<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DATAWARE TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DATAWARE TECHNOLOGIES, INC.
One Canal Park, Cambridge, Massachusetts 02141
(617) 621-0820
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2000 Annual Meeting of Stockholders of Dataware Technologies, Inc. will
be held at the Wyndham Hotel, The Washington Room, 89 Broad Street, Boston,
Massachusetts, at 10:00 a.m. on Thursday, April 13, 2000, for the following
purposes:
1. To elect one director to hold office for a term of three years and
until his successor is elected and has qualified.
2. To approve an amendment to Dataware's Restated Certificate of
Incorporation to increase the number of authorized shares of common
stock from 14,000,000 to 30,000,000 shares.
3. To approve an amendment to Dataware's Equity Incentive Plan to increase
the number of shares of common stock available for issuance by
2,000,000 shares.
4. To approve an amendment to Dataware's 1993 Employee Stock Purchase Plan
to increase the number of shares of common stock available for issuance
by 500,000 shares.
5. To transact other business that may further or relate to the foregoing
or as may otherwise properly come before the meeting or any adjournment
of the meeting.
Only stockholders of record at the close of business on February 18, 2000,
will be entitled to vote at the annual meeting or at any adjournment. A list of
stockholders of record will be open for your examination for any purpose germane
to the meeting for ten days before the meeting during ordinary business hours at
the offices of Palmer & Dodge LLP, counsel to Dataware, at One Beacon Street,
Boston, Massachusetts 02108.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By order of the Board of Directors,
STEPHEN H. BEACH, Secretary
Dated: March 13, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION ABOUT VOTING 1
PROPOSAL 1. ELECTION OF DIRECTORS 2
THE BOARD OF DIRECTORS AND ITS COMMITTEES 3
DIRECTOR COMPENSATION 3
PROPOSAL 2: AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION 4
PROPOSAL 3: AMENDMENT TO THE EQUITY INCENTIVE PLAN 5
PROPOSAL 4: AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN 8
EXECUTIVE COMPENSATION 9
SUMMARY COMPENSATION TABLE 9
STOCK OPTION GRANTS IN LAST FISCAL YEAR 10
YEAR-END STOCK OPTION VALUES 11
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION 12
STOCK PERFORMANCE GRAPH 14
SHARE OWNERSHIP 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 16
AUDITORS 16
STOCKHOLDER PROPOSALS 16
OTHER MATTERS 16
</TABLE>
<PAGE>
DATAWARE TECHNOLOGIES, INC.
Proxy Statement
----------------------------
Our Board of Directors is soliciting your proxy for use at the 2000
Annual Meeting of Stockholders to be held on Thursday, April 13, 2000 and at any
adjournments of the meeting. This proxy statement and accompanying proxy card
are first being sent or given to security holders on or about March 13, 2000.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. You may vote your shares of Dataware common stock at
the meeting if you were a stockholder of record at the close of business on
February 18, 2000. On that date, we had 10,309,579 shares of common stock
outstanding. You are entitled to one vote for each share of common stock that
you held on the record date.
HOW TO VOTE YOUR SHARES. You may vote your shares either by proxy or
by attending the annual meeting and voting in person. If you choose to vote by
proxy, please complete, date, sign and return the proxy card in the enclosed
postage-prepaid envelope. Alternatively, you may vote by telephone as described
on the proxy card. The proxies named in the proxy card will vote your shares as
you have instructed. If you sign the proxy card but do not make specific
choices, they will vote your shares for each agenda item as recommended by the
Board. Even if you plan to attend the meeting, please complete and mail your
proxy card to ensure that your shares are represented at the meeting.
PROPOSALS TO BE CONSIDERED AT THE ANNUAL MEETING. The principal
business expected to be transacted at the meeting, as more fully described
below, will be the election of one director, a vote to amend our Restated
Certificate of Incorporation to increase the number of shares of common stock we
are authorized to issue, and votes to amend our Equity Incentive Plan and
Employee Stock Purchase Plan to increase the number of shares of common stock we
may issue under each plan.
QUORUM. A quorum of stockholders is required in order to transact
business at the meeting. A majority in interest of the outstanding shares of
common stock, represented at the meeting in person or by proxy, constitutes a
quorum for the transaction of business.
NUMBER OF VOTES REQUIRED. The number of votes required to approve each
of the four proposals that are scheduled to be presented at the meeting is as
follows:
<TABLE>
<CAPTION>
PROPOSAL REQUIRED VOTE
-------- -------------
<S> <C>
. Election of directors. Plurality of the affirmative votes cast for or against
a nominee.
. Amendments to our charter to increase the authorized Affirmative vote of the holders of a majority of the
number of shares of common stock. outstanding shares of common stock.
. Amendments to our Equity Incentive Plan and Employee Affirmative vote of the holders of a majority of the
Stock Purchase Plan to increase the number of shares shares of common stock present or represented at the
available for issuance under the plans. meeting and entitled to vote.
</TABLE>
<PAGE>
ABSTENTIONS AND BROKER NON-VOTES. Abstentions and broker non-votes will be
considered present at the meeting for the purpose of constituting a quorum but
will not be counted as votes cast in the election of directors. A "broker non-
vote" occurs when a registered broker holding a customer's shares in the name of
the broker has not received voting instructions from the customer on the matter,
is barred by law or applicable rules from exercising its discretionary voting
authority in the particular matter, and so indicates on the proxy. In voting on
the proposal to amend the certificate of incorporation, abstentions and broker
non-votes will count as votes against the proposal. In voting on the proposals
to amend the Equity Plan and Purchase Plan, abstentions will count as votes
against the amendments and broker non-votes will not be counted.
HOW YOU MAY REVOKE YOUR PROXY. You may revoke the authority granted by your
executed proxy at any time before we exercise it by filing with the Secretary of
Dataware a written revocation or a duly executed proxy bearing a later date or
by voting in person at the meeting. If your shares are held in a brokerage or
bank account, you must make arrangements with your broker or bank to vote your
shares in person or to revoke your proxy.
EXPENSES OF SOLICITATION. We have retained Georgeson & Company to assist
in the solicitation of proxies for a fee of $7,500, plus expenses. Officers,
directors and employees of Dataware may solicit proxies from stockholders in
person or by other means of communication, including telephone, facsimile and e-
mail, without additional remuneration.
PROPOSAL 1. ELECTION OF DIRECTORS
The number of directors on the Board is currently fixed at five, divided
into three classes. At the meeting, one director will be elected to hold office
for three years and until his successor is elected and qualified. David C.
Mahoney, who is presently serving as a director, has been nominated for re-
election by the Board of Directors. Unless the enclosed proxy withholds
authority to vote for the nominee, the shares represented by the proxy will be
voted for the election of Mr. Mahoney. If Mr. Mahoney is unable to serve, which
is not expected, the shares represented by the enclosed proxy will be voted for
another candidate nominated by the Board of Directors. There currently is a
vacancy in the class of directors whose term expires in 2001, which may, under
our bylaws, be filled by the Board of Directors at any time until the 2001
annual meeting of stockholders.
The following table contains biographical information about the nominee for
director and current directors whose terms of office will continue after the
annual meeting.
<TABLE>
<CAPTION>
PRESENT
BOARD MEMBERSHIP, BUSINESS EXPERIENCE, TERM
NAME AND AGE AND OTHER DIRECTORSHIPS EXPIRES
- ------------ ----------------------- -------
<S> <C> <C>
David C. Mahoney* Mr. Mahoney has served as President and Chief Executive Officer since 2000
Age: 54 January 1999 and has been a director of Dataware since February 1999.
Before joining Dataware, he served as President and CEO of Sovereign Hill
Software, Inc., a supplier of advanced information retrieval software
products that we acquired on December 31, 1998. Mr. Mahoney was the
founder and, from 1983 to 1998, the Chairman and CEO of Banyan Systems
Incorporated, a provider of enterprise networking software and services
and Internet directory services. Mr. Mahoney is also a director of
Banyan Systems Incorporated and its subsidiary, Switchboard Incorporated,
Applix Incorporated and several smaller early stage software companies.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT
BOARD MEMBERSHIP, BUSINESS EXPERIENCE, TERM
NAME AND AGE AND OTHER DIRECTORSHIPS EXPIRES
- ------------ ----------------------- -------
<S> <C> <C>
Stephen H. Beach Mr. Beach has been a director and the Secretary of Dataware since its 2001
Age: 84 inception in 1988. Since 1985, Mr. Beach has practiced law in
Connecticut, specializing in, among other fields, computer, software and
software licensing law. Mr. Beach also served in several capacities for
Control Data Corporation from 1973 to 1985, most recently as Senior Vice
President and Secretary.
William R. Lonergan Mr. Lonergan has been a director of Dataware since 1988. From 1983 to 2002
Age: 75 1994, Mr. Lonergan was a general partner of Oxford Partners, a venture
capital firm, where he continues as a consultant. Mr. Lonergan is also a
director of Zitel Corporation.
Jeffrey O. Nyweide Mr. Nyweide has served as Vice Chairman of the Board of Directors and 2002
Age: 44 Senior Executive Vice President, Business Development since April 1997.
He was President and Chief Operating Officer of Dataware from 1993 until
1997. He was Vice President of Operations of Dataware from its inception
until 1989 and Executive Vice President of Dataware from 1989 to 1993.
Mr. Nyweide has also served as a member of the Board of Directors since
the inception of Dataware in 1988.
</TABLE>
- -------------
*Nominee for election as director
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The entire Board of Directors functions as a nominating committee,
considering nominations submitted to the Chairman of the Board. The Board of
Directors held seven meetings in 1999.
The Audit Committee, which consists of Messrs. Beach and Lonergan, is
responsible for providing the Board of Directors with an independent review of
our financial health and our financial controls and reporting. Its primary
functions are to recommend independent auditors to the Board of Directors,
review the results of the annual audit and the auditors' reports, and ensure the
adequacy of our financial controls and procedures. The Audit Committee held four
meetings in 1999.
The Compensation Committee, which consists of Messrs. Beach and Lonergan,
acts for the Board of Directors with respect to our compensation practices and
their implementation. It sets and implements the compensation of our officers
and administers the Equity Incentive Plan and the Employee Stock Purchase Plan.
The Compensation Committee held six meetings in 1999.
DIRECTOR COMPENSATION
Beginning in 2000, each newly elected director who is not an employee of
Dataware receives nonstatutory options to purchase 15,000 shares of common stock
under the Equity Incentive Plan, which become exercisable as to 7,500 shares on
each of the first two anniversaries of the director's election. Each nonemployee
director who is in office following the annual meeting of stockholders receives
an annual retainer in the form of nonstatutory options to purchase 7,500 shares
of common stock under the Equity Incentive Plan. (During 1999, nonemployee
directors in office received annual retainers of options to purchase 7,000
shares.) Any director who is newly elected between annual meetings receives
retainer options for 1,875 shares for each calendar
3
<PAGE>
quarter beginning after such election and before the next annual meeting.
Retainer options become exercisable in increments of 1,875 shares at the
beginning of each calendar quarter following the grant date, so long as the
director remains in office, and expire ten years from the grant date. The
exercise price of each option is the fair market value of the common stock on
the grant date. Non-employee directors also receive $1,250 for each meeting of
the Board of Directors that they attend, plus $500 for each committee meeting
that is held separately from a Board meeting, and are reimbursed for expenses
incurred in attending meetings. Officers of Dataware who are directors do not
receive additional compensation for their service as directors.
PROPOSAL 2: AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION
Our Board of Directors has approved an amendment to our restated certificate
of incorporation to increase the number of authorized shares of our common stock
from 14,000,000 to 30,000,000 shares, subject to stockholder approval. The Board
believes that increasing the number of authorized shares is essential to ensure
that we continue to have an adequate number of shares of common stock available
for future issuance. Currently, our charter authorizes us to issue 14,000,000
shares of common stock. As of February 18, 2000, there were 10,309,579 shares of
common stock outstanding, 2,805,205 shares reserved for issuance under our
Equity Incentive Plan, 46,112 shares reserved for issuance to former employees
of companies we have acquired in order to replace their prior stock options,
395,213 shares available for issuance under our employee stock purchase plan,
and 418,425 shares reserved for issuance upon exercise of options and warrants
issued to business partners in connection with services or technology provided
to us. In addition, we are asking the stockholders to approve increases of
2,000,000 shares for issuance under our Equity Incentive Plan and 500,000 shares
for issuance under our Employee Stock Purchase Plan. The Board recommends that
you consider and approve this proposed amendment to ensure that we continue to
have an adequate number of shares of common stock available for future use.
If the stockholders approve this increase, we would be able to issue stock for
any valid corporate purpose that our Board of Directors may deem advisable,
including stock splits and stock dividends, financings, funding employee benefit
plans and acquisitions. The availability of additional shares of common stock
for issuance will provide us with greater flexibility in taking any of these
actions without the delay or expense of obtaining stockholder approval, except
to the extent required by state law or Nasdaq requirements for the particular
transaction. We anticipate that we will need to raise additional capital during
the first half of 2000 to support the development of our business. We are
considering the options, and have made no decisions on the amount that would be
raised, on the type of securities that might be offered, or on any other terms
of any possible financing.
While our Board of Directors will authorize the issuance of additional common
stock based on its judgment as to our best interests and that of our
stockholders, future issuance of common stock could have a dilutive effect on
existing stockholders. Common stockholders are not now, and will not be,
entitled to preemptive rights to purchase shares of any authorized capital stock
if additional shares are issued later. In addition, the issuance of additional
shares of common stock, as well as the availability of preferred stock that the
Board may issue on such terms as it selects, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock.
If the amendment is approved by the stockholders, article FOURTH, subsection
(a) of our restated certificate of incorporation will be amended to read as
follows:
"FOURTH: The Corporation shall be authorized to issue Thirty-Eight Million
------
(38,000,000) shares of capital stock, which shall be divided into Thirty Million
(30,000,000) 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."
4
<PAGE>
The affirmative vote of holders of a majority of the shares of common stock
outstanding is required to approve the proposed amendment to our charter.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT TO OUR RESTATED CERTIFICATE
OF INCORPORATION IS IN THE BEST INTEREST OF DATAWARE AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT.
PROPOSAL 3: AMENDMENT TO THE EQUITY INCENTIVE PLAN
GENERAL
Our Equity Incentive Plan is an important element of Dataware's program to
align employee motivation with our stockholders' interests and to provide
appropriate equity compensation to employees and directors. The plan enables us
to offer competitive compensation to attract and retain key employees,
consultants and highly qualified directors, to provide an incentive for them to
achieve long-range performance goals, and to enable them to participate in our
long-term growth.
Stock options granted under the Equity Plan are a significant part of our
compensation package, as they are in the software industry generally. In 1999,
for example, we granted options to 100% of our employees. Competition for top-
notch software developers, sales personnel and other skilled employees has
become more intense as Internet and other high tech companies proliferate at a
rapid pace. Our Board of Directors strongly believes that, in this highly
competitive environment, we need to provide meaningful stock option grants to
retain and motivate key employees. The Board considers our ongoing program of
granting stock options broadly across the employee base to be very important to
our ability to compete for top talent and a significant incentive to promote our
success and, therefore, in the best interests of the Company's stockholders.
Equity incentives are equally common and important among our competitors and
throughout the high technology industry, and the strength of the U.S. economy
has only made equity more appealing to employees. Therefore, we continue to
consider it crucial that we have in place appropriate arrangements for granting
equity compensation.
Furthermore, our outside directors receive their annual retainer solely in the
form of stock options under the Equity Incentive Plan, which is intended to
align their interests with those of the stockholders. The outside directors
perform valuable services for the Company, and we wish to compensate them fairly
and adequately.
Options also benefit us in a number of other ways. For example, they tie
compensation to our performance; they conserve cash and reduce fixed costs; in
most cases they result in no charge to reported earnings, either upon grant or
exercise; they produce no dilution to earnings per share without an increase in
the stock price that benefits shareholders generally; the exercise of options
increases our capital; and we are entitled to a tax deduction upon the exercise
of nonstatutory stock options or the disqualifying disposition of incentive
stock options (ISOs).
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES ISSUABLE UNDER THE EQUITY
PLAN
Since 1993, an aggregate of 3,500,000 shares of our common stock have been
reserved for issuance under the Equity Plan, plus 130,000 shares that were
included when we merged our 1993 Director Stock Option Plan into the Equity
Plan. We last increased the number of options reserved for issuance under the
Equity Plan in 1998. As of February 18, 2000, there were options to purchase an
aggregate of 3,033,192 shares outstanding under the Equity Plan and no shares
remaining for award to employees. To date, we have granted 216,689 options to
employees under the Equity Plan subject either to approval of the proposed
amendment to the plan by the stockholders or to the availability of such shares
through cancellation of other options that are already outstanding. In order to
ensure that sufficient shares are available for option grants over the next few
years, the Board has voted, subject to stockholder approval, to increase the
number of shares issuable under the Equity Plan by 2,000,000 shares.
5
<PAGE>
PRINCIPAL TERMS OF THE EQUITY PLAN
The Equity Plan permits us to grant "Awards" to our employees, directors and
consultants, including incentive and nonstatutory stock options, stock
appreciation rights, performance shares and restricted stock. We have not
granted stock appreciation rights or other rights to acquire stock other than
stock options.
The Equity Plan is administered by the Compensation Committee of the Board of
Directors, which determines the persons to whom, and the times at which, Awards
are granted, the type of Award to be granted and all other related terms,
conditions and provisions of each Award. The Compensation Committee may
delegate to one or more officers the power to make awards to employees who are
not executive officers subject to Section 16 of the Securities Exchange Act of
1934. In addition, nonemployee directors receive stock options under the Equity
Plan in lieu of a cash retainer, as described under "ELECTION OF DIRECTORS -
Director Compensation" above.
Although the Compensation Committee has discretion in granting Awards, the
exercise price of any ISO may not be less than 100% of the fair market value of
our common stock on the date of the grant. Nonstatutory options also are
generally granted at fair market value. The closing price of our common stock
as reported by the Nasdaq on March 6, 2000 was $11.38. An option holder
may not transfer an ISO granted under the Equity Plan other than by will or the
laws of descent and distribution. Other Awards are transferable to the extent
provided by the Compensation Committee. The term of any ISO granted under the
Equity Plan may not exceed ten years, and no ISO may be granted under the Equity
Plan more than ten years from the Plan's adoption. The options we have granted
generally are subject to forfeiture restrictions that lapse over time during the
participant's employment. When a participant's employment is terminated,
vested options are generally cancelled if not exercised within a specified time.
The aggregate number of shares we may issue under the Equity Plan, as well as
those subject to outstanding Awards, is subject to appropriate adjustment in the
event of a stock split or other recapitalization. We may also issue shares
under the Equity Plan through the assumption or substitution of outstanding
grants from an acquired company without reducing the total number of shares
available under the Equity Plan.
The Board of Directors may amend or terminate the Equity Plan at any time,
subject to any necessary approval by the stockholders. In particular, any
amendment to the Equity Plan that would increase the number of shares issuable
to senior officers and directors or upon exercise of ISOs would require
stockholder approval.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. A participant does not realize taxable income upon
the grant or exercise of an ISO under the Equity Plan. If a participant does
not dispose of shares received upon exercise of an ISO for at least:
. two years from the date of grant and
. one year from the date of exercise,
then, upon sale of the shares, any amount realized in excess of the exercise
price is taxed to the participant as long-term capital gain and any loss
sustained will be a long-term capital loss. We may not take a deduction for
Federal income tax purposes. The exercise of ISOs also gives rise to an
adjustment in computing alternative minimum taxable income that may result in
alternative minimum tax liability for the participant.
If the participant disposes of shares of common stock acquired upon the
exercise of an ISO before the end of the one and two-year periods described
above (a "disqualifying disposition") then the participant realizes ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of such shares) over the exercise price. We would be
entitled to deduct that amount. Any further gain realized by the participant
would be taxed as a short-term or long-term capital
6
<PAGE>
gain and would not result in any deduction for the company. A disqualifying
disposition in the year of exercise will generally avoid the alternative minimum
tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. A participant does not realize income at the time
a nonstatutory option is granted. Upon exercise of the nonstatutory option, the
participant realizes ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise. We would receive a tax deduction for the same amount. Upon
disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term or long-term capital gain or loss and will
not result in any deduction by us.
A participant who receives any accelerated vesting or exercise of options or
stock appreciation rights or accelerated lapse of restrictions on restricted
stock in connection with a change in control might be deemed to have received an
"excess parachute payment " under federal tax law. In this case, the
participant may be subject to an excise tax and we may be denied a tax
deduction.
NEW PLAN BENEFITS TABLE
The following table presents information with respect to options granted under
the Equity Plan as of December 31, 1999, and options that will accrue to the
extent determinable to (i) the officers named in the Summary Compensation Table,
(ii) all executive officers as a group, (iii) all non-executive officer
employees as a group and (iv) all non-employee directors as a group.
Other than the grants to non-employee directors described in "ELECTION OF
DIRECTORS - Director Compensation," amounts of future Awards under the Equity
Plan are not determinable because, under the terms of the plan, these grants are
made at the discretion of the Compensation Committee. Future option exercise
prices are not determinable because they are based upon the fair market value of
our common stock on the date of grant.
<TABLE>
<CAPTION>
Dollar Number of Stock
Value for Options Granted
Options Granted ----------------
Name and Position in 1999 (1) 1999 2000
----------------- ---------- ---- ----
<S> <C> <C> <C>
David C. Mahoney $1,063,645 415,000 215,000
President and Chief Executive Officer
Michael Gonnerman 215,020 60,000 --
Treasurer, Vice President, Finance and
Chief Financial Officer
Jeffrey O. Nyweide 262,520 40,000 --
Senior Executive Vice
President, Business Development
Howard York 56,248 17,500 --
Vice President, Software Solutions
Charles Rabie 125,640 20,000 --
Vice President, Software Products
Executive Officer Group 2,654,537 702,500 215,000
Non-Employee Director Group (2) 40,689 15,000(2) 15,000(2)
Non-Executive Officer Employee Group 2,837,514 764,818
</TABLE>
- ------------------
(1) Reflects the value of the shares on the date of grant.
(2) Following the 2000 annual meeting of stockholders, our non-employee
directors, Messrs. Beach and Lonergan will each receive nonstatutory
options to purchase 7,500 shares of our common stock under the Equity Plan.
THE BOARD OF DIRECTORS BELIEVES THE INCREASE IN EQUITY PLAN SHARES IS
CRITICAL FOR DATAWARE AND RECOMMENDS A VOTE FOR THE INCREASE.
<PAGE>
PROPOSAL 4: AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
GENERAL
Our 1993 Employee Stock Purchase Plan was adopted by the Board of Directors
and the stockholders in May 1993. The Purchase Plan provides our full-time
employees the opportunity to purchase shares of common stock by automatic
payroll deduction. Like the Equity Plan, the Purchase Plan helps us attract and
retain top quality personnel, motivates them to acquire an equity stake in
Dataware and provides an incentive for them to achieve long-range performance
goals.
PROPOSED AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE PLAN
Since 1993, an aggregate of 850,000 shares of our common stock have been
reserved for issuance under the Purchase Plan, of which 454,787 shares have
been issued to date. As of February 18, 2000, 206 employees were eligible to
participate in the Purchase Plan. Our Board of Directors strongly believes that
we need to provide meaningful incentives to retain and motivate employees and
considers the ongoing program of allowing employees to purchase stock under the
Purchase Plan to be very important to our ability to compete for top talent. In
order to ensure that sufficient shares are available for issuance in the future
to eligible employees, the Board has voted, subject to stockholder approval, to
increase the number of shares issuable under the Purchase Plan by 500,000
shares.
PRINCIPAL TERMS OF THE PURCHASE PLAN
The Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code. Our Board of Directors, at its
discretion, grants rights to purchase shares of common stock under the plan.
The Compensation Committee of the Board determines the frequency and duration
of individual offerings under the plan and the date(s) when stock may be
purchased. Eligible employees participate voluntarily and may withdraw from any
offering at any time before stock is purchased. Participation terminates
automatically upon termination of employment for any reason. The purchase price
per share of our common stock in an offering is 85% of the lower of its fair
market value on the first day of an offering period or the applicable exercise
date and may be paid through regular payroll deductions, lump sum cash payments
or a combination of both, as determined by the Board of Directors. The Purchase
Plan may be amended or terminated at any time by the Board of Directors, subject
to any necessary approval by stockholders. In particular, any Purchase Plan
amendment that would increase the number of shares offered under the plan would
require stockholder approval. The Purchase Plan terminates on May 19, 2003.
No employee may subscribe for shares under the Purchase Plan if, immediately
after having subscribed, the employee would own 5% or more of the voting power
or of the value of all our classes of stock. Employees may not buy more than
$25,000 worth of stock through the plan in any calendar year, based on the fair
market value of the common stock at the beginning of the offering. In addition,
the Purchase Plan provides that no employee may allocate more than 15%, or such
lesser percentage as the Board of Directors may fix, of the employee's annual
rate of compensation to the purchase of stock through the Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE EMPLOYEE STOCK PURCHASE PLAN
A participant does not realize taxable income at the commencement of an
offering or at the time shares are purchased under the Purchase Plan. If a
participant does not dispose of shares purchased under the Purchase Plan for at
least:
. two years from the offering commencement date or
. one year from the purchase date,
then upon sale of the shares, 15% of the fair market value of the stock at the
commencement of the offering period (or, if less, the amount realized on sale of
such shares in excess of the purchase price) is taxed to the participant as
ordinary income, with any additional gain taxed as long-term capital gain, and
any loss sustained taxed as long-term capital loss. We may not take a deduction
for Federal income tax purposes.
If the participant dies at any time while owning shares purchased under the
Purchase Plan, then 15% of the fair market value of the stock at the
commencement of the offering period (or, if less, the fair market value of such
shares on the date of death, in excess of the purchase price) is taxed to the
participant as ordinary income in the year of death. We may not take a
deduction for Federal income tax purposes.
If a participant disposes of shares of common stock purchased under the
Purchase Plan before the expiration of the one-year and two-year holding periods
described above, then the participant realizes ordinary income in the year of
disposition in an amount equal to the excess of the fair market value of the
shares on the date of purchase over the purchase price of the shares. We would
be entitled to deduct that amount. Any further gain or loss realized by the
participant would be taxed as short-term or long-term capital gain or loss and
would not result in any deduction for the company.
THE BOARD OF DIRECTORS BELIEVES THE INCREASE IN PURCHASE PLAN SHARES IS IN
DATAWARE'S BEST INTEREST AND RECOMMENDS A VOTE FOR THE INCREASE.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information on the salaries, bonuses and other
compensation paid with respect to the last three fiscal years to the Chief
Executive Officer and each of our other four most highly compensated officers
whose salary and bonus for fiscal year 1999 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS (#)
- ---------------------------------- ---- --------- -------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
David C. Mahoney(2)............... 1999 $182,200 $ 50,105 $27,175 415,000
President and Chief
Executive Officer
Michael Gonnerman................. 1999 155,000 40,000 60,000
Treasurer, Vice President, 1998 162,143 50,472 -- 61,500
Finance, and Chief Financial 1997 63,138 -- -- --
Officer
Jeffrey O. Nyweide................ 1999 194,328 -- 15,088 40,000
Senior Executive 1998 167,306 192,274 11,478 45,000
Vice President, 1997 135,633 37,035 11,489 136,649
Business Development
Howard York....................... 1999 130,616 25,200 8,100 17,500
Vice President, Software 1998 105,669 112,961 7,800 15,000
Solutions 1997 88,400 20,575 7,800 21,120
Charles Rabie..................... 1999 140,000 15,000 8,100 20,000
Vice President, Software 1998 129,280 118,969 7,800 15,000
Products 1997 116,688 20,575 7,800 73,704
</TABLE>
- ------------------------------------------
(1) Includes (i) automobile allowances in each year with a value in 1999 of
$12,000 for Mr. Nyweide, $8,100 for Messrs. Rabie and York, and $7,800 for
Mr. Mahoney, (ii) payment for a life insurance policy for Mr. Mahoney in the
amount of $7,946 in 1999, and (iii) reimbursement of expenses for
preparation of tax returns in each year, with a 1999 amount of $11,429 for
Mr. Mahoney and $3,088 for Mr. Nyweide.
(2) Mr. Mahoney joined the Company on January 1, 1999.
9
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock options granted during
1999 to the officers named in the Summary Compensation Table.
<TABLE>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM ($)(1)
OPTIONS GRANTED TO PRICE EXPIRATION ---------------------------
NAME GRANTED(#) EMPLOYEES IN 1999 ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ----------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
David C. Mahoney..... 415,000 (2) + 28.28% 2.563 01/01/09 $668,921 $1,695,176
Michael Gonnerman.... 40,000 (3) + 2.73 2.094 08/16/09 52,676 133,492
20,000 (4) + 1.36 6.563 12/14/09 82,549 209,195
Jeffrey O. Nyweide... 40,000 (4) + 2.73 6.563 12/14/09 165,097 418,389
Howard York.......... 15,000 (5) 1.02 2.656 07/13/09 25,055 63,495
2,500 (4) 0.17 6.563 12/14/09 10,319 26,149
Charles Rabie........ 15,000 (5) 1.02 2.656 07/13/09 25,055 63,495
5,000 (4) 0.34 6.563 12/14/09 20,637 52,299
</TABLE>
- ------------------------------------------
(1) The values in this column are given for illustrative purposes, and do not
forecast possible future appreciation in our common stock. These values
represent hypothetical gains that could be achieved for each option if it
had been exercised at the end of its full ten-year option term, based on
the assumption that our stock price will appreciate over the exercise price
at the rates of 5% and 10%, compounded annually from the date of the
respective option grant. The actual gain, if any, on the exercise of a
stock option will depend on the future performance of the common stock and
the date of exercise. No gain to the optionees is possible without an
increase in the price of the common stock, which would, of course, benefit
all stockholders proportionately.
(2) The option is currently exercisable as to 141,250 shares and becomes
exercisable as to 91,250 shares on December 31st of each of 2000, 2001 and
2002.
(3) The option is exercisable as to 2,500 shares on each of August 16, 1999 and
February 15, 2000 and as to an additional 8,750 shares on August 15th of
each of 2000, 2001, 2002 and 2003.
(4) The option becomes exercisable in increments of 25% on December 14th of
each of 2000, 2001, 2002 and 2003.
(5) The option becomes exercisable in increments of 25% on December 31st of
each of 1999, 2000, 2001 and 2002.
+ Any of these options that are unvested would become exercisable in full
upon a change in control of Dataware.
10
<PAGE>
YEAR-END STOCK OPTION VALUES
The following table sets forth the total number of exercisable and
unexercisable stock options held at the end of 1999 by the officers named in the
Summary Compensation Table, as well as the value realized upon exercise of
options by Messrs. Nyweide and Rabie in 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END (#) AT YEAR-END ($)(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David C. Mahoney.... 0 $ 0 141,250 273,750 $2,074,539 $4,020,566
Michael Gonnerman... 0 0 60,250 61,250 873,859 835,059
Jeffrey O. Nyweide.. 34,703 45,400 192,899 73,750 2,730,290 906,303
Howard York......... 0 0 43,620 25,000 619,755 350,508
Charles Rabie....... 40,000 161,403 56,204 27,500 796,102 377,225
- ------------------------------
</TABLE>
(1) Based on the difference between the respective option exercise prices and
the closing price of the common stock on the date of exercise.
(2) Based on the difference between the respective option exercise prices and
the closing market price of $17.25 per share of common stock on December 31,
1999.
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS
David C. Mahoney. Under the terms of Mr. Mahoney's employment agreement,
he is entitled to a base salary of $182,200 per year, and is eligible to receive
an annual bonus of $100,000 based on our overall performance.
Jeffrey O. Nyweide. In February 2000, we entered into an agreement with
Mr. Nyweide, our former Senior Executive President, Business Development, in
connection with the termination of his employment with Dataware. Under the
agreement, Mr. Nyweide will be on leave of absence beginning March 1, 2000 and
his employment with us will continue until the earlier of: May 15, 2001, when
Mr. Nyweide terminates his employment or we terminate it for cause, or the date
Mr. Nyweide begins employment with another company. During the remaining term
of his employment, Mr. Nyweide will receive a salary of $200,000 per year. In
addition, if Mr. Nyweide performs special services upon our request, he will be
compensated at a rate of $3,000 per day for the actual time he works. If
Mr. Nyweide's employment terminates before May 15, 2001, we will pay him
severance by continuing to pay his salary until that date. Mr. Nyweide also may
continue to serve as a director of Dataware, but will not be eligible to receive
stock options or other compensation payable to our outside directors. Under the
agreement, Mr. Nyweide's stock options will continue to vest so long as
Mr. Nyweide remains with Dataware as a director, and vesting will accelerate
upon his resignation or upon a change of control of Dataware.
Michael Gonnerman. Under the terms of Mr. Gonnerman's employment
agreement, he is entitled to a base salary of $180,000 per year, and is eligible
to receive an annual bonus equal to 45% of his base salary based on our overall
performance.
Robert J. Farrell. In December 1999, we entered into an employment
agreement with Mr. Farrell when he became our Executive Vice President of Field
Operations and Chief Operating Officer. Under the terms of the employment
agreement, Mr. Farrell is entitled to a base salary of $250,000 per year, and is
eligible to receive an annual bonus of $100,000 based on the achievement of our
revenue and performance targets. Mr. Farrell is entitled to a guaranteed bonus
of $50,000 in 2000, subject to his continued employment with Dataware for the
first six months of 2000.
Kurt Mueller. In February 2000, we entered into an amemdment to the
severance agreement dated December 31, 1998, between us and Mr. Mueller, our
former President and Chief Executive Officer, in connection with Mr. Mueller's
resignation from our Board of Directors on February 8, 2000. Under the amended
agreement, Mr. Mueller will continue to be a voluntary part-time consultant
to Dataware until June 2000, and will receive monthly compensation equal to his
monthly average total compensation earned during 1997 and 1998, or $151,421.
In 1999, Mr. Mueller received a total of $276,136 under this agreement. Under
the amended agreement, all of Mr. Mueller's stock options will remain
exercisable until their respective expiration dates and will continue to vest
until their earlier expiration or Mr. Mueller's death. The amendment permits
Mr. Mueller to exercise his outstanding stock options on a net exercise basis
rather than for cash, and to transfer any portion of his vested stock options to
a third party.
11
<PAGE>
Each of the agreements with Messrs. Mahoney, Nyweide, Gonnerman and Farrell
have no stated term and may be terminated at any time by either party. Upon
termination without "cause," as defined in the agreements, or in the event of a
"change of control" of Dataware, as defined in the Equity Plan, Messrs. Mahoney,
Nyweide and Farrell would each be entitled to continue to receive their base
salaries and earned pro-rata bonus for a period of six months, plus one
additional month for each full year of service with Dataware, up to twelve
months. Mr. Gonnerman would be entitled to receive his base salary and earned
pro-rata bonus for four months, plus one additional month for each full year of
his service, up to twelve months.
In addition, any unvested stock options held by Messrs. Mueller, Mahoney,
Nyweide, and Farrell, and certain options held by Mr. Gonnerman, would become
exercisable in full upon a change in control of Dataware.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation of the senior corporate executives, including the individuals named
in the Summary Compensation Table. The committee also administers the Equity
Incentive Plan, including the grant of stock options and other awards under the
Equity Plan. The committee, which held six meetings during 1999, is currently
composed of Messrs. Lonergan (Chairman) and Beach, both of whom are outside
directors. This report is submitted by the Compensation Committee and addresses
the compensation policies for fiscal year 1999 as they affected Mr. Mahoney, the
Chief Executive Officer of Dataware, and each of the other officers named in the
Summary Compensation Table.
Overall Policy. The company's executive compensation program is designed
to be linked closely to corporate performance and returns to stockholders. To
this end, we have developed an overall compensation strategy and specific
compensation plan that ties a very significant portion of executive compensation
to the company's success in meeting specified performance goals. In addition,
through the use of stock options, we ensure that a part of the executives'
compensation is closely tied to appreciation in the company's stock price. The
overall objectives of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy, to link executive and stockholder interests
through equity based plans and, finally, to provide a compensation package that
recognizes individual contributions as well as overall business results. In
determining the compensation of the company's executive officers, other than the
CEO, the Compensation Committee takes into account the views of Mr. Mahoney in
reviewing the individual performance of the other executives whose compensation
is detailed in this proxy statement.
The key elements of the company's executive compensation consist of base
salary, annual bonus and stock options. The Compensation Committee's policies
with respect to each of these elements, including the bases for the compensation
awarded to Mr. Mahoney, are discussed below. In addition, while the elements of
compensation described below are considered separately, the Compensation
Committee takes into account the full compensation package afforded by the
company to the individual, including insurance and other employee benefits, as
well as the programs described below.
Base Salaries. Base salaries for new executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience of the individual. In making determinations regarding base salaries,
the Compensation Committee considers generally available information regarding
salaries prevailing in the industry, but does not utilize any particular indices
or peer groups.
12
<PAGE>
Annual salary adjustments are determined by evaluating the company's
performance and that of each executive officer, while also taking into account
new responsibilities. Corporate financial performance that is taken into
account includes annual revenues and net income. Contribution to net income is
assigned greater importance than revenues. The Compensation Committee, where
appropriate, also considers non-financial performance measures. These non-
financial performance measures may include such factors as increase in market
share, efficiency gains, quality improvements, and improvements in relations
with customers, suppliers and employees. No particular weight is given to any
of these non-financial factors. Based on these factors, the Compensation
Committee increased the salaries of the executive officers, other than the CEO,
between 8.2% and 23.6% over the 1998 scale, depending on individual performance.
Annual Bonus. The company's executive officers are eligible for an annual
cash bonus, which is based primarily on achievement of company performance
objectives that are established at the beginning of each year. Our performance
measure for bonus payments is based on annual revenues and net income before
one-time charges, weighted equally. In some cases, a business unit multiplier is
applied, based on the achievement of a particular business unit's performance
objectives, relative to pre-established operating targets. The Compensation
Committee establishes a total bonus pool each year and allocates a portion to
each executive. The pool may be increased based on preset multipliers if the
company exceeds its performance targets. Considering the company's performance
in 1999 and special individual efforts, certain officers of the company were
paid a corresponding portion of their potential bonus targets, in the amounts
shown in the Summary Compensation Table.
Stock Options. Stock options are granted to executive officers under our
Equity Incentive Plan, which was approved by the stockholders. Stock options
are typically granted with an exercise price equal to the fair market value of
the common stock on the date of grant and vest over various periods of time,
normally four years. Stock option grants are designed to incentivize the
creation of stockholder value over the long term, since the full benefit of the
compensation package cannot be realized unless stock price appreciation occurs
over a number of years. In determining the amount of the grants, the
Compensation Committee evaluates the job level of the executive,
responsibilities to be assumed in the upcoming year, and responsibilities in
prior years, and also takes into account the size of the officer's awards in the
past.
Chief Executive Officer. Mr. Mahoney joined Dataware at the beginning of
1999, when he signed an employment agreement that established a compensation
package consisting of a 1999 annual base salary of $182,200 and a bonus of
$100,000, $25,000 of which was guaranteed. 1999 was a year of substantial change
for Dataware. The Committee approved a total 1999 bonus for Mr. Mahoney of
$50,105, reflecting his leadership and achievements during the year. As part of
his employment agreement, Mr. Mahoney was also granted an option to purchase
415,000 shares of the Company's Common Stock. The Committee concluded that such
a grant was in keeping with ranges for equity compensation for newly-hired chief
executive officers of similar companies.
Conclusion. Through the programs described above, a very significant
portion of the company's executive compensation is linked directly to individual
and corporate performance and stock appreciation. In 1999, as in previous
years, a substantial portion of the targeted executive compensation consisted of
performance-based variable elements. The Compensation Committee intends to
continue the policy of linking executives' compensation to company performance
and returns to stockholders, recognizing that the ups and downs of the business
cycle from time to time may result in an imbalance for a particular period.
By the Compensation Committee,
William R. Lonergan, Chairman
Stephen H. Beach
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on our
common stock over the period beginning December 30, 1994, and ending December
31, 1999, as compared with that of the Nasdaq Market Index and an Industry
Index, based on an initial investment of $100 in each. Total stockholder return
is measured by dividing share price change plus dividends, if any, for each
period by the share price at the beginning of the respective period, and assumes
reinvestment of dividends. The Industry Index consists of 320 publicly traded
computer software companies reporting under the same Standard Industrial
Classification Code (SIC 7372) as Dataware.
[CHART APPEARS HERE]
<TABLE>
12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/21/99
--------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dataware Technologies, Inc. .... $ 100.00 $ 71.74 $ 25.09 $ 22.83 $ 22.28 $ 150.00
Industry Index.................. $ 100.00 $ 150.35 $ 199.84 $ 254.37 $ 427.43 $ 779.03
NASDAQ Market Index.......... $ 100.00 $ 129.71 $ 161.18 $ 197.16 $ 278.08 $ 490.46
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
SHARE OWNERSHIP
The following table shows the amount of our common stock beneficially owned
as of February 1, 2000 by (i) persons known by us to be beneficial owners of
more than 5% of our common stock, (ii) the officers named in the Summary
Compensation Table, (iii) the directors and nominees for election as directors
of Dataware, and (iv) all current executive officers and directors of Dataware
as a group:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
--------------------------------------
BENEFICIAL OWNER SHARES PERCENT OF CLASS
- ---------------- ------ ----------------
<S> <C> <C>
Kurt Mueller......................................................... 725,136 (2) 6.91%
Stuberstrasse 11A
80638 Munich
Germany
Jeffrey O. Nyweide................................................... 503,595 (3) 4.81%
David C. Mahoney..................................................... 141,250 (4) 1.35%
Charles Rabie........................................................ 62,904 (5) *
Michael Gonnerman.................................................... 60,500 (6) *
Howard York.......................................................... 51,196 (7) *
Stephen H. Beach..................................................... 32,218 (8) *
William R. Lonergan.................................................. 32,061 (9) *
All current executive officers and directors as a group (11 persons). 921,962 (10) 8.32%
</TABLE>
- ------------------------------------------
* Indicates less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares listed in the table.
(2) Includes 287,408 shares owned by Mr. Mueller's wife or by a trust for the
benefit of his daughter, as to which Mr. Mueller disclaims beneficial
ownership, and options to purchase 212,300 shares that are exercisable as
of February 1, 2000 or within 60 days thereafter.
(3) Includes options to purchase 192,899 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(4) Consists of options to purchase 141,250 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(5) Includes options to purchase 56,204 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(6) Consists of options to purchase 60,500 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(7) Includes options to purchase 43,620 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(8) Includes options to purchase 29,500 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(9) Includes options to purchase 31,500 shares that are exercisable as of
February 1, 2000 or within 60 days thereafter.
(10) Includes options to purchase a total of 801,523 shares that are exercisable
as of February 1, 2000 or within 60 days thereafter.
15
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our principal officers, directors, and 10% stockholders are required by
Section 16(a) of the Securities Exchange Act of 1934 to file with the SEC
reports of their ownership and changes in their ownership of our equity
securities. Based solely on our review of the reports furnished to us and
written representations that no other reports were required, we believe that
during our 1999 fiscal year our directors and officers complied with all Section
16(a) filing requirements.
AUDITORS
The firm of PricewaterhouseCoopers LLP, independent accountants, has
audited our financial statements for a number of years. The Board of Directors
has appointed PricewaterhouseCoopers LLP as auditors for our fiscal year ending
December 31, 2000. Representatives of PricewaterhouseCoopers LLP are expected
to attend the annual meeting, to be available to respond to appropriate
questions, and to have the opportunity to make a statement if they so desire.
STOCKHOLDER PROPOSALS
Our Bylaws require a stockholder who wishes to bring business before or
propose director nominations at an annual meeting to give written notice to the
Secretary of Dataware not less than 90 days before the anniversary of the
previous year's annual meeting date. However, if the meeting is called for a
date that is not 30 days before or after the anniversary of the previous year's
annual meeting date, then the stockholder's notice must be received within 10
days after the mailing of a notice or public disclosure of the date of the
annual meeting, whichever occurs first. The notice must contain specified
information about the proposed business or nominee and the stockholder making
the proposal or nomination. If you intend to present a proposal at the 2001
Annual Stockholder Meeting and desire that it be considered for inclusion in our
proxy statement and form of proxy, it must be received by Dataware at One Canal
Park, Cambridge, Massachusetts 02141; Attention: David C. Mahoney, President and
Chief Executive Officer, no later than November 14, 2000. If you intend to bring
business before or propose director nominations at the 2001 Annual Stockholder
Meeting you must give written notice to the Chairman of the Board, President or
Secretary of Dataware no later than January 15, 2001.
OTHER MATTERS
The Board of Directors does not know of any business to come before the
meeting other than the matters described in the notice. If other business is
properly presented for consideration at the meeting, the enclosed proxy
authorizes the persons named therein to vote the shares in their discretion.
A COPY OF OUR FORM 10-K FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WAS INCLUDED IN OUR ANNUAL
REPORT, WHICH HAS BEEN MAILED TO YOU. ANY HOLDER OR BENEFICIAL OWNER OF OUR
COMMON STOCK MAY OBTAIN ADDITIONAL COPIES OF THE FORM 10-K UPON WRITTEN REQUEST
ADDRESSED TO SUSAN WEINER, CONTROLLER, DATAWARE TECHNOLOGIES, INC., ONE CANAL
PARK, CAMBRIDGE, MASSACHUSETTS 02141.
16
<PAGE>
APPENDIX
PROPOSED EQUITY INCENTIVE PLAN
DATAWARE TECHNOLOGIES, INC.
EQUITY INCENTIVE PLAN
(AS AMENDED AND RESTATED)
This Equity Incentive Plan (the "Plan") constitutes an amendment and
restatement of the Dataware Technologies, Inc. 1993 Equity Incentive Plan, and
incorporates the former Dataware Technologies, Inc. 1988 Stock Option Plan and
1993 Director Stock Option Plan (the "Merged Plans"), which have been merged
into this Plan. The rights and privileges of holders of outstanding options or
rights under the Merged Plans shall not be adversely affected by such merger or
restatement.
Section 1. Purpose
-------
The purpose of the Plan is to attract and retain key employees and
directors and consultants of the Company and its Affiliates, to provide an
incentive for them to achieve long-range performance goals, and to enable them
to participate in the long-term growth of the Company.
Section 2. Definitions
-----------
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Stock Unit or Other Stock-Based Award awarded or granted under
the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor to such Code.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, each of whom is a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 or any successor provision, as applicable to the Company at the time ("Rule
16b-3").
"Common Stock" or "Stock" means the Common Stock, $0.01 par value, of
the Company.
"Company" means Dataware Technologies, Inc.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the
<PAGE>
event of the Participant's death. In the absence of an effective designation by
a Participant, "Designated Beneficiary" shall mean the Participant's estate.
"Effective Date" means May 19, 1993.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant that is not intended to be an Incentive
Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Other Stock-Based Award" means an Award, other than an Option, Stock
Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a
Common Stock element and awarded to a Participant under Section 11.
"Outside Director" means a member of the Board who is not an employee
of the Company or any Affiliate.
"Participant" means a person who receives an Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock, which may be earned
by the achievement of performance goals, awarded to a Participant under
Section 8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time during which an Award may
be forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
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"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
Section 3. Administration
--------------
The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions of the Committee. The
Committee shall have authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time consider advisable, and to interpret the provisions of the
Plan. The Committee's decisions shall be final and binding. To the extent
permitted by applicable law, the Committee may delegate to one or more executive
officers of the Company the power to make Awards to Participants who are not
Reporting Persons and all determinations under the Plan with respect thereto,
provided that the Committee shall fix the maximum amount of such Awards for all
such Participants and a maximum for any one Participant.
Section 4. Eligibility
-----------
All employees and, in the case of Awards other than Incentive Stock
Options, directors and consultants of the Company or any Affiliate, capable of
contributing significantly to the successful performance of the Company, other
than a person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. Incentive Stock Options may be granted only to persons
eligible to receive such Options under the Code.
Section 5. Stock Available for Awards
--------------------------
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 5,500,000 shares of Common Stock, provided that no more
than 10% of the maximum number of shares authorized from time to time to be
issued hereunder may be granted as Restricted Stock for consideration less than
100% of the Fair Market Value of the Common Stock on the date of the respective
grant. If any Award in respect of shares of Common Stock, including any grant of
option originally issued under either of the Merged Plans, expires or is
terminated unexercised or is forfeited, the shares subject to such Award, to the
extent of such expiration, termination or forfeiture, shall again be available
for award under the Plan. Common Stock issued through the assumption or
substitution of outstanding grants from an acquired company shall not reduce the
shares available for Awards under the Plan. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee (subject, in the case of Incentive
Stock Options, to any limitation required under the Code) shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
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<PAGE>
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
Section 6. Stock Options
-------------
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code or any successor provision and any regulations
thereunder, and no Incentive Stock Option may be granted hereunder more than ten
years after the Effective Date.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options. Nonstatutory Stock Options may be granted at such prices as the
Committee may determine.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, or by
retaining shares otherwise issuable pursuant to the Option, in each case valued
at their Fair Market Value on the date of delivery or retention, or such other
lawful consideration as the Committee may determine.
(e) The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery or retention of shares to the Company
in payment of an Option, the Participant automatically be awarded an Option for
up to the number of shares so delivered.
Section 7. Stock Appreciation Rights
-------------------------
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs granted in
tandem with Options shall have an exercise price not less than the exercise
price of the related Option. SARs granted alone and unrelated to an Option may
be granted at such exercise prices as the Committee may determine.
4
<PAGE>
(b) An SAR related to an Option, which SAR can only be exercised upon
or during limited periods following a change in control of the Company, may
entitle the Participant to receive an amount based upon the highest price paid
or offered for Common Stock in any transaction relating to the change in control
or paid during the thirty-day period immediately preceding the occurrence of the
change in control in any transaction reported in the stock market in which the
Common Stock is normally traded.
Section 8. Performance Shares
------------------
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.
(b) The committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.
Section 9. Restricted Stock
----------------
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock may be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the
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<PAGE>
Restricted Period, the Company shall deliver such certificates to the
Participant or if the Participant has died, to the Participant's Designated
Beneficiary.
Section 10. Stock Units
-----------
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. Other Stock-Based Awards
------------------------
(a) Subject to the provisions of the Plan, the Committee may make other
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock, including without
limitation convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based
on performance goals related to book value, subsidiary performance or such other
criteria as the Committee may determine, Restricted Periods, Performance Cycles,
conversion prices, maturities and security, if any, for any Other Stock-Based
Award. Other Stock-Based Awards may be sold to Participants at the face value
thereof or any discount therefrom or awarded for no consideration or such
minimum consideration as may be required by applicable law.
Section 12. Grant of Options to Outside Directors
-------------------------------------
(a) Automatic Grant of Options.
(i) Immediately following his or her election, each Outside
Director of the Company newly elected to the Board shall automatically be
granted Nonstatutory Stock Options to purchase 15,000 shares of Common Stock;
(ii) Immediately following the annual meeting of stockholders
each year, each Outside Director of the Company newly elected at or continuing
in office after such meeting shall automatically be granted an annual retainer
of Nonstatutory Stock Options to purchase 7,500 shares of Common Stock; and
(iii) Immediately following his or her election, each Outside
Director of the Company newly elected to the Board at any point during the year
between annual meetings of stockholders shall automatically be granted
Nonstatutory Stock Options to purchase 1,875 shares
6
<PAGE>
of Common Stock for each calendar quarter beginning after such election and
before the next anniversary date of the preceding annual meeting of
stockholders.
(b) Date of Grant. The "Date of Grant" for Options granted under this
Section 12 shall be (x) the date of the respective annual meeting of
stockholders, for each grant pursuant to clause (ii) of subsection (a) and (y)
the date of the respective director's election, for each grant pursuant to
clauses (i) and (iii) of subsection (a).
(c) Option Price. The option price for each option granted under this
Section 12 shall be the last sale price for a share of the Company's Common
Stock as reported by the Nasdaq National Market System, or the principal
exchange on which the Common Stock is then traded, as the case may be, for the
business day immediately preceding the Date of Grant.
(d) Term of Option. The term of each Option granted under this Section
12 shall be ten years from the Date of Grant.
(e) Exercisability of Options. Options granted under this Section 12
shall become exercisable, during the optionee's term in office, with respect to:
(i) 7,500 shares on each of the first two anniversaries of
the Date of Grant, for each grant pursuant to clause (i) of subsection (a); and
(ii) 1,875 shares at the beginning of each calendar quarter
following the Date of Grant, for each grant pursuant to clause (ii) or clause
(iii) of subsection (a).
(f) General Exercise Terms. An optionee holding exercisable Options
under this Section 12 who ceases to serve as a member of the Board may, during
his or her lifetime, exercise the rights he or she had under such Options at the
time he or she ceases to serve for the full unexpired term of such Option. Any
rights that have not yet become exercisable shall terminate upon cessation of
membership on the Board. Upon the death of a director, those entitled to do so
shall have the right, at any time within twelve months after the date of death,
to exercise in whole or in part any rights that were available to the director
at the time of his or her death. The rights of the optionee may be exercised by
the optionee's guardian or legal representative in the case of disability and by
the beneficiary designated by the optionee in writing delivered to the Company
or, if none has been designated, by the optionee's estate or his or her
transferee on death in accordance with this Section 12, in the case of death.
Options granted hereunder shall terminate, and no rights thereunder may be
exercised, after the expiration of the applicable exercise period.
Notwithstanding the foregoing provisions of this section, no rights under any
Options may be exercised after the expiration of ten years from their Date of
Grant.
(g) Method of Exercise and Payment. Options granted under this Section
12 may be exercised as provided in Section 6(d). Upon receipt of such notice and
payment, the Company shall promptly issue and deliver to the optionee (or other
person entitled to exercise the Option) a certificate or certificates for the
number of shares as to which the exercise is made.
(h) Merger. In the event of a Change in Control (as defined in Section
13(h)), or a reorganization or liquidation of the Company, any deferred exercise
period shall be automatically accelerated and each holder of an outstanding
option granted under this Section 12
7
<PAGE>
shall be entitled to receive upon exercise and payment in accordance with the
terms of the option the same shares, securities or property as he or she would
have been entitled to receive upon the occurrence of such event if he or she had
been, immediately prior to such event, the holder of the number of shares of
Common Stock purchasable under his or her option; provided, however, that in
lieu of the foregoing the Board may upon written notice to each holder of an
outstanding option or right under this Section 12, provide that such option or
right shall terminate on a date not less than 20 days after the date of such
notice unless theretofore exercised.
Section 13. General Provisions Applicable to Awards
---------------------------------------
(a) Limitations on Grants of Options and SARs. Subject to adjustment
under Section 5(b), the number of shares subject to Options and SARs granted to
any one individual during any fiscal year may not exceed 250,000 shares of
Common Stock.
(b) Transferability. An Award under this Plan may be transferred only
to the extent expressly permitted by the Committee and subject to such
conditions as the Committee may in its discretion impose.
(c) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.
(d) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(e) Settlement. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(f) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(g) Termination of Employment. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
8
<PAGE>
(h) Change in Control. In order to preserve a Participant's rights
under an Award in the event of a Change in Control (as defined below), the
Committee in its discretion may, at the time an Award is made or at any time
thereafter, take one or more of the following actions: (i) provide for the
acceleration of any time period relating to the exercise or realization of the
Award, (ii) provide for the purchase of the Award upon the Participant's request
for an amount of cash or other property that could have been received upon the
exercise or realization of the Award had the Award been currently exercisable or
payable, (iii) adjust the terms of the Award in a manner determined by the
Committee to reflect the Change in Control, (iv) cause the Award to be assumed,
or new rights substituted therefor, by another entity, or (v) make such other
provision as the Committee may consider equitable and in the best interests of
the Company.
As used herein, a "Change in Control" of the Company shall be
deemed to have occurred upon the occurrence of any of the following:
(A) Any transaction or series of transactions, as a
result of which any "person" (as defined in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder) (a "Person") is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under such act),
directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the
combined voting power of the Company's then
outstanding voting securities (the "Company's
Outstanding Voting Securities"); provided, however,
that a Change in Control shall not be deemed to have
occurred solely because of the acquisition of
securities of the Company by (1) one or more employee
benefit plans or related trusts established for the
benefit of the employees of the Company or any
Affiliate of the Company; or (2) any Person when such
acquisition (a) is effected primarily to prevent the
Company from being declared insolvent and (b) is
approved by the Board of Directors of the Company
(the "Board").
(B) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined
herein) cease for any reason to constitute at least a
majority of the Board. The Incumbent Directors shall
be (1) those members of the Board who were Directors
as of April 15, 1996 and who have served continuously
as Directors since such date, and (2) any other
member of the Board who subsequently became a
Director and whose election or nomination for
election by the Company's stockholders at the
beginning of his or her current tenure was approved
by a vote of at least a majority of the Directors who
were then Incumbent Directors, except that no
individual shall be an Incumbent Director if such
individual's initial assumption of office as a
Director occurred as a result of an actual or
threatened election contest with respect to the
election or removal of Directors, or other actual or
threatened solicitation of proxies or consents, by,
or on behalf of, a Person other than the Board.
(C) The consummation of a reorganization, merger,
consolidation, sale or other disposition of all or
substantially all of the assets of the Company, or
9
<PAGE>
similar transaction (a "Business Combination"),
unless all of the following conditions are met:
(1) the individuals and entities who are the
beneficial owners of the Company's
Outstanding Voting Securities immediately
before the consummation of the Business
Combination would beneficially own, directly
or indirectly, securities representing more
than 50% of the outstanding combined voting
power of the voting securities that would be
outstanding and entitled to vote generally
in the election of the governing body of the
corporation or other entity resulting from
such Business Combination (including,
without limitation, a corporation or other
entity that as a result of such transaction
would own the Company or all or
substantially all of the Company's assets,
either directly or through one or more
subsidiaries) (the "Resulting Entity"), and
the securities of the Resulting Entity that
would be owned by such beneficial owners of
the Company's Outstanding Voting Securities
would be owned by them in substantially the
same proportions as they own the Company's
Outstanding Voting Securities;
(2) no Person (excluding any corporation or
other entity resulting from such Business
Combination, and excluding any employee
benefit plan or related trust of the Company
or of such corporation or other entity
resulting from such Business Combination)
would beneficially own, directly or
indirectly, 30% or more of the combined
voting power of the outstanding voting
securities of the Resulting Entity except to
the extent that such ownership existed
before the Business Combination; and
(3) at least a majority of the members of the
board of directors of the Resulting Entity
would be persons who were Incumbent
Directors at the time of the execution of
the initial agreement or of the action of
the Board providing for such Business
Combination.
(D) Approval by the Company's stockholders of a
liquidation or dissolution of the Company (unless the
liquidation or dissolution is part of a Business
Combination excepted from clause (C) above).
(E) The close of business on the latest of the following
dates:
(1) the date that a tender or exchange offer by
any Person (other than the Company, any
Affiliate of the Company, or any employee
benefit plan or related trust established
for the benefit of the employees of the
Company or any Affiliate of the Company)
that, if consummated, would result in such
Person becoming a "beneficial owner" (as
defined in clause (A) above), directly or
indirectly, of securities of the Company
representing thirty percent
10
<PAGE>
(30%) or more of the combined voting power
of the Company's then outstanding voting
securities, is first published or sent or
given within the meaning of Rule 14d-2(a) of
the Securities Exchange Act of 1934, as
amended, and the rules and regulations
thereunder;
(2) the date upon which all regulatory approvals
required for the acquisition of securities
pursuant to the tender or exchange offer
referred to in clause (1) have been obtained
or waived; or
(3) the date upon which any approval of the
security holders of the Person publishing or
sending or giving the tender or exchange
offer referred to in clause (1) required for
the acquisition of securities pursuant to
such tender or exchange offer is obtained or
waived."
(i) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
loans may be secured by any security, including Common Stock, underlying or
related to such Award (provided that such Loan shall not exceed the Fair Market
Value of the security subject to such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.
(j) Withholding Taxes. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(k) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable laws.
(l) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required:
(i) if such action would terminate, or reduce the number of
shares issuable under, an Option unless any time period relating to the exercise
of such Option or the eliminated portion, as the case may be, is waived or
accelerated before such termination or reduction (and in such case the Committee
may provide for the Participant to receive cash or other property equal
11
<PAGE>
to the net value that would have been received upon exercise of the terminated
Option or the eliminated portion, as the case may be); and
(ii) in any case not involving the termination of, or
reduction of shares issuable under, an Option unless the Committee determines
that the action, taking into account any related action, would not materially
and adversely affect the Participant.
Section 14. Miscellaneous
-------------
(a) No Right To Employment. Except as provided in Section 12, no person
shall have any claim or right to be granted an Award. The grant of an Award
shall not be construed as giving a Participant the right to continued
employment. The Company expressly reserves the right at any time to dismiss a
Participant free from any liability or claim under the Plan, except as expressly
provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. The Plan became effective on the Effective Date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to any stockholder approval
that the Board determines to be necessary or advisable.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Delaware.
12
<PAGE>
--------------------------------------------
. Plan, including merger of 1988 Stock Option Plan, adopted by the Board
of Directors and approved by the Stockholders on May 19, 1993.
. Increase in shares issuable adopted by the Board of Directors April 15,
1994 and approved by the Stockholders May 25, 1994.
. Amendments adopted by the Board of Directors April 15, 1996 and
approved by the Stockholders May 23, 1996.
. Amendments adopted by the Board of Directors December 9, 1996.
. Increase in shares issuable adopted by the Board of Directors
February 11, 1997 and approved by the Stockholders May 23, 1997.
. Increase in shares issuable adopted by the Board of Directors April 14,
1998 and approved by the Stockholders May 21, 1998.
. Amendment and restatement, including merger of 1993 Director Stock
Option Plan, adopted by the Board of Directors April 13, 1999.
. Amendments adopted by the Board of Directors February 8, 2000.
13
<PAGE>
PROPOSED 1993 EMPLOYEE STOCK PURCHASE PLAN
DATAWARE TECHNOLOGIES, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
Section l. Purpose
- -------------------
The purpose of this 1993 Employee Stock Purchase Plan (the "Plan") is
to provide employees (referred to in this Plan as "associates") of Dataware
Technologies, Inc. (the "Company") and its subsidiaries the opportunity to
purchase shares (the "Shares") of the Company's Common Stock. The Plan is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1954, as amended (the "Code").
Section 2. Eligible Associates
- -------------------------------
Subject to the provisions of Sections 7, 8 and 9 below, any individual
who has been in the full-time employment (as defined below) of the Company, or
any of its subsidiaries (as defined in Section 425(f) of the Code) the employees
of which are designated from time to time by the Board of Directors as eligible
to participate in the Plan, for the six (6) month period before the day on which
an Offering Date (as defined in Section 3 below) occurs is eligible to
participate in any Offering (as defined in Section 3 below) made by the Company
hereunder. Full-time employment shall include all associates whose customary
employment is:
(a) 20 hours or more per week and
(b) more than five months
in the calendar year during which said Offering Date occurs or in the calendar
year immediately preceding such year.
Section 3. Offering Dates
- --------------------------
From time to time, the Company, by action of the Board of Directors,
will grant rights to purchase Shares to associates eligible to participate in
the Plan pursuant to one or more offerings (each of which is an "Offering") on a
date or series of dates (each of which is an "Offering Date") designated for
this purpose by the Board of Directors.
Section 4. Prices
- ------------------
The price per share for each grant of rights hereunder shall be the
lesser of:
(a) eighty-five percent (85%) of the fair market value of a
Share on the Offering Date on which such right was granted; or
(b) eighty-five percent (85%) of the fair market value of a
Share on the date such right is exercised.
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<PAGE>
At its discretion, the Board of Directors may determine a higher price for a
grant of rights.
Section 5. Exercise of Rights and Method of Payment
- ----------------------------------------------------
(a) Unless sooner cancelled by the associate pursuant to
Section 10, rights granted under the Plan will be exercised automatically and
irrevocably, in each case for a whole number of shares, periodically on
specified dates (each, and "Exercise Date") determined by the Board of Directors
pursuant to Section 6.
(b) The method of payment for Shares purchased upon exercise
of rights granted hereunder shall be through regular payroll deductions or by
lump sum cash payment or both, as determined by the Board of Directors. No
interest shall be paid upon payroll deductions unless specifically provided for
by the Board of Directors.
(c) Any payments or deductions received by the Company from a
participating associate and not utilized for the purchase of Shares upon
exercise of rights granted hereunder shall be promptly returned to such
associate by the Company after termination or cancellation of the right to which
the payment relates.
Section 6. Term of Rights
- --------------------------
The total period from an Offering Date to the last date on which rights
granted on that Offering Date are exercisable (the "Offering Period") shall in
no event be longer than twenty-seven (27) months. The Board of Directors when it
authorizes an Offering shall determine the length of the Offering Period and may
designate one or more Exercise Dates during the Offering Period. In any event,
the last day of each Offering Period shall be an Exercise Date. Rights granted
on an Offering Date shall be exercisable in full on the Offering Date or in such
proportion on each Exercise Date as the Board of Directors determines.
Section 7. Shares Subject to the Plan
- --------------------------------------
No more than One Million Three Hundred Fifty Thousand (1,350,000)
Shares may be sold pursuant to rights granted under the Plan. Appropriate
adjustments in the above figure, in the number of Shares covered by outstanding
rights granted hereunder, in the exercise price of the rights and in the maximum
number of Shares that an associate may purchase (pursuant to Section 9 below)
shall be made to give effect to any mergers, consolidations, reorganizations,
recapitalizations, stock splits, stock dividends or other relevant changes in
the capitalization of the Company occurring after the effective date of the
Plan, provided that no fractional Shares shall be issuable hereunder. Any
agreement of merger or consolidation shall include provisions for protection of
the then existing rights of participating associates under the Plan. Either
authorized and unissued Shares or issued Shares heretofore or hereafter
reacquired by the Company may be made subject to rights under the Plan. If for
any reason any right under the Plan terminates in whole or in part, Shares
subject to such terminated right may again be made subject to a right under the
Plan.
2
<PAGE>
Section 8. Limitations on Grants
- ---------------------------------
(a) No associate shall be granted a right hereunder if such
associate, immediately after the right is granted, would own stock or rights to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company, or of any subsidiary,
computed in accordance with Section 423(b)(3) of the Code.
(b) No associate shall be granted a right, if, after such
grant, his right to purchase shares under all employee stock purchase plans of
the Company and its subsidiaries would accrue at a rate that exceeds twenty-five
thousand dollars ($25,000) (or such other maximum as may be prescribed from time
to time by the Code) of the fair market value of such Shares (determined at the
time such right is granted) for each calendar year in which such right is
outstanding at any time in accordance with the provisions of Section 423(b)(8)
of the Code.
(c) No right granted to any participating associate under an
Offering, when aggregated with rights granted under any other Offering still
exercisable by such associate, shall cover more shares than may be purchased at
an exercise price not to exceed fifteen percent (15%) of the associate's annual
rate of compensation on the date the associate elects to participate in the
Offering, or such lesser percentage as the Board of Directors may determine.
Section 9. Limit on Participation
- ----------------------------------
Participation in an Offering shall be limited to eligible associates
who elect to participate in such Offering in the manner, and within the time
limitations, established by the Board of Directors when it authorizes the
Offering.
Section 10. Cancellation of Election to Participate
- ----------------------------------------------------
An associate who has elected to participate in an Offering may cancel
such election as to all (but not part) of the unexercised rights granted under
such Offering by giving written notice of such cancellation to the Company at
any time during the Offering. All amounts paid by the associate for the Shares
or withheld for the purchase of Shares from the associate's compensation through
payroll deductions that have not then been used for the purchase of Shares upon
a prior Exercise Date shall be paid to the associate, without interest, unless
otherwise determined by the Board of Directors, upon such cancellation.
Section 11. Termination of Employment
- --------------------------------------
Upon the termination of a participating associate's employment for any
reason, including the death of the associate, during an Offering, all such
unexercised rights to purchase Shares held by the associate shall immediately
terminate and amounts paid by the associate for the Shares or withheld for the
purchase of Shares from the associate's compensation through payroll deductions
that have not then been used for the purchase of Shares upon a prior Exercise
Date shall be paid to the associate or to the associate's estate, without
interest unless otherwise determined by the Board of Directors.
3
<PAGE>
Section 12. Associate's Rights as Stockholder
- ----------------------------------------------
No participating associate shall have any rights as a stockholder in
the Shares subject to a right granted hereunder until such right has been
exercised and full payment has been made for such Shares.
Section 13. Rights Not Transferable
- ------------------------------------
Rights under the Plan are not assignable or transferable by a
participating associate and are exercisable only by the associate.
Section 14. Amendments to or Discontinuation of the Plan
- ---------------------------------------------------------
The Board of Directors of the Company shall have the right to amend,
modify or terminate the Plan at any time without notice; provided, however, that
the then existing rights of all participating associates shall not be adversely
affected thereby, and provided further that, subject to the provisions of
Section 7 above, the total number of Shares that may be offered under the Plan
may not be increased without the approval of the stockholders of the Company.
Section 15. Effective Date and Approvals
- -----------------------------------------
Subject to the approval of the stockholders of the Company, this Plan
shall be effective on May 19, 1993, the date it was adopted by the Board of
Directors. Approval of this Plan by the stockholders shall be secured within
twelve (12) months after the date of such adoption.
The Company's obligation to offer, sell and deliver its Shares under
the Plan is subject to (i) the approval of any governmental authority required
in connection with the authorization, issuance or sale of such Shares, (ii)
satisfaction of the listing or quotation requirements of any national securities
exchange or national market system on which the Shares are then listed or quoted
and (iii) compliance, in the opinion of the Company's counsel, with all
applicable federal and state securities and other laws.
Section 16. Term of Plan
- --------------------------
No rights shall be granted under the Plan after May 19, 2003.
Section 17. Administration of the Plan
- ----------------------------------------
The Board of Directors or any committee or person(s) to whom it
delegates its authority (the "Administrator") shall administer, interpret and
apply all provisions of the Plan as it deems necessary to meet special
circumstances not anticipated or covered expressly by the Plan. In the event
that the Board of Directors delegates such authority to a committee of the
Board, all references herein to the "Board of Directors" shall be deemed to be
references to such Committee. Nothing contained in this Section shall be deemed
to authorize the Administrator to alter or administer the provisions of the Plan
in a manner inconsistent with the provisions of Section 423 of the Code.
4
<PAGE>
----------------------------------------
. Plan adopted by the Board of Directors on May 19, 1993.
. Plan approved by the stockholders on May 19, 1993.
. Increase in shares issuable adopted by the Board of Directors April 14,
1998 and approved by the Shareholders May 21, 1998.
. Increase in shares issuable adopted by the Board of Directors
February 8, 2000.
5
<PAGE>
FORM OF PROXY CARD
DATAWARE TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS APRIL 13, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Michael
Gonnerman and Ann Smith, and each of them, with full power of substitution to
each, proxies to represent the undersigned at the Annual Meeting of Stockholders
of Dataware Technologies, Inc. to be held at the Wyndham Hotel, The Washington
Room, 89 Broad Street, Boston, Massachusetts at 10:00 A.M. on April 13, 2000,
and at any adjournment thereof, and to vote as designated on the reverse all
shares of stock of Dataware Technologies, Inc. that the undersigned would be
entitled to vote at said meeting. A majority of said proxies present and acting
at the meeting (or, if only one shall be present and acting, then that one) may
exercise all the powers granted hereby. Said proxies are authorized to vote in
their discretion upon any other matters that may come before the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(REVERSE SIDE OF PROXY CARD)
Instructions for Voting Your Proxy
Dataware Technologies, Inc. is offering stockholders of record two alternative
ways of voting your proxies:
. By telephone (using a touch-tone telephone) . By Mail (traditional method)
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you had returned your proxy card. We encourage you to use this cost
effective and convenient way of voting, 24 hours a day, 7 days a week.
- -----------------
TELEPHONE VOTING Available only until 5:00 p.m. Eastern time on April 12, 2000
- -----------------
. This method of voting is available for residents of the U.S. and Canada.
. On a touch tone telephone, call TOLL FREE, 1-877-260-0406 24 hours a day, 7
days a week.
. You will be asked to enter ONLY the CONTROL NUMBER shown below.
. Have your proxy card ready, then follow the prerecorded instructions.
. Your vote will be confirmed and cast as you directed.
- -----------------
VOTING BY MAIL
- -----------------
. Simply mark, sign, and date your proxy card and return it in the postage-paid
envelope.
. If you are voting by telephone, please do not mail your proxy card.
------------------- ------------------
COMPANY NUMBER CONTROL NUMBER
------------------- ------------------
TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE
- --------------------------------------------------------------------------------
[X] Please Mark Votes as in
this Example
- --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED, THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL
- --------------------------------------------------------------------------------
1. To elect one director to hold FOR AGAINST ABSTAIN
office for a term of three years [_] [_] [_]
and until his successor is
elected and has qualified.
2. To approve an amendment to FOR AGAINST ABSTAIN
Dataware's Restated Certificate [_] [_] [_]
of Incorporation to increase the
number of authorized shares of
common stock from 14,000,000 to
30,000,000 shares.
3. To approve an amendment to FOR AGAINST ABSTAIN
Dataware's Equity Incentive [_] [_] [_]
Plan to increase the number of
shares of common stock available
for issuance by 2,000,000 shares.
4. To approve an amendment to FOR AGAINST ABSTAIN
Dataware's 1993 Employee Stock [_] [_] [_]
Purchase Plan to increase the
number of shares of common stock
available for issuance by 500,000
shares.
Date: , 2000
--------------------
- -------------------------------
- -------------------------------
SIGNATURES
Please sign your name exactly as it appears herein. When signing as attorney,
executor, administrator, trustee, or guardian, please give your full title as it
appears herein. When signing as joint tenants, all parties in the joint tenancy
must sign. When a proxy is given by a corporation, it should be signed by an
authorized officer and the corporate seal affixed. No postage is required if
returned in the enclosed envelope and mailed in the United States.
PLEASE SIGN, DATE, AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
