the payment of dividends or the distribution of
assets.
10. Amendment. The Restated Certificate of Incorporation of the Company
---------
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Junior Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Junior Preferred Stock, voting together as a
single series.
<PAGE>
11. Fractional Shares. The Junior Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of the Junior Preferred Stock.
IN WITNESS WHEREOF, this Certificate is executed and attested on behalf of
the Corporation by the undersigned as of the 28th day of June, 1996.
/s/ Kurt Mueller
--------------------------------
Chairman of the Board and
Attest Chief Executive Officer
/s/ Matthew C. Dallett
------------------------
Assistant Secretary
<PAGE>
DATAWARE TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
____________________________
Dataware Technologies, Inc., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
(1) That pursuant to authority vested in the Board of Directors of the
Corporation by the Restated Certificate of Incorporation, of the Corporation,
the Board of Directors of the Corporation, by unanimous written consent dated
April 7, 1997, adopted a resolution providing for the creation of a series of
the Corporation's Preferred Stock, $.01 par value, which series is designated as
"Series B Convertible Preferred Stock," which resolution is as follows:
VOTED: That, pursuant to the authority vested in the Board of Directors of
the Company by Article IV of its Restated Certificate of
Incorporation, a series of Series B Convertible Preferred Stock of the
Company, $.01 par value ("Series B Stock"), be and it hereby is
created with the designations, powers, preferences and rights of the
shares of such series and the qualifications, limitation or
restrictions thereof as set forth in Exhibit A hereto; and that the
proper officers of the Company be, and they hereby are, authorized and
directed to execute and file a Certificate of Designations with the
Secretary of State of Delaware setting forth the designations, powers,
preferences and rights of the Series B Stock, and the qualifications,
limitations or restrictions thereof.
(2) That attached hereto is said Exhibit A as adopted pursuant to
said resolution.
IN WITNESS WHEREOF, Dataware Technologies, Inc. has caused this
certificate to be signed as of the 14th day of April, 1997.
DATAWARE TECHNOLOGIES, INC.
Attest:
/s/ Matthew C. Dallett By: /s/ Kurt Mueller
- -------------------------- --------------------------------
Matthew C. Dallett Kurt Mueller
Assistant Secretary Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT A
SERIES B CONVERTIBLE PREFERRED STOCK
The rights, preferences, privileges, and limitations granted to and
imposed on the Series B Convertible Preferred Stock (the "Series B Convertible
Preferred Stock"), which series shall consist of 3,000 shares, are as set forth
below. The following rights, preferences, privileges, and limitations are
subject to the designation, description, and terms of one or more subsequent
series of Preferred Stock by the Board of Directors of Dataware Technologies,
Inc. (the "Corporation") pursuant to authority granted by the Certificate of
Incorporation. To the extent that the rights, preferences, privileges, and
limitations of any such subsequent series conflict or are inconsistent with any
of the rights, preferences, privileges, and limitations of the Series B
Convertible Preferred Stock, the designation and description of terms of the
subsequent series which is the latest so designated shall control and prevail
over the rights, preferences, privileges, and limitations of the Series B
Convertible Preferred Stock.
SECTION 1. DEFINITIONS. As used herein, the following terms shall
-----------
have the following meanings:
"AMEX" shall mean the American Stock Exchange, Inc.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Corporation.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
Corporation.
"Computation Date" shall mean
(1) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after
the Issuance Date, the date which is 31 days after the Issuance Date;
(2) each date which is 30 days after the Computation Date
specified in the preceding clause (1), if the Corporation shall not
have filed the Registration Statement with the SEC prior to such 30th
day;
(3) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after
the Issuance Date, the date on which the Corporation shall have so
filed the Registration Statement;
(4) the date which is 91 days after the Issuance Date, unless
the Registration Statement theretofore has been declared effective by
the SEC,
<PAGE>
(5) each date which is 30 days after the Computation Date
specified in the preceding clause (4), if the Registration Statement has
not been declared effective by the SEC prior to such 30th day,
(6) if the Registration Statement has not been declared
effective by the SEC within 90 days after the Issuance Date, the date on
which the Registration Statement is declared effective by the SEC,
(7) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of the
Registration Rights Agreement, the date which is 30 days after the date the
Corporation was so required to request acceleration (if the Corporation
shall not have so requested acceleration prior to such 30th day);
(8) each date which is 30 days after the Computation Date
referred to in the preceding clause (7), if the Corporation shall have
failed to so request acceleration of the Registration Statement prior to
such 30th day;
(9) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of the
Registration Rights Agreement, the date on which the Corporation shall have
so requested acceleration of the Registration Statement;
(10) the date on which the Registration Statement has ceased for
30 days (whether or not consecutive) to be available, for use by any holder
of shares of Series B Convertible Preferred Stock which is named therein as
a selling stockholder with the SEC, if, at any time during which the
Registration Statement is required by the Registration Rights Agreement to
remain available for such use, the Registration Statement ceases to be so
available for any reason (including, without limitation, by reason of an
SEC stop order, a material misstatement or omission therein or the
information contained in the Registration Statement having become outdated)
and shall remain so unavailable on such 30th day and each date which is the
30th day (whether or not consecutive) after such 30th day on which the
Registration Statement shall have remained so unavailable,
(11) the date on which the Registration Statement becomes
available for use by holders of shares of Series B Convertible Preferred
Stock, if, at any time during which the Registration Statement is required
by the Registration Rights Agreement to remain available for such use, the
Registration Statement ceases to be so available for any reason (including,
without limitation, by reason of an SEC stop order, a material misstatement
or omission therein or the information contained in the Registration
Statement having become outdated),
(12) the date on which any holder of shares of Series B
Convertible Preferred Stock shall have become unable for 30 days (whether
or not consecutive) to convert shares of Series B Convertible Preferred
Stock in accordance with Section 10(a) for any reason (other than by reason
of the 4.9% limitation set forth in Section 10(a)),
<PAGE>
if any holder of shares of Series B Convertible Preferred Stock shall
remain unable so to convert shares of Series B Convertible Preferred Stock
on such 30th day and each date which is 30 days after such 30th day if
holders then remain unable to so convert, and
(13) the date on which holders of shares of Series B Convertible
Preferred Stock become able to convert shares of Series B Convertible
Preferred Stock in accordance with Section 10(a), if any holder of shares
of Series B Convertible Preferred Stock shall have become unable to convert
shares of Series B Convertible Preferred Stock in accordance with Section
10(a) for any reason (other than by reason of the 4.9% limitation set forth
in Section 10(a));
provided, however, that if more than one event which could give rise to a
- -------- -------
Computation Date during any period shall have occurred, only one of such events
shall be deemed to result in a Computation Date so that the adjustments provided
herein by reason of the occurrence of a Computation Date shall be made only once
in respect of any period of time and then in the maximum amount based on all
such Computation Dates.
"Computed Price" of one share of Common Stock on any date shall mean
the lesser of (1) the product obtained by multiplying (a) the Conversion
Percentage applicable on such date times (b) the arithmetic average of the per
share Market Price of the Common Stock for the Measurement Period with respect
to the applicable dividend payment date and (2) the greater of (a) $3.99625
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
on or after the date of filing of this Certificate of Designations with the
Secretary of State of the State of Delaware) and (b) on and after the 90th day
after the Issuance Date, an amount equal to the arithmetic average of the Market
Price of the Common Stock for the Measurement Period for the date which is 90
days after the Issuance Date (subject to equitable adjustments for stock splits,
stock dividends, combinations, recapitalizations, reclassifications and similar
events occurring on or after the date which is 90 days after the Issuance Date);
provided, however, that in no event shall the Computed Price determined in
- -------- -------
accordance with this clause (2) be greater than $6.00 (subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring on or after the date of filing of
this Certificate of Designations with the Secretary of State of the State of
Delaware).
"Conversion Agent" shall mean American Stock Transfer & Trust Company,
or its duly appointed successor.
"Conversion Amount" initially shall be equal to $1,000.00, subject to
adjustment as hereinafter provided.
"Conversion Date" shall mean the date on which the notice of
conversion is actually received by the Conversion Agent, whether by mail,
courier, personal service, telephone line facsimile transmission or other means,
in case of a conversion at the option of the holder pursuant to Section 10(a).
<PAGE>
"Conversion Notice" shall mean a written notice, duly signed by or on
behalf of the holder, stating the number of shares of Series B Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Percentage" shall mean with respect to a Conversion Date
or a dividend payment date 80%; provided however, that notwithstanding any
-------- -------
other provision hereof (1) if (v) the Corporation shall fail to file the
Registration Statement with the SEC on or before the date which is 30 days after
the Issuance Date, (w) the Registration Statement is not ordered effective by
the SEC within 90 days after the Issuance Date, (x) the Corporation shall fail
to request acceleration of the Registration Statement as and when required by
Section 3(a) of the Registration Rights Agreement, (y) the Registration
Statement shall cease to be available for use by any holder of shares of Series
B Convertible Preferred Stock which is named therein as a selling stockholder
for any reason (including, without limitation, by reason of an SEC stop order, a
material misstatement or omission in the Registration Statement or the
information contained in the Registration Statement having become outdated) as
contemplated by clauses (10) and (11) of the definition of Computation Date, or
(z) a holder of shares of Series B Convertible Preferred Stock shall have become
unable to convert any shares of Series B Convertible Preferred Stock in
accordance with Section 10(a) (other than by reason of the 4.9% limitation set
forth in Section 10(a)), as contemplated by clauses (12) and (13) of the
definition of Computation Date, then in each such case (1) the applicable
percentage stated above in this paragraph shall be reduced by two-and-one-half
percentage points on each Computation Date (pro rated in the case of any
Computation Date which is less than 30 days after a Computation Date) and (2)
the Conversion Percentage applicable to a particular conversion shall be subject
to reduction as provided in Section 10(b)(6).
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Current Market Price" shall mean with respect to any date the
arithmetic average of the Market Price of the Common Stock on the 30 consecutive
trading days commencing 45 trading days before such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Issuance Date" shall mean the first date of original issuance of any
shares of Series B Convertible Preferred Stock.
"Junior Dividend Stock" shall mean, collectively, the Common Stock and
any other class or series of capital stock of the Corporation, including the
Junior Preferred Stock (as defined below in Section 4), ranking junior as to
dividends to the Series B Convertible Preferred Stock.
"Junior Liquidation Stock" shall mean the Common Stock or any other
class or series of the Corporation's capital stock, including the Junior
Preferred Stock, ranking junior as to liquidation rights to the Series B
Convertible Preferred Stock.
<PAGE>
"Liquidation Preference" shall mean, for each share of Series B
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.
"Mandatory Conversion Date" shall mean the date which is three years
after the Issuance Date.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on the principal securities exchange or
other market on which such security is listed for trading, as reported by such
exchange or other market; provided, however, that if during any Measurement
-------- -------
Period:
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market
Price of the Common Stock for each day in such Measurement Period prior to
the earlier of (1) the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution and (2) the date on
which ex-dividend trading in the Common Stock with respect to such dividend
or distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the
earlier of (1) the record date fixed for such determination and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
dividend or distribution begins and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock (other than any rights issuable
pursuant to the Rights Agreement), or fix a record date for such issuance,
which rights or warrants entitle such holders (for a period expiring within
forty-five (45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for
or purchase shares of Common Stock at a price per share less than the
Market Price (determined without regard to this proviso) for any day in
such Measurement Period which is prior to the end of such 45-day period,
then the Market Price for such day shall be reduced so that the same shall
equal the price determined by multiplying the Market Price (determined
without regard to this proviso) by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the record date fixed for the determination of stockholders
entitled to receive such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered would
purchase at such Market Price, and of which the denominator shall be the
number of shares of Common Stock outstanding on the close of business on
such record date plus the total number of additional shares of Common Stock
so offered for subscription or purchase. In determining whether any rights
or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than the Market Price (determined without
<PAGE>
regard to this proviso), and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Market Price of the Common Stock for
each day in such Measurement Period prior to the earlier of (1) the day
upon which such subdivision becomes effective and (2) the date on which ex-
dividend trading in the Common Stock with respect to such subdivision
begins shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Market Price for each day in such
Measurement Period prior to the day upon which such combination becomes
effective shall be proportionately increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i)
of this proviso applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or warrants referred
to in clause (ii) of this proviso and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation)
(the foregoing hereinafter in this clause (iv) of this proviso called the
"Securities"), or fix a record date for any such distribution, then, in
each such case, the Market Price for any day in such Measurement Period
prior to the earlier of (1) the record date for such distribution and (2)
the date on which ex-dividend trading in the Common Stock with respect to
such distribution begins shall be reduced so that the same shall be equal
to the price determined by multiplying the Market Price (determined without
regard to this proviso) by a fraction of which the numerator shall be the
Market Price (determined without regard to this proviso) on such date less
the fair market value (as determined in good faith by resolution of the
Board of Directors of the Corporation) on such date of the portion of the
Securities so distributed or to be distributed applicable to one share of
Common Stock and the denominator shall be the Market Price (determined
without regard to this
proviso); provided, however, that in the event the then fair market value
-------- -------
(as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Market Price (determined without regard to this clause (iv) of this
proviso) on any such day, in lieu of the foregoing adjustment, adequate
provision shall be made so that the holders of shares of Series B
Convertible Preferred Stock shall have the right to receive in payment of
dividends on the shares of Series B Convertible Preferred Stock or upon
conversion of the shares of Series B Convertible Preferred Stock, as the
case may be, the amount of Securities the holders of shares of Series B
Convertible Preferred Stock would have received had the number of shares of
Common Stock to be issued in payment of such dividends on the shares of
Series B Convertible Preferred Stock, or had the holders of shares of
Series B Convertible Preferred Stock converted the shares of Series B
Convertible Preferred Stock, in either such case immediately prior to the
record date for such distribution. If the Board of Directors of
<PAGE>
the Corporation determines the fair market value of any distribution for
purposes of this clause (iv) by reference to the actual or when issued
trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market on the
same day for which an adjustment in the Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of Common Stock, or rights or warrants
to subscribe for or purchase shares of Common Stock to which clause (ii) of
this proviso applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets, shares
of capital stock, rights or warrants other than such shares of Common Stock
or rights or warrants to which clause (ii) of this proviso applies (and any
Market Price reduction required by this clause (iv) with respect to such
dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Market Price reduction required by clauses (i)
and (ii) of this proviso with respect to such dividend or distribution
shall then be made), except that any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the meaning of
clause (i) of this proviso;
(v) The Corporation or any subsidiary of the Corporation shall (x)
by dividend or otherwise, distribute to all holders of its Common Stock
cash in (or fix any record date for any such distribution), or (y)
repurchase or reacquire shares of its Common Stock (other than shares
surrendered in payment of the exercise price or tax obligations incurred in
connection with the exercise of a stock option issued to any of the
Corporation's employees, directors, or consultants; each, an "Option Share
Surrender") for, in either case, an aggregate amount that, combined with
(1) the aggregate amount of any other such distributions to all holders of
its Common Stock made exclusively in cash after the Issuance Date and
within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this clause
(v) has been made, (2) the aggregate amount of any cash plus the fair
market value (as determined in good faith by a resolution of the Board of
Directors of the Corporation) of consideration paid in respect of any
repurchase or other reacquisition by the Corporation or any subsidiary of
the Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the twelve (12) months
preceding the date of payment of such distribution or making of such
repurchase or reacquisition, as the case may be, and in respect of which no
adjustment pursuant to this clause (v) has been made, and (3) the aggregate
of any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration
payable in respect of any tender offer by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within
the twelve (12) months preceding the date of payment of such distribution
or completion of such repurchase or reacquisition, as the case may be, and
in respect of which no adjustment pursuant to clause (vi) of this proviso
has been made, exceeds 10% of the product of the Market Price (determined
without regard to this proviso) on any day in such Measurement Period prior
to the earlier of (1) the record
<PAGE>
date with respect to such distribution and (2) the date on which ex-
dividend trading in the Common Stock with respect to such distribution
begins or the date of such repurchase or reacquisition, as the case may be,
times the number of shares of Common Stock outstanding on such date, then,
and in each such case, the Market Price for such day shall be reduced so
that the same shall equal the price determined by multiplying the Market
Price (determined without regard to this proviso) for such day by a
fraction (i) the numerator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day less an amount
equal to the quotient of (x) the excess of such combined amount over such
10% and (y) the number of shares of Common Stock outstanding on such day
and (ii) the denominator of which shall be equal to the Market Price
(determined without regard to this proviso) on such day; provided, however,
-------- -------
that in the event the portion of the cash so distributed or paid for the
repurchase or reacquisition of shares (determined per share based on the
number of shares of Common Stock outstanding) applicable to one share of
Common Stock is equal to or greater than the Market Price (determined
without regard to this clause (v) of this proviso) of the Common Stock on
any such day, in lieu of the foregoing adjustment, adequate provision shall
be made so that the holders of shares of Series B Convertible Preferred
Stock shall have the right to receive in payment of dividends on shares of
Series B Convertible Preferred Stock or upon conversion of shares of Series
B Convertible Preferred Stock, as the case may be, the amount of cash the
holders of shares of Series B Convertible Preferred Stock would have
received had the number of shares of Common Stock to be issued in payment
of such dividends on shares of Series B Convertible Preferred Stock, or had
the holders of shares of Series B Convertible Preferred Stock converted
shares of Series B Convertible Preferred Stock, in either such case,
immediately prior to the record date for such distribution or the payment
date of such repurchase, as applicable; or
(vi) A tender offer made by the Corporation or any of its subsidiaries
for all or any portion of the Common Stock shall expire and such tender
offer (as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Corporation) that
combined together with (1) the aggregate of the cash plus the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Corporation), as of the expiration of such tender offer,
of consideration payable in respect of any other tender offers, by the
Corporation or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to this
clause (vi) has been made, (2) the aggregate amount of any cash plus the
fair market value (as determined in good faith by a resolution of the Board
of Directors of the Corporation) of consideration paid in respect of any
repurchase or other reacquisition by the Corporation or any subsidiary of
the Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the twelve (12) months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this clause (vi) has been made, and (3) the
aggregate amount of any distributions to all holders of the Corporation's
Common Stock made exclusively in cash within twelve (12) months preceding
the expiration of such tender offer and in respect of which no
<PAGE>
adjustment pursuant to clause (v) of this proviso has been made, exceeds
10% of the product of the Market Price (determined without regard to this
proviso) on any day in such period times the number of shares of Common
Stock outstanding on such day, then, and in each such case, the Market
Price for such day shall be reduced so that the same shall equal the price
determined by multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding on such day multiplied by
the Market Price (determined without regard to this proviso) for such day
and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of all shares validly tendered and not withdrawn
as of the last time tenders could have been made pursuant to such tender
offer (the "Expiration Time") (the shares deemed so accepted, up to any
such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) on such day and the Market Price (determined without
regard to this proviso) of the Common Stock on the trading day next
succeeding the Expiration Time. If the application of this clause (vi) to
any tender offer would result in an increase in the Market Price
(determined without regard to this proviso) for any day, no adjustment
shall be made for such tender offer under this clause (vi) for such day;
provided further, however, that if on any date there shall be no reported
- -------- ------- -------
closing bid price of such security, the "Market Price" on such date shall be the
closing bid of such security on the date next preceding such date on which a
closing bid price for such security has been so reported; provided further,
-------- -------
however, that if on any date there shall be no reported closing bid price of
- -------
such security and at the time the closing bid price for such date is being
determined there shall be known a closing bid price so reported for the date
next subsequent to such date on which a closing bid price shall have been so
reported, then the Market Price on such date for which there shall have been no
reported closing bid price shall be the lower of (x) the Market Price as
determined pursuant to the second proviso to this definition and (y) the closing
bid price as so reported for such succeeding day for which a closing bid price
as so reported is known.
"Maximum Share Amount" shall mean 1,335,256 shares, or such greater
number as permitted by the rules of the Nasdaq (such amount to be subject to
equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the date of filing this Certificate of Designations with
the Secretary of State of the State of Delaware), of Common Stock.
"Measurement Period" shall mean, with respect to any date, the period
of five (5) consecutive trading days ending one trading day prior to such date.
"Nasdaq" shall mean the Nasdaq National Market.
"Notice of Redemption" shall mean a notice given by the Corporation to
the holders of Series B Convertible Preferred Stock pursuant to Section 9, which
notice shall state (1) that the Corporation is exercising its right to redeem
all or a portion of the outstanding shares of Series B Convertible Preferred
Stock pursuant to Section 9, (2) the number of shares of Series
<PAGE>
B Convertible Preferred Stock held by such holder which are to be redeemed, (3)
the Redemption Price per share of Series B Convertible Preferred Stock to be
redeemed or the formula for determining the same, determined in accordance
herewith and (4) the applicable Redemption Date.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Optional Redemption Event" shall mean any one of the following
events:
(1) For any period of five consecutive trading days there shall be no
closing bid price of the Common Stock on any national securities exchange
or the Nasdaq;
(2) The Common Stock ceases to be listed for trading on the Nasdaq,
the NYSE, the AMEX or the Nasdaq SmallCap Market;
(3) The inability for 30 or more days (whether or not consecutive) of
any holder of shares of Series B Convertible Preferred Stock who is
entitled to optional redemption rights under Section 11 to sell such shares
of Common Stock issued or issuable on conversion of shares of Series B
Convertible Preferred Stock pursuant to the Registration Statement for any
reason on each of such 30 days;
(4) The Corporation shall fail or default in the timely performance
of any material obligation to a holder of shares of Series B Convertible
Preferred Stock under the terms of this Certificate of Designations or
under the Registration Rights Agreement or any other agreements or
documents entered into in connection with the issuance of shares of Series
B Convertible Preferred Stock, as such instruments may be amended from time
to time;
(5) Any consolidation or merger of the Corporation with or into
another entity (other than a merger or consolidation of a subsidiary of the
Corporation into the Corporation or a wholly-owned subsidiary of the
Corporation) where the shareholders of the Corporation immediately prior to
such transaction do not collectively own at least 51% of the outstanding
voting securities of the surviving corporation of such consolidation or
merger immediately following such transaction or the common stock of such
surviving corporation is not listed for trading on the Nasdaq, the NYSE,
the AMEX or the Nasdaq SmallCap Market; or
(6) The taking of any action, including any amendment to the
Corporation's Certificate of Designations, which materially and adversely
affects the rights of any holder of shares of Series B Convertible
Preferred Stock.
"Optional Redemption Notice" shall have the meaning provided in
Section 11(b).
"Optional Redemption Price" shall mean the greater of (i) the sum of
(a) the sum of (1) $1,000, (2) an amount equal to the accrued but unpaid
dividends on the share of Series B Convertible Preferred Stock to be redeemed,
and (3) an amount equal to the accrued and unpaid interest on dividends in
arrears on such share of Series B Convertible Preferred Stock through the date
of redemption pursuant to Section 11 (as provided in Section 5) plus (b) an
----
<PAGE>
amount equal to the product obtained by multiplying (x) the sum stated in the
immediately preceding clause (a) times (y) the quotient (expressed as a
-----
percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the date of redemption
pursuant to Section 11 by (B) the Conversion Percentage in effect on the date of
--
redemption pursuant to Section 11 and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would,
but for the redemption pursuant to Section 11, be issuable on conversion in
accordance with Section 10(a) of one share of Series B Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series B Convertible Preferred Stock on the date of
redemption pursuant to Section 11 (determined without regard to any limitation
on conversion contained in Section 10(a)) times (y) the arithmetic average of
-----
the Market Price of the Common Stock for the five consecutive trading days
ending one trading day prior to the date of redemption pursuant to Section 11.
"Parity Dividend Stock" shall mean any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series B Convertible Preferred Stock.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series B Convertible Preferred Stock.
"Redemption Date" shall mean the date of a redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 9, determined in
accordance therewith.
"Redemption Price" shall mean the greater of (i) the sum of (a) the
sum of (1) $1,000, (2) an amount equal to the accrued but unpaid dividends on
such share of Series B Convertible Preferred Stock, and (3) an amount equal to
the accrued and unpaid interest on dividends in arrears (determined as provided
in Section 5) through the Redemption Date plus (b) an amount equal to the
----
product obtained by multiplying (x) the sum stated in the immediately preceding
clause (a) times (y) the quotient (expressed as a percentage) obtained by
-----
dividing (A) the amount determined by subtracting from 100 percent the
Conversion Percentage in effect on the Redemption Date by (B) the Conversion
--
Percentage in effect on the Redemption Date and (ii) an amount equal to the
product obtained by multiplying (x) the number of shares of Common Stock which
would, but for the redemption pursuant to Section 9, be issuable on conversion
in accordance with Section 10(a) of one share of Series B Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series B Convertible Preferred Stock on the
Redemption Date (determined without regard to any limitation on conversion
contained in Section 10(a)) times (y) the arithmetic average of the Market Price
-----
of the Common Stock for the five consecutive trading days ending one trading day
prior to the Redemption Date.
"Registration Effective Date" shall mean, with respect to any share of
Series B Convertible Preferred Stock, the date on which the Registration
Statement is first ordered effective by the SEC.
<PAGE>
"Registration Rights Agreement" shall mean the Registration Rights
Agreement entered into between the Corporation and the original holder of the
shares of Series B Convertible Preferred Stock, as amended or modified from time
to time in accordance with their terms.
"Registration Statement" shall mean the Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 2(a) of
the Registration Rights Agreement.
"Restricted Person" shall have the meaning provided in Section 10(a).
"Rights Agreement" shall mean the Rights Agreement dated July 8, 1996
between the Corporation and American Stock Transfer & Trust Company, as Rights
Agent, as it may be amended from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
"Senior Dividend Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series B
Convertible Preferred Stock.
"Senior Liquidation Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series B
Convertible Preferred Stock.
"Series B Convertible Preferred Stock" shall mean the Series B
Convertible Preferred Stock of the Corporation.
"Share Limitation Redemption Date" shall mean each date on which the
Corporation is required to redeem shares of Series B Convertible Preferred Stock
as provided in this Section 7(a).
"Share Limitation Redemption Price" shall mean the greater of (i) the
sum of (a) the sum of (1) $1,000, (2) an amount equal to the accrued but unpaid
dividends on the share of Series B Convertible Preferred Stock to be redeemed
pursuant to Section 7(a), and (3) an amount equal to the accrued and unpaid
interest on dividends in arrears on such share of Series B Convertible Preferred
Stock through the applicable Share Limitation Redemption Date (as provided in
Section 5) plus (b) an amount equal to the product obtained by multiplying (x)
----
the sum stated in the immediately preceding clause (a) times (y) the quotient
-----
(expressed as a percentage) obtained by dividing (A) the amount determined by
subtracting from 100 percent the Conversion Percentage in effect on the
applicable Share Limitation Redemption Date by (B) the Conversion Percentage in
--
effect on the applicable Share Limitation Redemption Date and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock which would, but for the redemption pursuant to Section 7(a), be issuable
on conversion in accordance with Section 10(a) of one share of Series B
Convertible Preferred Stock and any accrued and unpaid dividends thereon and any
accrued and unpaid interest on dividends thereon in arrears if a Conversion
Notice were given by the holder of such share of Series B Convertible Preferred
Stock on the applicable Share Limitation Redemption Date (determined without
regard to any limitation on conversion contained in Section 10(a)) times (y) the
-----
arithmetic average of
<PAGE>
the Market Price of the Common Stock for the five consecutive trading days
ending one trading day prior to the applicable Share Limitation Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of such
Common Stock on conversion of the Series B Convertible Preferred Stock, as and
to the extent required under Rule 4460(i) of the Nasdaq as in effect from time
to time or any successor provision.
"Subscription Agreement" shall mean the Subscription Agreement between
the Corporation and the original holder of shares of Series B Convertible
Preferred Stock pursuant to which the shares of Series B Convertible Preferred
Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series shall
----------------------
be designated as "Series B Convertible Preferred Stock", and the number of
shares constituting the Series B Convertible Preferred Stock shall be 3,000, and
shall not be subject to increase.
SECTION 3. STATED CAPITAL. The amount to be represented in stated
--------------
capital at all times for each share of Series B Convertible Preferred Stock
shall be the greater of (i) the sum of (a) the sum of (1) $1,000, (2) to the
extent legally available, the accrued but unpaid dividends on such share of
Series B Convertible Preferred Stock, and (3) an amount equal to the accrued and
unpaid interest on dividends in arrears (as provided in Section 5) through the
date of determination plus (b) an amount equal to the product obtained by
----
multiplying (x) the sum stated in the immediately preceding clause (a) times (y)
-----
the quotient (expressed as a percentage) obtained by dividing (A) the amount
determined by subtracting from 100 percent the Conversion Percentage in effect
on such date of determination by (B) the Conversion Percentage in effect on such
--
date of determination and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, at the time of
such determination, be issuable on conversion in accordance with Section 10(a)
of one share of Series B Convertible Preferred Stock and any accrued and unpaid
dividends thereon and any accrued and unpaid interest on dividends thereon in
arrears if a Conversion Notice (as defined herein) were given by the holder of
such share of Series B Convertible Preferred Stock on the date of such
determination (determined without regard to any limitation on conversion
contained in 10(a)) times (y) the arithmetic average of the Market Price of the
-----
Common Stock for the five consecutive trading days ending one trading day prior
to the date of such determination. The Corporation shall take such action as
may be required to maintain the amount required by this Section 3 to be
represented in stated capital for the Series B Convertible Preferred Stock not
less frequently than monthly.
SECTION 4. RANK. All Series B Convertible Preferred Stock shall rank
----
(i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and
<PAGE>
distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, (ii) on a parity with any
additional series of the class of Preferred Stock which series the Board of
Directors may from time to time authorize, both as to payment of dividends and
as to distributions of assets upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, (iii) on a parity with the
shares of any additional class of preferred stock (or series of preferred stock
of such class) which the Board of Directors or the stockholders may from time to
time authorize in accordance herewith, which class (or series thereof) by its
terms ranks on a parity with the shares of Series B Convertible Preferred Stock
and (iv) senior to any other class or series of preferred stock (other than as
stated in the immediately preceding clauses (ii) and (iii)) of the Corporation.
The Series B Convertible Preferred Stock shall rank prior to the Corporation's
Series A Junior Participating Preferred Stock (the "Junior Preferred Stock")
with respect to the payment of dividends and the distribution of assets upon
liquidation, distribution, or winding up of the Corporation, whether voluntary
or involuntary.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of
---------------------------
Series B Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $45.00 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest (except as otherwise
provided herein as to dividends in arrears) from the date of original issuance
and shall be payable quarterly on January 1, April 1, July 1, and October 1 of
each year commencing July 1, 1997 (except that if any such date is a Saturday,
Sunday, or legal holiday, then such dividend shall be payable on the next
succeeding day that is not a Saturday, Sunday, or legal holiday) to holders of
record as they appear on the stock books of the Corporation on such record
dates, not more than 20 nor less than 10 days preceding the payment dates for
such dividends, as shall be fixed by the Board. Dividends on the Series B
Convertible Preferred Stock shall be paid in cash or, subject to the limitations
in Section 5(b) hereof, shares of Common Stock of the Corporation or any
combination of cash and shares of Common Stock, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of
Series B Convertible Preferred Stock for each quarterly dividend period shall be
computed by dividing the annual dividend amount by four. The amount of
dividends payable for the initial dividend period and any period shorter than a
full quarterly dividend period shall be computed on the basis of a 360-day year
of twelve 30-day months. Dividends not paid on a payment date, whether or not
such dividends have been declared, will bear interest at the rate of 12% per
annum until paid. Except as provided in the Rights Agreement, no dividends or
other distributions, other than the dividends payable solely in shares of any
Junior Dividend Stock, shall be paid or set apart for payment on any shares of
Junior Dividend Stock, and no purchase, redemption, or other acquisition shall
be made by the Corporation of any shares of Junior Dividend Stock unless and
until all accrued and unpaid dividends on the Series B Convertible Preferred
Stock and interest on dividends in arrears at the rate specified herein shall
have been paid or declared and set apart for payment.
If at any time any dividend on any the Senior Dividend Stock shall be
in default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series B Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividends for the then current dividend period, shall have
been paid or declared and set apart for payment, without interest. No full
dividends
<PAGE>
shall be paid or declared and set apart for payment on any Parity Dividend Stock
for any period unless all accrued but unpaid dividends (and interest on
dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series B Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series B Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series B Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series B
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series B Convertible Preferred Stock
and the Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series B
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.
Any references to "distribution" contained in this Section 5 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole discretion
to issue shares of Common Stock in payment of dividends on the Series B
Convertible Preferred Stock, the Corporation shall issue and dispatch, or cause
to be issued and dispatched, by the third trading day after such dividend
payment date to each holder of such shares a certificate representing the number
of whole shares of Common Stock arrived at by dividing the per share Computed
Price of such shares of Common Stock into the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series B Convertible Preferred Stock held by such holder which are being paid in
shares of Common Stock were being paid in cash; provided, however, that if
-------- -------
certificates representing shares of Common Stock are issued and dispatched to
holders of Series B Convertible Preferred Stock subsequent to the fifth trading
day after a dividend payment date, the percentage used to calculate the Computed
Price will be reduced by one for each trading day after the third trading day
following such dividend payment date to the date of dispatch of shares of Common
Stock. No fractional shares of Common Stock shall be issued in payment of
dividends. In lieu thereof, the Corporation shall pay cash in an amount equal
to the product of (x) the Market Price of the Common Stock for the Measurement
Period applicable to such dividend times (y) the fraction of a share of Common
-----
Stock which would otherwise be issuable by the Corporation. The Corporation
shall not exercise its right to issue shares of Common Stock in payment of
dividends on Series B Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid
in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under
<PAGE>
any law or regulation, and such registration or approval has not been
effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on
any securities exchange or market on which the Common Stock is then listed;
or have not been approved for quotation if the Common Stock is traded in
the over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of one share of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of
Common Stock as a dividend payment or (B) are no longer listed on a
national securities exchange, on the Nasdaq National Market or the Nasdaq
SmallCap Market;
(vi) the issuance of shares of Common Stock in payment of dividends
on Series B Convertible Preferred Stock held by any Restricted Person would
result in any Restricted Person beneficially owning more than 4.9% of the
Common Stock, determined as provided in the proviso to the second sentence
of Section 10(a) hereof; or
(vii) an Optional Redemption Event shall have occurred and any holder
shall be entitled to exercise optional redemption rights under Section 10
hereof by reason of such Optional Redemption Event.
Shares of Common Stock issued in payment of dividends on Series B
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof is
hereby authorized; and the dispatch thereof will be, and for all purposes shall
be deemed to be, payment in full of the cumulative dividends to which holders
are entitled on the applicable dividend payment date.
(c) Except as provided in the Rights Agreement, neither the
Corporation nor any subsidiary of the Corporation shall redeem, repurchase or
otherwise acquire in any one transaction or series of related transactions any
shares of Common Stock, Junior Dividend Stock or Junior Liquidation Stock if the
number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any Option Share
Surrender) is more than either (x) 5.0% of the number of shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one person or group of affiliated
persons, unless the Corporation or such subsidiary offers to purchase for cash
from each holder of shares of Series B Convertible Preferred Stock at the time
of such redemption, repurchase or acquisition the same percentage of such
holder's shares of Series B Convertible Preferred Stock as the percentage of the
number of outstanding shares of Common Stock, Junior Dividend Stock
<PAGE>
or Junior Liquidation Stock, as the case may be, to be so redeemed, repurchased
or acquired at a purchase price per share of Series B Convertible Preferred
Stock equal to the greater of (i) the sum of (a) the sum of (1) $1,000, (2) an
amount equal to the accrued but unpaid dividends on such share of Series B
Convertible Preferred Stock, plus (3) an amount equal to the accrued and unpaid
----
interest on dividends in arrears (determined as provided in Section 5) through
the date of purchase pursuant to this Section 5(c) plus (b) an amount equal to
----
the product obtained by multiplying (x) the sum stated in the immediately
preceding clause (a) times (y) the quotient (expressed as a percentage) obtained
-----
by dividing (A) the amount determined by subtracting from 100 percent the
Conversion Percentage in effect on the date of purchase pursuant to this Section
5(c) by (B) the Conversion Percentage in effect on the date of purchase pursuant
--
to this Section 5(c) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(c), be issuable on conversion in accordance
with Section 10(a) of one share of Series B Convertible Preferred Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series B Convertible Preferred Stock on the date of purchase
pursuant to this Section 5(c) (determined without regard to any limitation on
conversion contained in Section 10(a)) times (y) the arithmetic average of the
-----
Market Price of the Common Stock for the Measurement Period with respect to the
date of purchase pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any Tender Offer for outstanding shares of Common Stock, unless
the Corporation contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Corporation or any subsidiary of the Corporation, unless
such person agrees with the Corporation to make an offer, in either such case to
each holder of outstanding shares of Series B Convertible Preferred Stock to
purchase for cash at the time of purchase in such Tender Offer the same
percentage of shares of Series B Convertible Preferred Stock held by such holder
as the percentage of outstanding shares of Common Stock offered to be purchased
in such Tender Offer at a price per share of Series B Convertible Preferred
Stock equal to the greater of (i) the sum of (a) the sum of (1) $1,000, (2) an
amount equal to the accrued but unpaid dividends on such share of Series B
Convertible Preferred Stock, and (3) an amount equal to the accrued and unpaid
interest on dividends in arrears (determined as provided in Section 5) through
the date of purchase pursuant to this Section 5(d) plus (b) an amount equal to
----
the product obtained by multiplying (x) the sum stated in the immediately
preceding clause (a) times (y) the quotient (expressed as a percentage) obtained
-----
by dividing (A) the amount determined by subtracting from 100 percent the
Conversion Percentage in effect on the date of purchase pursuant to this Section
5(d) by (B) the Conversion Percentage in effect on the date of purchase pursuant
--
to this Section 5(d) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(d), be issuable on conversion in accordance
with Section 10(a) of one share of Series B Convertible Preferred Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series B Convertible Preferred Stock on the date of purchase
pursuant to this Section 5(d) (determined without regard to any limitation on
conversion contained in Section 10(a)) times (y) the price per share of Common
-----
Stock offered in such Tender Offer.
<PAGE>
SECTION 6. LIQUIDATION PREFERENCE. In the event of a liquidation,
----------------------
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series B Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; provided, however, that such rights shall accrue to the
-------- -------
holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series B Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series B Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution, or winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION.
--------------------
(A) MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT. (1)
--------------------------------------------------
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the Nasdaq, the Corporation shall not be required to issue upon conversion of
shares of Series B Convertible Preferred Stock pursuant to Section 10 more than
the Maximum Share Amount, less the aggregate number of shares of Common Stock
issued by the Corporation pursuant to Section 5 as dividends on the Series B
Convertible Preferred Stock. The Maximum Share Amount shall be allocated among
the shares of Series B Convertible Preferred Stock at the time of initial
issuance thereof pro rata based on the total number of authorized shares of
Series B Convertible Preferred Stock provided in Section 2. Each certificate
for shares of Series B Convertible Preferred Stock initially issued shall bear a
notation as to the number of shares constituting the portion of the Maximum
Share Amount allocated to the shares of Series B Convertible Preferred Stock
represented by such certificate for purposes of conversion thereof. The
Corporation shall maintain records which show the number of shares of Common
Stock issued by the Corporation pursuant to Section 5 as dividends on the shares
of Series B Convertible Preferred Stock represented by each certificate, which
records shall be controlling in the absence of manifest error. Upon surrender
of any certificate for shares of Series B Convertible Preferred Stock for
transfer or re-registration thereof (or, at the option of the holder, for
conversion pursuant to Section 10(a) of less than all of the shares of Series B
Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series B Convertible Preferred Stock
evidenced by such new certificate (including, without limitation, by taking into
account the number of shares of Common Stock issued by the Corporation pursuant
to Section 5 as a dividend on the shares of
<PAGE>
Series B Convertible Preferred Stock represented by the certificate so
surrendered and not previously reflected on the certificate so surrendered, as
shown on the records maintained by the Corporation). If any certificate for
shares of Series B Convertible Preferred Stock is surrendered for split-up into
two or more certificates representing an aggregate number of shares of Series B
Convertible Preferred Stock equal to the number of shares of Series B
Convertible Preferred Stock represented by the certificate so surrendered (as
reduced by any contemporaneous conversion of shares of Series B Convertible
Preferred Stock represented by the certificate so surrendered), each certificate
issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining portion of the Maximum Share Amount allocated to the certificate so
surrendered. If any shares of Series B Convertible Preferred Stock represented
by a single certificate are converted in full pursuant to Section 10, all of the
portion of the Maximum Share Amount allocated to such shares of Series B
Convertible Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series B Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series B Convertible Preferred
Stock so converted, and if there shall be no other shares of Series B
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series B Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than five
business days after the occurrence, give notice to each holder (by telephone
line facsimile transmission at such number as such holder has specified in
writing to the Corporation for such purposes or, if such holder shall not have
specified any such number, by overnight courier or first class mail, postage
prepaid, at such holder's address as the same appears on the stock books of the
Corporation) and any holder may at any time after the occurrence give notice to
the Corporation, in either case, if on any ten trading days within any period of
20 consecutive trading days the Corporation would not have been required to
convert shares of Series B Convertible Preferred Stock of such holder in
accordance with Section 10(a) as a consequence of the limitations set forth in
Section 7(a)(1) had all outstanding shares of Series B Convertible Preferred
Stock held by such holder been converted into Common Stock on each such day,
determined without regard to the limitation, if any, on such holder contained in
the proviso to the second sentence of Section 10(a) (any such notice, whether
given by the Corporation or a holder, an "Inconvertibility Notice"). If the
Corporation shall have given or been required to give any Inconvertibility
Notice, or if a holder shall have given any Inconvertibility Notice, then within
ten business days after such Inconvertibility Notice is given or was required to
be given, the holder receiving or giving, as the case may be, the
Inconvertibility Notice shall have the right by written notice to the
Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series B Convertible Preferred Stock (which,
if applicable, shall be all of such holder's outstanding shares of Series B
Convertible Preferred Stock) as shall not, on the business day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 7(a)(1) (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)), within ten business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder directs the
<PAGE>
Corporation to redeem outstanding shares of Series B Convertible Preferred Stock
and, prior to the date the Corporation is required to redeem such shares of
Series B Convertible Preferred Stock, the Corporation would have been able,
within the limitations set forth in Section 7(a)(1), to convert all of such
holder's outstanding shares of Series B Convertible Preferred Stock (determined
without regard to the limitation, if any, on such holder contained in the
proviso to the second sentence of Section 10(a)) on any ten trading days within
any period of 20 consecutive trading days commencing after the period of 20
consecutive trading days which gave rise to the applicable Inconvertibility
Notice from the Corporation or such holder of shares of Series B Convertible
Preferred Stock, as the case may be, had all of such holder's outstanding shares
of Series B Convertible Preferred Stock been surrendered for conversion into
Common Stock on each of such ten trading days within such 20 trading day period,
then the Corporation shall not be required to redeem any shares of Series B
Convertible Preferred Stock by reason of such Inconvertibility Notice.
(3) Notwithstanding the giving of any notice by the Corporation to the
holders of Series B Convertible Preferred Stock pursuant to Section 7(a)(2) or
the giving or the absence of any notice by the holders of the Series B
Convertible Preferred Stock in response thereto or any redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 7(a)(2), thereafter the
provisions of Section 7(a)(2) shall continue to be applicable on any occasion
unless the Stockholder Approval shall have been obtained from the stockholders
of the Corporation or waived by the Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation shall
make payment in immediately available funds of the applicable Share Limitation
Redemption Price to such holder of shares of Series B Convertible Preferred
Stock to be redeemed to or upon the order of such holder as specified by such
holder in writing to the Corporation at least one business day prior to such
Share Limitation Redemption Date. If the Corporation is required to redeem all
or any portion of a holder's outstanding shares of Series B Convertible
Preferred Stock pursuant to this Section 7(a), the Corporation shall make
payment to such holder of the shares of Series B Convertible Preferred Stock to
be redeemed in respect of each share of Series B Convertible Preferred Stock to
be redeemed of an amount equal to the Share Limitation Redemption Price. Upon
redemption of less than all of the shares of Series B Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three business days after surrender of such certificate to the Corporation,
the Corporation shall issue a replacement certificate for the shares of Series B
Convertible Preferred Stock evidenced by such certificate which have not been
redeemed. Only whole shares of Series B Convertible Preferred Stock may be
redeemed.
(B) NO OTHER MANDATORY REDEMPTION. The shares of Series B Convertible
-----------------------------
Preferred Stock shall not be subject to mandatory redemption by the Corporation
except as provided herein.
SECTION 8. NO SINKING FUND. The shares of Series B Convertible
---------------
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
SECTION 9. OPTIONAL REDEMPTION. So long as the Corporation is in
-------------------
compliance in all material respects with its obligations to the holders of
shares of Series B
<PAGE>
Convertible Preferred Stock (including, without limitation, its obligations
under the Registration Rights Agreement and the provisions of this Certificate
of Designations), the Corporation shall have the right, exercisable on not less
than 20 days or more than 30 days written notice to the holders of record of the
shares of Series B Convertible Preferred Stock to be redeemed, at any time on or
after the date on which the Registration Statement shall have been effective
with the SEC for 60 consecutive days to redeem all, and from time to time to
redeem any part of not less than 200 shares (or such lesser number of shares of
Series B Convertible Preferred Stock as shall remain outstanding at the time of
exercise of such redemption right), of Series B Convertible Preferred Stock in
accordance with this Section 9. Any Notice of Redemption under this Section
shall be delivered to the holders of the shares of Series B Convertible
Preferred Stock at their addresses appearing on the records of the Corporation;
provided, however, that any failure or defect in the giving of notice to any
- -------- -------
such holder shall not affect the validity of notice to or the redemption of
shares of Series B Convertible Preferred Stock of any other holder. On the
Redemption Date and after receipt by the Corporation of certificates for shares
of Series B Preferred Stock to be redeemed pursuant to this Section 9, the
Corporation shall make payment of the applicable Redemption Price to each holder
of shares of Series B Convertible Preferred Stock to be redeemed to or upon the
order of such holder as specified by such holder in writing to the Corporation
at least one business day prior to the Redemption Date. If the Corporation
exercises its right to redeem all or a portion of the outstanding shares of
Series B Convertible Preferred Stock the Corporation shall make payment to the
holders of the shares of Series B Convertible Preferred Stock to be redeemed in
respect of each share of Series B Convertible Preferred Stock to be redeemed of
an amount equal to the Redemption Price. Upon redemption of less than all of
the shares of Series B Convertible Preferred Stock evidenced by a particular
certificate, promptly, but in no event later than three business days after
surrender of such certificate to the Corporation, the Corporation shall issue
and deliver to the holder of record of the surrendered certificate (or such
holder's assignee) a replacement certificate for the shares of Series B
Convertible Preferred Stock which have not been redeemed. Only whole shares of
Series B Convertible Preferred Stock may be redeemed. If the Corporation
exercises its right to redeem less than all outstanding shares of Series B
Convertible Preferred Stock, then such redemption shall be made, as nearly as
practical, pro rata among the holders of record of the Series B Convertible
Preferred Stock. No share of Series B Convertible Preferred Stock as to which
the holder exercises the right of conversion pursuant to Section 10 or the
optional repurchase right pursuant to Section 11 may be redeemed by the
Corporation pursuant to this Section 9 on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Notice of Redemption shall have been given prior to the date of
exercise of such conversion right or optional redemption right, as the case may
be.
SECTION 10. CONVERSION.
----------
(A) CONVERSION AT OPTION OF HOLDER. The holders of the Series B
------------------------------
Convertible Preferred Stock may convert any or all of their shares of Series B
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as hereinafter provided.
Commencing on the earlier of (1) the date which is 90 days after the Issuance
Date and (2) the Registration Effective Date, and at any time thereafter, each
share of Series B Convertible Preferred Stock may be converted at the office of
the Conversion Agent or at such other additional office or offices, if any, as
the Board of Directors may designate,
<PAGE>
initially into such number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share)
determined by dividing (x) the sum of (i) $1,000, (ii) accrued but unpaid
dividends to the applicable Conversion Date on the share of Series B Convertible
Preferred Stock being converted, and (iii) accrued but unpaid interest on the
dividends on the share of Series B Convertible Preferred Stock being converted
in arrears to the applicable Conversion Date at the rate provided in Section 5
(such sum, the "Conversion Amount") by (y) the lesser of (a) the product of (I)
the Conversion Percentage with respect to the applicable Conversion Date times
-----
(II) the arithmetic average of the Market Price of the Common Stock for the
Measurement Period with respect to the applicable Conversion Date and (b) the
greater of (I) $3.99625 (subject to equitable adjustments for stock splits,
stock dividends, combinations, recapitalizations, reclassifications and similar
events occurring on or after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware) and (II) on
and after the 90th day after the Issuance Date, an amount equal to the
arithmetic average of the Market Price of the Common Stock for the Measurement
Period for the date which is 90 days after the Issuance Date (subject to
equitable adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring on or after
the date which is 90 days after the Issuance Date); provided, however, that in
-------- -------
no event shall the amount determined in accordance with this clause (b) be
greater than $6.00 (subject to equitable adjustments for stock splits, stock
dividends, combinations, recapitalizations, reclassifications and similar events
occurring on or after the date of filing of this Certificate of Designations
with the Secretary of State of the State of Delaware), in each case subject to
adjustment as hereinafter provided (the "Conversion Rate"); provided further,
----------------
however, that in no event shall any holder of shares of Series B Convertible
- -------
Preferred Stock be entitled to convert any shares of Series B Convertible
Preferred Stock in excess of that number of shares of Series B Convertible
Preferred Stock upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by such holder and any person whose beneficial
ownership of shares of Common Stock would be aggregated with such holder's
beneficial ownership of shares of Common Stock for purposes of Section 13(d) of
the Exchange Act, and Regulation 13D-G thereunder (each a "Restricted Person"
and collectively, the "Restricted Persons") (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted shares of Series
B Convertible Preferred Stock) and (2) the number of shares of Common Stock
issuable upon the conversion of the number of shares of Series B Convertible
Preferred Stock with respect to which the determination in this proviso is being
made, would result in beneficial ownership by such holder and all Restricted
Persons of such holder of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence.
(B) OTHER PROVISIONS. (1) Notwithstanding anything in this Section
----------------
10(b) to the contrary, no change in the Conversion Amount pursuant to Section
10(b) shall actually be made until the cumulative effect of the adjustments
called for by this Section 10(b) since the date of the last change in the
Conversion Amount would change the Conversion Amount by more than 1%. However,
once the cumulative effect would result in such a change, then the Conversion
Rate shall actually be changed to reflect all adjustments called for by this
Section 10(b) and not previously made. Notwithstanding anything in this Section
10(b), no change in the Conversion Amount shall be made that would result in a
Conversion Price of less than the
<PAGE>
par value of the Common Stock into which shares of Series B Convertible
Preferred Stock are at the time convertible.
(2) The holders of shares of Series B Convertible Preferred Stock at
the close of business on the record date for any dividend payment to holders of
Series B Convertible Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series B
-------- -------
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of
Series B Convertible Preferred Stock on a record date for a dividend payment who
(or whose transferee) tenders any of such shares for conversion into shares of
Common Stock on or after such dividend payment date will receive the dividend
payable by the Corporation on such shares of Series B Convertible Preferred
Stock on such date, and the converting holder need not make any payment of the
amount of such dividend in connection with such conversion of shares of Series B
Convertible Preferred Stock. Except as provided above, no adjustment shall be
made in respect of cash dividends on Common Stock or Series B Convertible
Preferred Stock that may be accrued and unpaid at the date of surrender of
shares of Series B Convertible Preferred Stock.
(3) (A) The right of the holders of Series B Convertible Preferred
Stock to convert their shares shall be exercised by delivering (which may be
done by telephone line facsimile transmission) a Conversion Notice to the
Conversion Agent, as provided above. If a holder of Series B Convertible
Preferred Stock elects to convert any shares of Series B Convertible Preferred
Stock in accordance with Section 10(a), such holder shall not be required to
physically surrender the certificate(s) representing such shares of Series B
Convertible Preferred Stock to the Corporation unless all of the shares of
Series B Convertible Preferred Stock represented thereby are so converted. Each
holder of shares of Series B Convertible Preferred Stock and the Corporation
shall maintain records showing the number of shares so converted and the dates
of such conversions or shall use such other method, satisfactory to such holder
and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any shares of Series B Convertible Preferred Stock evidenced by a particular
certificate therefor are converted as aforesaid, the holder of Series B
Convertible Preferred Stock may not transfer the certificate(s) representing
such shares of Series B Convertible Preferred Stock unless such holder first
physically surrenders such certificate(s) to the Corporation, whereupon the
Corporation will forthwith issue and deliver upon the order of such holder of
shares of Series B Convertible Preferred Stock new certificate(s) of like tenor,
registered as such holder of shares of Series B Convertible Preferred Stock
(upon payment by such holder of shares of Series B Convertible Preferred Stock
of any applicable transfer taxes) may request, representing in the aggregate the
remaining number of shares of Series B Convertible Preferred Stock represented
by such certificate(s). Each holder of shares of Series B Convertible Preferred
Stock, by acceptance of a certificate for such shares, acknowledges and agrees
that (1) by reason
<PAGE>
of the provisions of this paragraph, following conversion of any shares of
Series B Convertible Preferred Stock represented by such certificate, the number
of shares of Series B Convertible Preferred Stock represented by such
certificate may be less than the number of shares stated on such certificate and
by reason of Section 7(a), the number of shares of Common Stock from the Maximum
Share Amount allocated to the shares of Series B Convertible Preferred Stock
represented by such certificate for purposes of conversion of such shares may be
less than the number thereof stated on such certificate and (2) the Corporation
may place a legend on the certificates for shares of Series B Convertible
Preferred Stock which refers to or describes the provisions of this paragraph.
(B) The Corporation shall pay any transfer tax arising in connection
with any conversion of shares of Series B Convertible Preferred Stock except
that the Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery upon
conversion of shares of Common Stock or other securities or property in a name
other than that of the holder of the shares of the Series B Convertible
Preferred Stock being converted, and the Corporation shall not be required to
issue or deliver any such shares or other securities or property unless and
until the person or persons requesting the issuance thereof shall have paid to
the Corporation the amount of any such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. The number of
shares of Common Stock to be issued upon each conversion of shares of Series C
Convertible Preferred Stock shall be the number set forth in the applicable
Conversion Notice which number shall be conclusive absent manifest error. The
Corporation shall notify a holder who has given a Conversion Notice of any claim
of manifest error within one business day after such holder gives such
Conversion Notice and no such claim of error shall limit or delay performance of
the Corporation's obligation to issue upon such conversion the number of shares
of Common Stock which are not in dispute. A Conversion Notice shall be deemed
for all purposes to be in proper form unless the Corporation notifies a holder
of shares of Series B Convertible Preferred Stock being converted within one
business day after a Conversion Notice has been given (which notice shall
specify all defects in the Conversion Notice) and any Conversion Notice
containing any such defect shall nonetheless be effective on the date given if
the converting holder promptly corrects all such defects.
(4) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the outstanding
shares of Series B Convertible Preferred Stock, the Corporation promptly shall
seek such corporate action as may, in the opinion of its counsel, be
<PAGE>
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(5) In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, or in
the case of any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series B Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series B
Convertible Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series B Convertible Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis which preserves the economic benefits
of the conversion rights of the holders of shares of Series B Convertible
Preferred Stock on a basis as nearly as practical as such rights exist hereunder
prior thereto. If, in connection with any such consolidation, merger, sale,
transfer, or share exchange, each holder of shares of Common Stock is entitled
to elect to receive securities, cash, or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series B Convertible Preferred Stock the right to elect the
securities, cash, or other assets into which the Series B Convertible Preferred
Stock held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election). The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.
(6) If a holder shall have given a Conversion Notice for shares of
Series B Convertible Preferred Stock, the Corporation shall issue and deliver to
such person certificates for the Common Stock issuable upon such conversion
within three business days after such Conversion Notice is given and the person
converting shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of any action or inaction by
the converting holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder of any obligation to the Corporation, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Corporation to the holder in connection with such conversion. If the
Corporation fails to issue and deliver the certificates for the Common Stock to
the holder converting shares of Series B Convertible Preferred Stock
<PAGE>
pursuant to the first sentence of this paragraph as and when required to do so,
in addition to any other liabilities the Corporation may have hereunder and
under applicable law (1) the Corporation shall pay or reimburse such holder on
demand for all out-of-pocket expenses including, without limitation, reasonable
fees and expenses of legal counsel incurred by such holder as a result of such
failure, (2) the Conversion Percentage applicable to such conversion shall be
reduced by two-and-one-half percentage points from the Conversion Percentage
otherwise applicable to such conversion and (3) such holder may by written
notice (which may be given by mail, courier, personal service or telephone line
facsimile transmission) or oral notice (promptly confirmed in writing) given at
any time prior to delivery to such holder of the certificates for the shares of
Common Stock issuable upon such conversion of shares of Series B Convertible
Preferred Stock, rescind such conversion, whereupon such holder shall have the
right to convert such shares of Series B Convertible Preferred Stock thereafter
in accordance herewith.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock to purchase fractional shares of Common Stock which
would otherwise be issuable in respect of the aggregate number of such shares
surrendered for conversion at one time by the same holder, the Corporation shall
pay in cash an amount equal to the product of (i) the arithmetic average of the
Market Price of a share of Common Stock on the three consecutive trading days
ending on the trading day immediately preceding the Conversion Date and (ii)
such fraction of a share.
(8) The Conversion Amount shall be adjusted from time to time under
certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:
(i) In case the Corporation shall (other than pursuant to the Rights
Agreement) issue rights or warrants on a pro rata basis to all holders of the
Common Stock entitling such holders to subscribe for or purchase Common Stock on
the record date referred to below at a price per share less than the Current
Market Price for such record date, then in each such case the Conversion Amount
in effect on such record date shall be adjusted in accordance with the formula
C\\1\\ = C x O + N
-------------
O + N x P
-----
M
where
C\\1\\ = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable pursuant to
the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which amount
shall include amounts received by the Corporation in respect of the
issuance and the exercise of such rights or warrants).
<PAGE>
M = the Current Market Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall (other than pursuant to the Rights
Agreement), by dividend or otherwise, distribute to all holders of its Junior
Stock (as hereinafter defined) evidences of its indebtedness or assets
(including securities, but excluding any warrants or subscription rights
referred to in subparagraph (i) above and any dividend or distribution paid in
cash out of the retained earnings of the Corporation), then in each such case
the Conversion Amount then in effect shall be adjusted in accordance with the
formula
C\\1\\ = C x M
-----------
M - F
where
C\\1\\ = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Market Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair market
value on the record date of the assets or securities to be distributed
divided by the number of shares of Common Stock outstanding on the
record date. The Board of Directors shall determine such fair market
value, which determination shall be conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series B Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant to
Section 10(b)(5), the holder of any Series B Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable on
the Common Stock.
<PAGE>
(10) Whenever the Conversion Amount is adjusted as herein provided,
the Corporation shall send to each holder and each transfer agent, if any, for
the Series B Convertible Preferred Stock and the Common Stock, a statement
signed by the Chairman of the Board, the President, or any Vice President of the
Corporation and by its Treasurer or its Secretary or an Assistant Secretary
stating the adjusted Conversion Amount determined as provided in this Section
10, and any adjustment so evidenced, given in good faith, shall be binding upon
all stockholders and upon the Corporation. Whenever the Conversion Amount is
adjusted, the Corporation will give notice by mail to the holders of record of
Series B Convertible Preferred Stock, which notice shall be made within 15 days
after the effective date of such adjustment and shall state the adjustment and
the Conversion Amount. Notwithstanding the foregoing notice provisions, failure
by the Corporation to give such notice or a defect in such notice shall not
affect the binding nature of such corporate action of the Corporation.
(11) Whenever the Corporation shall propose to take any of the actions
specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of Section
10(b)(8) which would result in any adjustment in the Conversion Amount under
this Section 10(b), the Corporation shall cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series B Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.
(C) MANDATORY CONVERSION. So long as the Corporation shall be in
--------------------
compliance in all material respects with its obligations to the holders of the
Series B Convertible Preferred Stock (including its obligations under the
Registration Rights Agreement and the provisions of this Certificate of
Designations) and so long as the Registration Statement shall be effective, on
the Mandatory Conversion Date all of the outstanding shares of Series B
Convertible Preferred Stock shall be converted, in accordance with the
provisions, and subject to the limitations, of this Section 10 into shares of
Common Stock to the extent the same are at such time convertible into shares of
Common Stock. On the Mandatory Conversion Date all outstanding shares of Series
B Convertible Preferred Stock (or such lesser number of shares of Series B
Convertible Preferred Stock as are convertible into Common Stock on the
Mandatory Conversion Date) shall be converted into such number of shares of
Common Stock as shall be determined pursuant to this Section 10 as if the
conversion of such number of shares of Series B Convertible Preferred Stock were
made by the holders thereof in accordance herewith without any further action on
the part of the holders of such shares of Series B Convertible Preferred Stock.
Upon receipt by the Corporation of certificates for shares of Series B
Convertible Preferred Stock converted into shares of Common Stock in accordance
with this Section 10(c), the Corporation shall issue and, within three trading
days after such surrender, deliver to or upon the order of such holder (1) that
number of shares of Common Stock as shall be issuable in respect of the
conversion of the number of shares of Series B Convertible Preferred Stock
converted, together with accrued and unpaid dividends thereon to the date of
conversion and accrued and unpaid interest on dividends on such shares which are
in arrears, into Common Stock as shall be determined in accordance herewith and
(2) a new certificate for the balance of shares of Series B Convertible
Preferred Stock, if any.
<PAGE>
SECTION 11. REDEMPTION AT OPTION OF HOLDERS. (a) Each holder of
-------------------------------
shares of Series B Convertible Preferred Stock shall be entitled, at such
holder's option, by notice to the Corporation given within 20 days after the
occurrence of an Optional Redemption Event, to require the Corporation to redeem
all or a portion of such shares following the occurrence of an Optional
Redemption Event.
(b) To exercise the optional redemption right, a holder of shares of
Series B Convertible Preferred Stock shall deliver to the Corporation a notice
of redemption (an "Optional Redemption Notice"), accompanied by the certificate
for the shares of Series B Convertible Preferred Stock to be redeemed. Any
Optional Redemption Notice shall state (1) that the holder delivering such
notice is thereby requiring the Corporation to redeem shares of Series B
Convertible Preferred Stock pursuant to this Section 11, (2) the Optional
Redemption Event giving rise to such redemption, and (3) the number of shares of
Series B Convertible Preferred Stock held by such holder which are to be
redeemed. In no event later than five business days following receipt of such
notice by the Corporation, the Corporation shall make payment in immediately
available funds of the Optional Redemption Price applicable on the date of such
redemption with respect to the shares of Series B Convertible Preferred Stock to
be redeemed to or upon the order of such holder as specified by such holder in
the Optional Redemption Notice. Upon redemption of less than all of the shares
of Series B Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three business days after surrender of such
certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series B Convertible Preferred Stock which have
not been redeemed. Only whole shares of Series B Convertible Preferred Stock
may be redeemed.
SECTION 12. VOTING RIGHTS. Except as otherwise required by law or
-------------
expressly provided herein, shares of Series B Convertible Preferred Stock shall
not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series B Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Restated Certificate of Incorporation if the amendment, alteration, or repeal
materially and adversely affects the powers, preferences, or special rights of
the Series B Convertible Preferred Stock, or (2) the creation and issuance of
any Senior Dividend Stock or Senior Liquidation Stock; provided, however, that
-------- -------
any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and adversely
such powers, preferences, or special rights and any such increase or creation
and issuance may be made without any such vote by the holders of Series B
Convertible Preferred Stock except as otherwise required by law.
SECTION 13. OUTSTANDING SHARES. For purposes of this Certificate of
------------------
Designations, all shares of Series B Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of surrender of certificates representing
shares of Series B Convertible Preferred Stock for conversion into Common Stock,
all shares of Series B Convertible Preferred Stock converted into Common Stock;
(ii) from the date of registration of transfer, all shares of Series B
Convertible Preferred Stock held of record by the Corporation or any subsidiary
or
<PAGE>
Affiliate (as defined herein) of the Corporation and (iii) from the Share
Limitation Redemption Date, Redemption Date or Optional Redemption Date all
shares of Series B Convertible Preferred Stock which are redeemed, so long as in
each case the Share Limitation Redemption Price, the Redemption Price or the
Optional Redemption Price, as the case may be, of such shares of Series B
Convertible Preferred Stock shall have been paid by the Corporation as and when
required hereby. For the purposes of this Certificate of Designations,
"Affiliate" means any person, other than the original holders of the shares of
Series B Convertible Preferred Stock, directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation.
"Control" is the power to direct the management and policies of a person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise.
<PAGE>
FIRST AMENDMENT TO RIGHTS AGREEMENT
-----------------------------------
This FIRST AMENDMENT amends the Rights Agreement dated as of July 8, 1996
(the "Agreement") between Dataware Technologies, Inc., a Delaware corporation
(the "Company"), and American Stock Transfer & Trust Company, a New York
corporation, as Rights Agent. Capitalized terms used and not defined herein
have the same respective meanings as in the Agreement. Except as set forth
herein, the Agreement shall remain in force without change.
WHEREAS, the Board of Directors of the Company has authorized the issuance
and sale of shares of the Company's Series B Convertible Preferred Stock (the
"Series B Shares") and deems it desirable that the holders of the Series B
Shares, as such, as of any time have the same rights under the Agreement as they
would have had they converted the Series B Shares into Common Stock immediately
before such time;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree pursuant to Section 27 of the
Agreement that the Agreement is hereby amended by deleting subsection 1(g)
thereof in its entirety and substituting therefor the following new subsection
1(g):
"(g) "Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person. Without
limiting the foregoing, "Common Stock" shall also include the shares of common
stock, par value $0.01 per share, of the Company at the time issuable upon
conversion of the outstanding shares of the Series B Convertible Preferred Stock
of the Company."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of April 14, 1997.
Attest: DATAWARE TECHNOLOGIES, INC.
By: /s/ Matthew C. Dallett By: /s/ Kurt Mueller
---------------------- ----------------
Matthew C. Dallett Kurt Mueller
Assistant Secretary Chairman of the Board and
Chief Executive Officer
<PAGE>
Attest: AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ Susan Silber By: /s/ Herbert J. Lemmer
------------------- ---------------------
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
-2-
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of April 10, 1997, by and
between DATAWARE TECHNOLOGIES, INC., a Delaware corporation, with headquarters
located at 222 Third Street, Suite 3300, Cambridge, Massachusetts 02142 (the
"Company"), and GFL ADVANTAGE FUND LIMITED, a British Virgin Islands corporation
(the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into shares of Common Stock, $.01
par value (the "Common Stock"), of the Company; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(A) SUBSCRIPTION. The Buyer hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series B Convertible
Preferred Stock, $.01 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement, having the terms and conditions
as set forth in the form of Certificate of Designations of the Series B
Convertible Preferred Stock attached hereto as ANNEX I (the "Certificate of
Designations") at the price per share and for the aggregate purchase price set
forth on the signature page of this Agreement. The purchase price for the
Preferred Shares shall be payable in United States Dollars. The shares of
Common Stock issuable upon conversion of the Preferred Shares are referred to
herein as the "Common Shares." The Common Shares and the Preferred Shares are
referred to herein collectively as the "Shares."
(B) FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Preferred Shares by delivering good funds in United States Dollars to the escrow
agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached
hereto as ANNEX II (the "Joint Escrow Instructions"). Such delivery of funds
shall be made against delivery by the Company of the certificates for the
Preferred Shares registered in the name of the Buyer. Promptly following
payment by the Buyer to the Escrow Agent of the purchase price of the Preferred
Shares, but in no event later than two Business Days after such payment, the
Company shall deliver certificates for the Preferred Shares, registered in the
name of the Buyer, to the Escrow Agent. The certificates for the Preferred
Shares shall be delivered by the Company to the Escrow Agent on a delivery
against payment basis at the closing. By signing this Agreement, the Buyer and
the Company each agrees to all of the terms and conditions of, and becomes a
party to, the Joint Escrow Instructions, all of the provisions of which are
incorporated
<PAGE>
herein by this reference as if set forth in full. As used in this Agreement,
the term "Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.
(C) METHOD OF PAYMENT. Payment of the purchase price for the
Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: Advantage/Dataware
Not later than 4:00 p.m., New York City time, on the date which is two Business
Days after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for the Preferred
Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(B) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3);
(C) REOFFERS AND RESALES. All subsequent offers and sales of the
Shares by the Buyer shall be made pursuant to registration of the Shares being
offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(D) COMPANY RELIANCE. The Buyer understands that the Preferred
Shares are being offered and sold, and the Common Shares are being offered, to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Preferred Shares and
to receive an offer of the Common Shares;
-2-
<PAGE>
(E) INFORMATION PROVIDED. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Shares and the offer of the Common Shares which have been requested by
the Buyer; the Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and (2) proxy statement for the Company's 1996 Annual Meeting, in each
case as filed with the SEC (collectively, the "SEC Reports"); and the Buyer
understands that its investment in the Shares involves a high degree of risk;
(F) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares; and
(G) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(A) ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as now being conducted,
and (ii) to execute, deliver and perform its obligations under this Agreement,
the Registration Rights Agreement, the form of which is attached hereto as ANNEX
III (the "Registration Rights Agreement"), the Certificate of Designations, the
Transfer Agent Instructions, the form of which is attached hereto as ANNEX IV
(the "Transfer Agent Instructions"), and the other agreements to be executed and
delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. The Company is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company.
(B) CAPITALIZATION. The authorized capital stock of the Company
currently consists of (a) 14,000,000 shares of Common Stock of which 6,676,279
shares were outstanding of April 10, 1997, all of which are fully paid and
nonassessable; and (b) 8,000,000 shares of Preferred Stock, $.01 par value, none
of which are outstanding, of which 300,000 shares are designated as Series A
Junior Participating Preferred Stock, and 3,000 shares will be designated as
Series B Convertible Preferred Stock and issued pursuant to this Agreement; and
on the
-3-
<PAGE>
Closing Date (as defined herein) there will be no material increase from April
10, 1997 in the number of shares of Common Stock outstanding. As of April 10,
1997, the Company had outstanding options and warrants entitling the holders to
purchase 1,885,237 shares of Common Stock. Other than as set forth in the
preceding sentence, the Company does not have outstanding any material amount of
securities (or obligations to issue any such securities) convertible into,
exchangeable for or otherwise entitling the holders thereof to acquire shares of
Common Stock, except as disclosed in the SEC Reports. The outstanding shares of
Common Stock and outstanding options, warrants and other securities to purchase
Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants and other securities has
been issued in violation of the preemptive rights of any securityholder of the
Company. The offers and sales of the outstanding shares of Common Stock and
options, warrants and other rights to acquire Common Stock were at all relevant
times either registered under the 1933 Act and applicable state securities laws
or exempt from such requirements. No holder of any of the Company's securities
has any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement) except
as set forth on SCHEDULE 3(B) attached hereto.
(C) CONCERNING THE SHARES. The Shares have been duly authorized and
the Preferred Shares, when issued and paid for in accordance with this
Agreement, and the Common Shares, when issued upon conversion of the Preferred
Shares or in payment of dividends thereon, as the case may be, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive or similar rights of any stockholder of the Company or any other
person to acquire any of the Shares. The Common Stock is listed for trading on
the Nasdaq National Market ("Nasdaq") and (1) the Company and the Common Stock
meet the criteria for continued listing and trading on Nasdaq; (2) the Company
has not been notified since January 1, 1995 by Nasdaq of any failure or
potential failure to meet the criteria for continued listing and trading on
Nasdaq and (3) no suspension of trading in the Common Stock is in effect. The
Company knows of no reason that the Common Shares will not be eligible for
listing on Nasdaq.
(D) SUBSCRIPTION AGREEMENT; REGISTRATION RIGHTS AGREEMENT; TRANSFER
AGENT INSTRUCTIONS. This Agreement, the Registration Rights Agreement and the
Transfer Agent Instructions have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered on behalf of the
Company and this Agreement is, and the Registration Rights Agreement and the
Transfer Agent Instructions, when executed and delivered by the Company, will
be, valid and binding obligations of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and limits upon rights
to indemnity.
(E) NON-CONTRAVENTION. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the issuance of the
Preferred Shares as contemplated by this Agreement and the other transactions
contemplated by this Agreement, the Registration Rights Agreement, the terms of
the Preferred Stock and the Transfer Agent Instructions do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the Restated Certificate of
Incorporation
-4-
<PAGE>
or by-laws of the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound which would have a material adverse
effect on the Company or any applicable law, rule or regulation or any
applicable decree, judgment or order of any court, United States federal or
state regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets which would
have a material adverse effect on the Company.
(F) APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for (1) the execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement (except such authorization of
the SEC as is required with respect to accelerating the effectiveness of any
registration statement filed pursuant thereto) and the Transfer Agent
Instructions, (2) the issuance and sale of the Preferred Shares as contemplated
by this Agreement and (3) the issuance of Common Shares on conversion of the
Preferred Shares .
(G) INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Buyer in connection with the transactions contemplated by
the Agreement, including, without limitation, the information referred to in
Section 2(e) of this Agreement, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Company has not filed any reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"1934 Act") since December 31, 1996 other than the Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
(H) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company, except as disclosed in the SEC Reports
or as otherwise disclosed to Buyer in writing.
(I) ABSENCE OF CERTAIN PROCEEDINGS. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against the Company or any of its subsidiaries and, to the knowledge
of the Company, there is no inquiry or investigation before or by any court,
public board or body or governmental agency pending or threatened against the
Company or any of its subsidiaries, in any such case wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries taken as a whole or
the transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents; the Company
does not have pending before the SEC any request for confidential treatment of
information and to the best of the Company's knowledge no such request will be
made by the Company prior to the time the Registration Statement relating to the
Common Shares which is contemplated by the Registration Rights Agreement is
-5-
<PAGE>
first ordered effective by the SEC; and to the best of the Company's knowledge
there is not pending or contemplated, and there has been no, investigation by
the SEC involving the Company or any director or officer of the Company.
(J) PROPERTIES. The Company and its subsidiaries have good title to
all property real and personal (tangible and intangible) and other assets owned
by them, free and clear of all security interests, charges, mortgages, liens or
other encumbrances, except such as are described in the SEC Reports or such as
do not materially interfere with the use of such property made, or proposed to
be made, by the Company or its subsidiaries. The leases, licenses or other
contracts or instruments under which the Company and its subsidiaries lease,
hold or are entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries
has received notice of any material violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties.
(K) LABOR RELATIONS. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company or any of its subsidiaries.
(L) SEC FILINGS. The Company has timely filed all required forms,
reports and other documents with the SEC. All of such forms, reports and other
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act.
(M) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar
person is entitled to any commission, fee or other compensation by reason of the
transactions contemplated by this Agreement other than as disclosed in writing
by the Company to the Buyer with respect to two such persons prior to execution
and delivery of this Agreement by the Buyer, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
any person for any such commission, fee or other compensation.
(N) RIGHTS AGREEMENT. Assuming that the Buyer does not hold any
shares of Common Stock other than as acquired pursuant to this Agreement or upon
conversion of the Preferred Shares pursuant to the Certificate of Designations,
and subject to the limitations on the number of shares of Common Stock that may
be held by the Buyer contained therein, the execution and delivery of this
Agreement by the Company, the issuance of the Preferred Shares as contemplated
by this Agreement, the issuance of the shares of Common Stock upon conversion of
the Preferred Shares and the other transactions contemplated by this Agreement,
the Registration Rights Agreement, the terms of the Preferred Stock and the
Transfer Agent Instructions will not constitute a Triggering Event, as defined
in the Rights Agreement dated July 8, 1996, between the Company and the Transfer
Agent, as Rights Agent, as amended. The holder of the Preferred Shares will be
entitled, with respect to the Common Shares, to the benefits available to the
holders of Common Stock under the Rights Agreement.
-6-
<PAGE>
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(A) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Shares have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Common Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any such resale
of Shares under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Shares
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder (other than
pursuant to Section 4(d) hereof and pursuant to the Registration Rights
Agreement).
(B) RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
certificates for the Preferred Shares and, until such time as the Common Shares
have been registered for resale under the 1933 Act as contemplated by the
Registration Rights Agreement, the certificates for the Common Shares issued
upon conversion of the Preferred Shares, may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in the
absence of an effective registration statement for the securities under the
Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
Once the Registration Statement required to be filed by the Company pursuant to
Section 2 of the Registration Rights Agreement has been declared effective,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC which bear such restrictive legend and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three days
after surrender of such certificates by the Buyer and (2) the Company shall not
place any restrictive legend on certificates for Common Shares issued on
conversion of the Preferred Shares or impose any stop-transfer restriction
thereon.
(C) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
(D) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to the Buyer
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promptly after such filing. The Buyer agrees to cooperate with the Company in
connection with such filing and, upon request of the Company, to provide all
information relating to the Buyer reasonably required for such filing.
(E) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the
Closing Date, the Company shall file a notification for listing of additional
shares with the Nasdaq and shall provide evidence of such filing to the Buyer.
So long as the Buyer beneficially owns any of the Preferred Shares or the Common
Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(F) USE OF PROCEEDS. Neither the Company nor any subsidiary of the
Company owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System ("margin stock"). The proceeds of sale of the Preferred
Shares will be used for general working capital purposes and in the operation of
the Company's business. None of such proceeds will be used, directly or
indirectly (1) (other than financing its subsidiaries in the ordinary course of
business) to make any loan to or investment in any other person or (2) for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock or for the purpose of maintaining, reducing or retiring any
indebtedness which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might constitute the
transactions contemplated by this Agreement a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
transactions contemplated hereby to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the 1934 Act, in each case as in effect now or as the same may hereafter
be in effect.
(G) BLUE SKY LAWS. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
for, the Preferred Shares for sale to the Buyer pursuant to this Agreement and
the Common Shares for issuance to the Buyer on conversion of the Preferred
Shares under such of the securities or "blue sky" laws of jurisdictions as shall
be applicable to the sale of the Preferred Shares pursuant to this Agreement and
the issuance to the Buyer of Common Shares on conversion of the Preferred
Shares. The Company shall furnish copies of all filings, applications, orders
and grants or confirmations of exemptions relating to such securities or "blue
sky" laws on or prior to the Closing Date.
(H) CERTAIN EXPENSES. Whether or not the closing occurs, the Company
shall pay or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer) incurred by the
Buyer, not in excess of $7,500, in connection with this Agreement and the
transactions contemplated hereby.
(I) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains
Stockholder Approval (as defined in the Certificate of Designations) or a waiver
thereof from Nasdaq, the Company will not issue any shares of Common Stock or
shares of any other series of preferred stock or other securities convertible
into, exchangeable for or otherwise entitling
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<PAGE>
the holder to acquire shares of Common Stock which would be subject to the
requirements of Rule 4460(i) of the Nasdaq (or any successor or replacement
provision thereof) and which would be integrated with the sale of the Preferred
Shares to the Buyer or the issuance of Common Shares upon conversion thereof for
purposes of Rule 4460(i) of the Nasdaq (or any successor or replacement
provision thereof).
(2) The Company shall not offer, sell, contract to sell or issue (or
engage any person to assist the Company in taking any such action) any equity
securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any Common Stock (collectively, "Equity
Securities") at a price below the market price of the Common Stock during the
period from the date of this Agreement to the date on which the Registration
Statement (as defined in the Registration Rights Agreement) shall have been
effective with the SEC for 60 consecutive days; provided, however, that nothing
-------- -------
in this Section 4(i)(2) shall prohibit the Company from issuing securities (x)
pursuant to compensation plans for employees, directors, officers, advisers or
consultants of the Company and in accordance with the terms of such plans as in
effect as of the date of this Agreement or (y) upon exercise of conversion,
exchange, purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement.
(J) BEST EFFORTS. Each of the parties shall use its best efforts
------------
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares set forth in Section 7 or 8, as the case
may be, of this Agreement on or before the Closing Date.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(A) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by
the Buyer of the aggregate purchase price for the Preferred Shares in accordance
with Section 1(c) hereof, and in any event prior to the Closing Date, the
Company will (1) execute and deliver the Transfer Agent Instructions
substantially in the form attached hereto as ANNEX IV to and thereby irrevocably
instruct, American Stock Transfer & Trust Company, as Transfer Agent and
Registrar (the "Transfer Agent"), to issue certificates for the Common Shares
from time to time upon conversion of the Preferred Shares in such amounts as
specified from time to time to the Transfer Agent in the Notices of Conversion
surrendered in connection with such conversions and referred to in Section 5(b)
of this Agreement and (2) appoint the Transfer Agent the conversion agent for
the Preferred Stock. The certificates for the Common Shares may bear the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the resale of the Common Shares under the 1933 Act. The
certificates for the Common Shares shall be registered in the name of the Buyer
or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of Preferred Shares. The Company warrants that
no instruction other than (x) such instructions referred to in this Section 5,
(y) stop transfer instructions to give effect to Section 4(a) hereof prior to
registration of the resale of the Common Shares under the 1933 Act and (z) the
instructions required by Section 3(n) of the Registration Rights Agreement will
be given by the Company to the Transfer Agent and that the Common Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section 5(a) shall
limit in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of
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the Shares. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory in form, scope and substance to the Company that
registration of a resale by the Buyer of any of the Shares in accordance with
clause (1)(B) of Section 4(a) of this Agreement is not required under the 1933
Act, the Company shall permit the transfer of such Shares and, in the case of
the Common Shares, promptly, but in no event later than three days after receipt
of such opinion, instruct the Company's transfer agent to issue upon transfer
one or more share certificates in such name and in such denominations as
specified by the Buyer. Nothing in this Section 5(a) shall limit the
obligations of the Company under Section 3(n) of the Registration Rights
Agreement.
(B) CONVERSION PROCEDURE. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer or any subsequent
holder of the Preferred Shares shall complete, sign and furnish to the Transfer
Agent a Notice of Conversion in the form attached hereto as ANNEX V, which shall
be deemed to satisfy all requirements of the Certificate of Designations.
6. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Shares
(the "Closing Date") shall be 12:00 noon, New York City time, on the date which
is one Business Day after the date on which the Buyer has deposited the purchase
price for the Preferred Shares with the Escrow Agent in accordance with Section
1(c) hereof, or such other mutually agreed to time. The closing shall occur on
the Closing Date at the offices of the Escrow Agent.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares to the Buyer pursuant to this Agreement is conditioned upon the
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Company in its sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Preferred
Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
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<PAGE>
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares on the Closing Date is conditioned upon the satisfaction of the
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the certificates
for the Preferred Shares in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with the
Secretary of State of the State of Delaware of the Certificate of Designations;
(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Restated Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(3) such other matters as reasonably requested by the Buyer; and
(e) Receipt by the Buyer on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX VI attached hereto.
9. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York.
(b) This Agreement may be executed in counterparts and by the parties
hereto on separate counterparts, all of which together shall constitute one and
the same instrument. A facsimile transmission of this Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of
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<PAGE>
the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(e) This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement.
(f) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective five days after being placed in the mail, if
mailed, or upon receipt, if delivered personally or by courier, in the case of
the Company addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line
facsimile transmission number (617) 621-0307) or, in the case of the Buyer, at
its address shown on the signature page of this Agreement, with a copy to
Genesee International, Inc., 10500 N.E. 8th Street, Suite 1920, Bellevue,
Washington 98004-4332 (telephone line facsimile transmission number 206-462-
4645) or such other address as a party shall have provided by notice to the
other party in accordance with this provision. The Buyer hereby designates as
its address for any notice required or permitted to be given to the Buyer
pursuant to the Certificate of Designations the address shown on the signature
page of this agreement, with a copy to: GFL Advantage Fund Limited, c/o Genesee
International, Inc., 10500 N.E. 8th Street, Suite 1920, Bellevue, Washington
98004-4332 (facsimile number 206-462-4645), until the Buyer shall designate
another address for such purpose.
(h) Prior to the Closing Date, the Buyer shall have the right to
assign its rights and obligations under this Agreement with respect to the
purchase of all or any portion of the Preferred Shares, provided any such
assignee, by written instrument duly executed by such assignee, assumes all
obligations of the Buyer hereunder with respect to the purchase of the portion
of the Preferred Shares so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement, whereupon
the Buyer shall be relieved of any further obligations, responsibilities and
liabilities with respect to the purchase of all or the portion of the Preferred
Shares the obligation for the purchase of which has been so assigned. In the
case of any such assignment, the Company shall agree in writing with such
assignee to make available to such assignee the benefits of the Registration
Rights Agreement with respect to the Common Shares issuable on conversion of the
Preferred Shares with respect to which the purchase under this Agreement has
been so assigned. Any transfer of the Preferred Shares by the Buyer after the
Closing Date shall be made in accordance with Section 4(a).
(i) The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred
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<PAGE>
Shares and shall remain in full force and effect regardless of any investigation
made by or on behalf of them or any person controlling or advising any of them.
(j) This Agreement and its Annexes set forth the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral, with
respect thereto.
(k) The Buyer shall have the right to terminate this Agreement by
giving notice to the Company at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before April 21, 1997, other than solely by reason of a breach of this Agreement
by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES: 3,000
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $3,000,000.00
GFL ADVANTAGE FUND LIMITED
SIGNATURE: /s/ A.P. de Groot
----------------------------------
Name: A.P. de Groot
Title: President
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
DATAWARE TECHNOLOGIES, INC.
By: /s/ Kurt Mueller
-----------------------------------------
Kurt Mueller
Chairman of the Board and
Chief Executive Officer
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 10, 1997 (this
"Agreement"), is made by and between DATAWARE TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the Subscription Agreement, dated as of
April 10, 1997, between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Initial
Investor an aggregate of 3,000 shares (the "Preferred Shares") of preferred
stock of the Company as provided in the Subscription Agreement, which shares of
Preferred Stock are convertible into shares (the "Conversion Shares") of Common
Stock, $.01 par value (the "Common Stock"), of the Company; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Certificate of Designations" means the Certificate of Designations of
Series B Convertible Preferred Stock as filed by the Company with the Secretary
of State of the State of Delaware.
"Computation Date" has the meaning provided in the Certificate of
Designations.
"Conversion Percentage" has the meaning provided in the Certificate of
Designations.
"Investor" means the Initial Investor and any transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness
<PAGE>
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
"Registrable Securities" means the Conversion Shares and any shares of
Common Stock issued by the Company to any Investor as a dividend on the
Preferred Shares.
"Registration Period" means the period from the Closing Date to the
earlier of (i) the date which is two years after the Closing Date and (ii) the
date on which the Investors no longer own any Registrable Securities; provided,
--------
however, that if on the date specified in the preceding clause (i) the Investors
- -------
would not be permitted under the Securities Act to sell all Registrable
Securities beneficially owned by the Investors without restriction on the manner
of sale or the amount of securities sold and without the requirement for the
giving of any notice to, or the making of any filing with, the SEC, then the
period specified in such clause (i) shall be extended to the earlier of the date
on which the Investors are so permitted or the date which is three years after
the Closing Date.
"Registration Statement" means a registration statement of the Company
under the Securities Act, including any amendment thereto.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms defined in the introductory paragraph or the
recitals to this Agreement shall have the respective meanings therein provided.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company shall prepare, and on or
prior to the date which is 30 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3 covering at least 1,335,256 shares of Common
Stock as Registrable Securities, and which Registration Statement shall state
that, in accordance with Rule 416 under the Securities Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Shares to prevent
dilution resulting from stock splits, stock dividends or similar transactions or
by reason of changes in the conversion price of the Preferred Shares in
accordance with the terms thereof. If at any time the number of shares of
Common Stock included in the Registration Statement required to be filed as
provided in the first sentence of this Section 2(a) shall be insufficient to
cover the number of shares of Common Stock issuable on conversion in full of the
unconverted Preferred Shares, then promptly, but in no event later than 20 days
after such insufficiency shall occur, the Company shall file with the SEC an
additional Registration Statement on Form S-3 (which shall not constitute a
post-effective amendment to the Registration Statement filed pursuant to the
first sentence of this Section 2(a)) covering such number of shares of Common
Stock as shall be sufficient to permit such conversion. For all purposes of
this Agreement such additional Registration Statement shall be deemed to be the
Registration Statement required to
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<PAGE>
be filed by the Company pursuant to Section 2(a) of this Agreement, and the
Company and the Investors shall have the same rights and obligations with
respect to such additional Registration Statement as they shall have with
respect to the initial Registration Statement required to be filed by the
Company pursuant to this Section 2(a).
(B) CERTAIN OFFERINGS. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Company shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering. The Investors who hold the
Registrable Securities to be included in such underwriting shall pay all
underwriting discounts and commissions and other fees and expenses of such
investment banker or bankers and manager or managers so selected in accordance
with this Section 2(b) (other than fees and expenses relating to registration of
Registrable Securities under federal or state securities laws, which are payable
by the Company pursuant to Section 5 hereof) with respect to their Registrable
Securities and the fees and expenses of such legal counsel so selected by the
Investors.
(C) ADJUSTMENTS OF CONVERSION TERMS. If (1) the Company fails to file
the Registration Statement with the SEC on or prior to the date which is 90 days
after the Closing Date, (2) the Registration Statement covering the Registrable
Securities which is required to be filed by the Company pursuant to the first
sentence of Section 2(a) hereof is not effective within 120 days after the
Closing Date, (3) the Company fails to submit a request for acceleration of the
effective date of the Registration Statement in accordance with Section 3(a),
(4) the Registration Statement required to be filed by the Company pursuant to
Section 2(a) shall cease to be available for use by any holder of shares of
Series B Convertible Preferred Stock which is named therein as a selling
stockholder for any reason (including, without limitation, by reason of an SEC
stop order, a material misstatement or omission in such Registration Statement
or the information contained in such Registration Statement having become
outdated) or (5) a holder of shares of Series B Convertible Preferred Stock
having become unable to convert any shares of Series B Convertible Preferred
Stock in accordance with Section 10(a) of the Certificate of Designations (other
than by reason of the 4.9% limitation set forth therein), then on each
Computation Date the Conversion Percentage shall be adjusted as provided in the
Certificate of Designations.
(D) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within ten (10) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock
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<PAGE>
which may be included in the Registration Statement because, in such
underwriter(s)' judgment, such limitation is necessary to effect an orderly
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
--------
however, that the Company shall not exclude any Registrable Securities unless
- -------
the Company has first excluded all outstanding securities the holders of which
are not entitled by right to inclusion of securities in such Registration
Statement; and provided further, however, that, after giving effect to the
-------- ------- -------
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement, based on the number of securities for
which registration is requested except to the extent such pro rata exclusion of
such other securities is prohibited under any written agreement entered into by
the Company with the holder of such other securities prior to the date of this
Agreement, in which case such other securities shall be excluded, if at all, in
accordance with the terms of such agreement. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. The obligations of the Company
under this Section 2(d) may be waived by Investors holding a majority in
interest of the Registrable Securities and shall expire after the Company has
afforded the opportunity for the Investors to exercise registration rights under
this Section 2(d) for two registrations; provided, however, that any Investor
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who shall have had any Registrable Securities excluded from any Registration
Statement in accordance with this Section 2(d) shall be entitled to include in
an additional Registration Statement filed by the Company the Registrable
Securities so excluded. Notwithstanding any other provision of this Agreement,
if the Registration Statement required to be filed pursuant to Section 2(a) of
this Agreement shall have been ordered effective by the SEC and the Company
shall have maintained the effectiveness of such Registration Statement as
required by this Agreement and if the Company shall otherwise have complied in
all material respects with its obligations under this Agreement, then the
Company shall not be obligated to register any Registrable Securities on such
Registration Statement referred to in this Section 2(d).
(E) ELIGIBILITY FOR FORM S-3. The Company meets the requirements for
the use of Form S-3 for registration of the Registrable Securities for resale by
the Investors. The Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to become eligible for the use of
Form S-3 and so as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 30 days
after the Closing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times during the
Registration Period; submit to the SEC, within three business days after the
Company learns that
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no review of the Registration Statement will be made by the staff of the SEC or
that the staff of the SEC has no further comments on the Registration Statement,
as the case may be, a request for acceleration of effectiveness of the
Registration Statement to a time and date not later than 48 hours after the
submission of such request; and the Company represents and warrants to, and
covenants and agrees with, the Investors that the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all time during which it is required to be effective
hereunder (and each such amendment and supplement at the time it is filed with
the SEC and at all time during which it is available for use in connection with
the offer and sale of the Registrable Securities) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
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in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
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jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its charter or by-
laws, which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders;
(e) in the event that the Registrable Securities are being offered in
an underwritten offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest
of the Registrable Securities being sold, furnish on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
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<PAGE>
(k) make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney, accountant or other agent retained by any such Investor or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
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each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at the Company's own expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor, at such Investor's own expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(l) use its best efforts (i) to cause all the Registrable Securities
covered by the Registration Statement to be listed on the Nasdaq National Market
("Nasdaq") or such other principal securities market on which securities of the
same class or series issued by the Company are then listed or traded or (ii) if
securities of the same class or series as the Registrable Securities are not
then listed on Nasdaq or any such other securities market, to cause all of the
Registrable Securities covered by the Registration Statement to be listed on the
New York Stock Exchange or the American Stock Exchange;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
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(n) cooperate with the Investors who hold Registrable Securities
being offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as EXHIBIT 1
and an opinion of such counsel, if required by the Company's transfer agent, in
the form attached hereto as EXHIBIT 2;
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations in Rule
10b-6 under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
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<PAGE>
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company
and the Investors, shall be borne by the Company, provided, however, that the
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Investors shall bear the fees and out-of-pocket expenses of the one legal
counsel selected by the Investors pursuant to Section 2(b) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in
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the Securities Act) for the Investors, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each person, if
any, who controls any such underwriter within the meaning of the Securities Act
or the Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) with respect to any preliminary prospectus shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
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stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
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that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
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liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount by which the net proceeds to such Investor from the sale of
Registrable Securities pursuant to such Registration Statement exceeds the cost
of such Registrable Securities to such Investor. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
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Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a
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reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action. The indemnification required
by this Section 6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss, damage
or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
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circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or all or any portion of the Preferred Shares) of
Registrable Securities only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
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assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In connection with any such transfer the Company shall, at its sole cost and
expense, promptly after such assignment take such actions as shall be reasonably
acceptable to the Initial Investor and such transferee to assure that the
Registration Statement and related prospectus are available for use by such
transferee for sales of the Registrable Securities in respect of which the
rights to registration have been so assigned.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, at Dataware Technologies, Inc.,
222 Third Street, Suite 3300, Cambridge, Massachusetts 02142, Attention: Chief
Financial Officer, telephone line facsimile transmission No. (617) 621-0307,
(ii) if to the Initial Investor, c/o Genesee International, Inc., 10500 N.E. 8th
Street, Suite 1920, Bellevue, Washington 98004-4332, telephone line facsimile
transmission No. (206) 462-4645 and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by certified mail, four days after deposit with the
United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall
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<PAGE>
be deemed inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to
perform its obligations under this Agreement, including, without limitation, the
Company's obligations under Section 3(n), or any delay in such performance could
result in damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct and consequential damages caused by
any such failure or delay.
(j) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
DATAWARE TECHNOLOGIES, INC.
By /s/ Kurt Mueller
---------------------------------------
Name: Kurt Mueller
Title: Chairman of the Board and
Chief Executive Officer
GFL ADVANTAGE FUND LIMITED
By /s/ A.P. deGroot
---------------------------------------
Name: A.P. deGroot
Title: President
-15-
<PAGE>
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
40 Wall Street
New York, New York 10005
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you [(1) to transfer or re-register the certificates for the shares of Common
Stock, $.01 par value (the "Common Stock"), of Dataware Technologies, Inc., a
Delaware corporation (the "Company"), represented by certificate numbers _______
and _______ for an aggregate of _______ shares (the "Outstanding Shares") of
Common Stock presently registered in the name of [Name of Investors] upon
surrender of such certificate(s) to you, notwithstanding the legend appearing on
such certificates, and (2)]/1/ to issue shares (the "Conversion Shares") of
Common Stock to or upon the order of the holder from time to time on conversion
of the shares (the "Preferred Shares") of Series B Convertible Preferred Stock,
$.01 par value, of the Company, issued by the Company upon receipt by you of a
Notice of Conversion from such holder in the form enclosed herewith. [The
transfer or re-registration of the certificates for the Outstanding Shares by
you should be made at such time as you are requested to do so by the record
holder of the Outstanding Shares. The certificate issued upon such transfer or
re-registration should be registered in such name as requested by the holder of
record of the certificate surrendered to you and should not bear any legend
which would restrict the transfer of the shares represented thereby. In
addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares.]/2/ Certificates for the Conversion Shares
should not bear any restrictive legend and should not be subject to any stop-
transfer restriction.
Contemporaneously with the delivery of this letter, the Company is
delivering to you an opinion of Palmer & Dodge LLP as to registration of [the
Outstanding Shares and]/*/ the Conversion Shares under the Securities Act of
1933, as amended.
___________________
/1/ Omit if no conversions of Preferred Stock have occurred before SEC
registration is declared effective.
<PAGE>
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
DATAWARE TECHNOLOGIES, INC.
By:
___________________________________________
Name:
Title:
Enclosures
cc: [Name of Investor]
<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
April __, 1997
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
40 Wall Street
New York, New York 10005
DATAWARE TECHNOLOGIES, INC.
SHARES OF COMMON STOCK
----------------------------
Ladies and Gentlemen:
We are counsel to Dataware Technologies, Inc., a Delaware corporation
(the "Company"), and we understand that [Name of Investor] (the "Holder") has
purchased from the Company an aggregate of 3,000 shares (the "Preferred Shares")
of the Company's Series B Convertible Preferred Stock, $.01 par value (the
"Preferred Stock"). The Preferred Shares were purchased by the Holder pursuant
to a Subscription Agreement, dated as of April __, 1997, between the Holder and
the Company (the "Subscription Agreement"). Pursuant to a Registration Rights
Agreement, dated as of April __, 1997, between the Company and the Holder (the
"Registration Rights Agreement") entered into in connection with the purchase by
the Holder of the Preferred Shares, the Company agreed with the Holder, among
other things, to register for resale the shares of Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares") under the
Securities Act of 1933, as amended (the "Securities Act"), upon the terms
provided in the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, on __________, the Company filed a Registration Statement on
Form S-3 (File No. 333-__________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Conversion
Shares, which names the Holder as a selling stockholder thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Conversion
Shares have been registered for resale under the Securities Act.
<PAGE>
This opinion may be relied upon by the Holder as if addressed to the
Holder. [Other appropriate language to be included.]
Very truly yours,
cc: [Name of Investor]
