<PAGE>
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):
AUGUST 31, 2000
DATAWARE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21860 06-1232140
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
ONE CANAL PARK, CAMBRIDGE, MASSACHUSETTS 02141
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(617) 621-0820
<PAGE>
ITEM 5. OTHER EVENTS.
------------
On August 31, 2000, Dataware Technologies, Inc. ("Dataware," the "Company"
or "we") completed the registered offer and sale of 350 shares of 8% Series C
Convertible Preferred Stock, $0.01 par value per share (the "Preferred Shares"),
and warrants (the "Warrants") to purchase 362,500 shares of Common Stock, $0.01
par value per share ("Common Stock"), for total proceeds of $3,220,000 (the
"Financing"). A summary of the terms of the Preferred Shares and Warrants, and
of the Financing, follows. This summary is qualified in its entirety by
reference to the specific terms of the agreements and other documents under
which the Financing is taking place, particularly the Certificate of Designation
setting forth the terms of the Preferred Shares, the Convertible Preferred Stock
Purchase Agreement, and the form of Warrant (collectively, the "Financing
Documents") that are filed as exhibits to this Current Report on Form 8-K. The
Financing Documents contain the complete details and additional information
relating to these and other topics.
The Preferred Shares and Warrants, as well as the shares of Common Stock
issuable upon conversion or exercise, respectively, of the Preferred Shares and
Warrants (the "Underlying Shares") are covered by the Company's Registration
Statement on Form S-3 (the "Registration Statement") (File No. 333-37248), which
the Securities and Exchange Commission ("SEC") previously declared effective. In
order to furnish an exhibit for incorporation by reference into the Registration
Statement, the Company hereby files as Exhibit 5.2 to the Registration Statement
an opinion of Palmer & Dodge LLP, counsel to the Company, regarding the validity
of the Shares.
INFORMATION ABOUT THE COMPANY / FORWARD LOOKING STATEMENTS
----------------------------------------------------------
Statements concerning the Company's anticipated performance, including
future revenues, costs and profits, or about the development of the Company's
products or markets, made in the Company's press releases, SEC filings, and
other oral and written public statements may be deemed forward-looking
statements. Such statements are based on the current assumptions of the
Company's management, which are believed to be reasonable. However, they are
subject to significant risks and uncertainties, including but not limited to the
important factors set forth below and those described under "Gross Profit,"
"Liquidity and Capital Resources" and "Certain Factors That May Affect Future
Results" in the Company's Quarterly Report on Form 10-Q, as amended, for the
quarter ended June 30, 2000, and in Exhibit 99.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, that could cause actual
results to differ materially from those described in the forward-looking
statements.
WE MAY BE UNABLE TO MAINTAIN OUR LISTING ON THE NASDAQ NATIONAL MARKET, WHICH
MAY REDUCE THE LIQUIDITY OF OUR TRADING MARKET.
At June 30, 2000, we were not in compliance with the criteria for
maintenance of our Nasdaq National Market listing in that our tangible net worth
is significantly less than the $4 million required. We have been asked by Nasdaq
to provide them with our plans and timetable for achieving compliance. We expect
that the sale of the Preferred Shares and Warrants will improve our tangible net
worth, but we also must be able to raise additional equity financing and/or
improve operating results sufficiently to ensure we continue to meet the
requirements. If
<PAGE>
we cannot meet the National Market criteria as required by Nasdaq, our shares
will no longer be listed on the Nasdaq National Market. A listing on the Nasdaq
Small Cap Market provides less visibility and a less active trading market than
the National Market. That might result in lower market prices for our Common
Stock and reduce both our ability to raise necessary financing and the ability
of investors to sell when and on terms they wish.
OUR OPERATING RESULTS HAVE BEEN, AND MAY CONTINUE TO BE, HAMPERED BY THE
LIQUIDITY CONCERNS OF SOME OF OUR CUSTOMERS, PARTICULARLY INTERNET-FOCUSED
BUSINESSES. THIS WILL RESULT IN OUR HAVING LESS CASH TO INVEST IN THE GROWTH OF
OUR BUSINESS AND OUR NEAR-TERM REVENUES MAY NOT BE AS HIGH AS WE HAD FORECAST.
We have not been able to increase our revenues as quickly as we had
anticipated earlier this year. In particular, we have not been able to develop
as much business as we had hoped, or to collect significant receivables, from
certain internet-focused companies (so-called "dot.coms") due in part to their
liquidity troubles caused by the decline in their stock market values.
Accordingly, we will not have as much cash to invest in the growth of our
business as we had hoped. This means that our revenues may not grow as quickly
as we had predicted.
TERMS OF PREFERRED SHARES
-------------------------
Each Preferred Share has an initial "Stated Value" for dividend and
conversion purposes of $10,000. Holders of Preferred Shares are entitled to
receive dividends at the rate of 8% of the Stated Value per annum. The Stated
Value per share will increase to the extent dividends accrue rather than being
paid in cash. The Preferred Shares are convertible into Common Shares at a rate
that fluctuates with, and at a discount to, the market price of the Common
Stock. Following a merger in which control of Dataware changes hands or a sale
of our assets, the holders of Preferred Shares would be entitled to receive 150%
of the Common Shares they would otherwise receive when they convert the
Preferred Shares.
The holders of Preferred Shares are entitled to receive cumulative
dividends at the rate of 8% of the then-current Stated Value per annum.
Dividends are payable on each date on which a holder presents Preferred Shares
for conversion into Common Shares. We have the option each time to pay dividends
in cash or to accrue them. If we accrue dividends, they increase the Stated
Value of the unconverted Preferred Shares and are thus subject to compounding
until paid. The Preferred Shares rank senior with respect to the payment of
dividends to our Common Shares and to any other equity or equity equivalent
securities of Dataware other than those securities that are currently
outstanding and specifically provide that they are senior to the Series C
Preferred Stock with respect to dividends.
The holders of Preferred Shares have the option to convert Preferred Shares
into Common Shares at any time. The Preferred Shares are convertible into the
number of Common Shares equal to the aggregate Stated Value (as this value may
have been increased by accruing and compounding of dividends) of the number of
Preferred Shares being converted, divided by the Conversion Price as of that
time. The Conversion Price floats at an amount that equals 95% of the average
of the 3 lowest closing bid prices of our Common Stock in the 30 trading day
period before the date of conversion. The Conversion Price is subject to a cap
(the "Fixed Conversion Price") equal to 120% of the average of the 5 most recent
closing bid prices before
3
<PAGE>
the date of the Closing of the Financing. The Conversion Price or the Fixed
Conversion Price (and therefore the number of Common Shares issuable upon
conversion of the Preferred Shares) may be adjusted in the event that we take
certain corporate actions, such as paying a stock dividend or making other
distributions on shares of our capital stock (other than the Preferred Shares)
payable in Common Shares; subdividing, splitting or combining the outstanding
Common Shares; issuing shares of capital stock upon reclassification or exchange
of our Common Shares; issuing shares, or warrants, rights or options to holders
of Common Shares (but not holders of Preferred Shares) entitling them to
subscribe or convert for Common Shares at a price below the Conversion Price in
effect at any time; or distributing to the holders of Common Shares evidence of
indebtedness or assets or rights or warrants to subscribe for any security of
Dataware.
A holder of Preferred Shares and Warrants may not utilize its conversion or
exercise rights to the extent that after such conversion or exercise, such
holder, together with its affiliates, would beneficially own over 4.999% and
9.999% of the outstanding Common Shares. This restriction may be waived by each
holder on not less than 61 days' notice to us. Since the number of Common
Shares issuable upon conversion of the Preferred Shares and exercise of the
Warrants will change based upon fluctuations of the market price of our Common
Shares before a conversion or exercise, the actual number of Common Shares that
will be issued under the Preferred Shares and Warrants, and consequently the
number of Common Shares that will be beneficially owned by such holder cannot be
determined at this time. This Prospectus Supplement covers more than the number
of Common Shares that are beneficially owned by the initial purchaser upon
Closing, giving effect to these provisions. However, the 4.999% and 9.999%
limitation would not prevent a holder from acquiring and selling in excess of
4.999% and 9.999% of our Common Shares through a series of conversions and sales
under Preferred Shares and exercise of Warrants.
In addition, under Nasdaq rules, we cannot issue shares at below-market
prices in an amount equal to 20% or more of the number of currently outstanding
shares of our Common Stock. Under the Financing Documents, if a conversion of
all Preferred Shares would cause us to exceed 19.999% of the Common Shares
outstanding immediately before the Closing of the Financing (2,142,395 shares),
we may seek shareholder approval to exceed the limit. If we do not obtain
shareholder approval, we will be required to delist from Nasdaq and have our
Common Shares quoted on the OTC Bulletin Board, which does not have a limit on
the number of shares issuable at below-market prices.
We must convert all outstanding Preferred Shares into Common Shares on the
third anniversary of the Closing of the Financing, unless this conversion is not
permitted at that time. The automatic conversion of Preferred Shares would be
delayed beyond that date for certain reasons, including that the issuance of the
Common Shares would exceed the Nasdaq share issuance limits or for so long as we
are in default under any of the Financing Documents.
The Preferred Shares contain no provisions for redemption, whether in our
or the holders' control.
In liquidation, the holders of Preferred Shares would be entitled to
receive the then-current Stated Value of the outstanding Preferred Shares before
the distribution of any cash or
4
<PAGE>
assets to the holders of shares of Common Stock or any other equity or equity
equivalent securities of Dataware.
In a merger in which control of Dataware changes hands, or upon the sale of
more than one-half of our assets, the holders of Preferred Shares would be
entitled to convert all outstanding shares of Series C Preferred Stock into the
securities or other property to be received by the holders of Common Stock at
the rate of 150% of the amount they would have received upon conversion in the
absence of such merger or sale.
Subject to certain protective provisions provided in the Certificate of
Designation establishing the Preferred Shares, the Preferred Shares do not carry
voting rights. As a condition of our agreeing to amend our Shareholder Rights
Plan as described below, the holders of Preferred Shares have agreed to vote
their Preferred Shares or Common Shares, as the case may be, as requested by the
Board of Directors on all matters at any time that they own Preferred Shares or
own more than 5% of the outstanding Common Shares.
We have amended our Shareholder Rights Plan to exclude each holder of
Preferred Shares from the definition of an "Acquiring Person" whose share
acquisitions trigger the protective provisions of that Plan, as long as the
holder of Preferred Shares remains bound to vote as described above. The
Amendment is filed as Exhibit 4.2 to this Form 8-K.
We may not consummate new financings without the approval of the holders of
Preferred Shares for 90 trading days following the Closing of the Financing.
Furthermore, we are required to give the holders of Preferred Shares first
refusal rights on future financings for 180 trading days following the Closing
of the Financing.
TERMS OF WARRANTS
-----------------
We issued to the purchasers of the Preferred Shares Warrants to purchase up
to 362,500 Common Shares. Each Warrant has a term of 5 years and an exercise
price of 120% of the average of the 5 most recent closing bid prices of our
Common Stock before the date of the Closing of the Financing. Holders of the
Warrants may exercise the Warrants only on a "cashless" basis by surrendering a
portion of the Warrants in exchange for Common Shares issuable upon exercise of
the unsurrendered portion. With respect to warrants to purchase 262,500 Common
Shares, in the event of a merger in which control of Dataware changes hands, or
a sale of more than one-half of our assets, the holders of Warrants would be
entitled to exercise the Warrants for the securities or other property to be
received by the holders of Common Shares at the rate of 150% of the amount they
would have received upon exercise in the absence of such merger or sale.
Additionally, the exercise price and the number of Common Shares issuable upon
exercise of the Warrants may be adjusted in the event that we undertake
corporate transactions such as the ones described above under "Terms of
Preferred Shares - Conversion."
USE OF PROCEEDS
---------------
Dataware received aggregate gross proceeds from the sale of Preferred
Shares and Warrants in the Financing of $3,220,000, and we expect to incur
approximately $80,000 in
5
<PAGE>
offering expenses. We will use the net proceeds for working capital and general
corporate purposes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
------------------------------------------------------------------
(c) Exhibits:
--------
Exhibit
No. Description
------- -----------
3.1 Certificate of Designation dated August 31, 2000, amending the
Company's Restated Certificate of Incorporation.
4.1 Convertible Preferred Stock Purchase Agreement between the
Company and the Purchasers named therein, dated as of August 31,
2000.
4.2 Third Amendment to Rights Agreement between the Company and
American Stock Transfer & Trust Company, as Rights Agent, dated
as of August 31, 2000.
4.3 Form of Common Stock Purchase Warrant, dated as of August 31,
2000.
5.2 Opinion of Palmer & Dodge LLP.
23.3 Consent of Palmer & Dodge LLP (included as part of their opinion
filed herewith).
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 31, 2000 DATAWARE TECHNOLOGIES, INC.
By: /s/ Michael Gonnerman
---------------------------
Michael Gonnerman
Vice President, Chief Financial
Officer and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
-------- -----------
3.1 Certificate of Designation dated August 31, 2000, amending the
Company's Restated Certificate of Incorporation.
4.1 Convertible Preferred Stock Purchase Agreement between the Company
and the Purchasers named therein, dated as of August 31, 2000.
4.2 Third Amendment to Rights Agreement between the Company and American
Stock Transfer & Trust Company, as Rights Agent, dated as of August
31, 2000.
4.3 Form of Common Stock Purchase Warrant, dated as of August 31, 2000.
5.2 Opinion of Palmer & Dodge LLP.
23.3 Consent of Palmer & Dodge LLP (included as part of their opinion filed
herewith).
