-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OXcWt9mzx3JEGES0obJYfBq0p0riC9uJU0RFPwqEd4QRDbemM27M5SwojBiCjgqY YZT8HFcTL+pUixJoDce21w== 0000316222-96-000006.txt : 19960405 0000316222-96-000006.hdr.sgml : 19960405 ACCESSION NUMBER: 0000316222-96-000006 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960404 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCALIBUR TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000316222 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 850278207 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-01595 FILM NUMBER: 96544631 BUSINESS ADDRESS: STREET 1: 2000 CORPORATE RIDGE STREET 2: SUITE 1095 CITY: MCLEAN STATE: VA ZIP: 22102 BUSINESS PHONE: 7037902110 MAIL ADDRESS: STREET 1: 9255 TOWNE CENTRE DRIVE STREET 2: 9TH FLOOR CITY: SAN DIEGO STATE: CA ZIP: 92121 424B3 1 PROSPECTUS PROSPECTUS EXCALIBUR TECHNOLOGIES CORPORATION 350,000 SHARES OF COMMON STOCK This Prospectus relates to 350,000 shares of Common Stock, par value $.01 per share (the "Shares"), of Excalibur Technologies Corporation, a Delaware corporation (the "Company"), which may be sold from time to time by the persons and entities listed as Selling Shareholders herein (the "Selling Shareholders"). The Company will not receive any proceeds from the sale of the Shares by the Selling Shareholders. See "Plan of Distribution." The Company will pay all the expenses, estimated to be approximately $25,000, in connection with this offering, other than underwriting commissions and discounts and counsel fees and expenses of the Selling Shareholders. AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Company's Common Stock is traded in the over-the-counter market and included in the NASDAQ National Market System under the symbol EXCA. The last reported sale price of the Common Stock reported in the NASDAQ National Market System on April 1, 1996 was $28.00 per share. The date of this Prospectus is April 3, 1996. TABLE OF CONTENTS Page Available Information....................................... 3 Incorporation of Certain Information by Reference........... 3 The Company................................................. 5 Risk Factors................................................ 6 Plan of Distribution........................................ 9 Use of Proceeds............................................. 10 Dilution.................................................... 10 Selling Shareholders........................................ 11 Description of Capital Stock................................ 13 Experts..................................................... 15 Legal Matters............................................... 15 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL OR AN OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER AT ANY TIME SHALL IMPLY THAT THE INFORMATION PROVIDED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. - 2 - AVAILABLE INFORMATION --------------------- This Prospectus does not contain all of the information set forth in the Registration Statement of which this Prospectus is a part and which is filed with the Securities and Exchange Commission (the "Commission.") The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Commission. For further information with respect to the Company, reference is made to such Registration Statement and the exhibits thereto, and to such reports, proxy statements and other information filed with the Commission. Such Registration Statement, reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Room 1400, 75 Park Place, New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ------------------------------------------------- The following documents filed by the Company with the Commission (File No. 0- 9747) are incorporated by reference: 1. The Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1995. 2. The Company's Quarterly Reports on Form 10-Q for the three month periods ended April 30, July 31 and October 31, 1995. 3. The Company's Report on Form 10-Q/A filed November 9, 1995 amending its Quarterly Report on Form 10-Q for the three months ended July 31, 1995. 4. The Company's Current Reports on Form 8-K filed June 7, July 7 and August 4, 1995. 5. The Company's Amendment No. 1 to Form 8-K filed September 12, 1995 and Amendment No. 2 to Form 8-K filed November 9, 1995, both amending the Current Report on Form 8-K filed August 4, 1995. 6. The Company's Current Report on Form 8-K filed November 21, 1995. 7. The Company's Proxy Statement dated October 16, 1995. All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the - 3 - termination of the offering of the Shares shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of any and all documents that have been incorporated by reference herein, other than exhibits to such documents, may be obtained upon request without charge from the Company's Corporate Secretary, Excalibur Technologies Corporation, 2000 Corporate Ridge, Suite 1095, McLean, Virginia, 22102, telephone number (703) 790-2110. Please specify the information desired when making such request. - 4 - THE COMPANY ----------- The Company is a leader in the development and sale of information retrieval software, based on adaptive pattern recognition ("APRP(TM)) technology. This technology, which identifies patterns in the binary representations of data, permits information storage with automatic indexing and content-based retrieval, or "fuzzy searching," with accuracy and speed. Using this technology, the Company has developed a family of software retrieval products, including libraries, servers and applications, which index, search and retrieve multimedia data -- text, image, signal and full motion video. The libraries and servers are suitable to be used by Value Added Resellers (VARs"), System Integrators ("SIs"), Original Equipment Manufactures ("OEMs") end-user customers, and systems and software companies to index, search and retrieve multimedia data in software applications and systems. The Company's principal application software product, an off-the-shelf, commercially available document imaging and information retrieval system, has been developed using the Company's text library, and is sold primarily through VARs and relationships with other software vendors. The Company markets and distributes its products through VARs, SIs, OEMs, direct sales, and a marketing agreement with IBM. As of January 31, 1995, more than 500 customers were using the Company's document imaging and information retrieval products. The Company has established a wholly-owned subsidiary in the United Kingdom, Excalibur Technologies International, Ltd. ("ETIL"), which began operations in July 1992. Except as otherwise indicated, the term "Company" refers to Excalibur Technologies Corporation and its subsidiaries. On July 20, 1995, Excalibur Technologies Corporation ("Excalibur") acquired all of the outstanding shares of stock of ConQuest Software, Inc. ("ConQuest"), a private company located in Columbia, Maryland engaged in the business of providing natural language text management software tools. Excalibur issued approximately 1,427,000 restricted shares of Excalibur common stock, and options to acquire approximately 572,000 restricted shares of Excalibur common stock to the former ConQuest shareholders and optionholders. The transaction has been accounted for as a pooling of interests. The results of operations discussed herein for the Company for the nine month periods ended October 31, 1995 and 1994 and the fiscal years ended January 31, 1995, 1994 and 1993 include, respectively, the ConQuest results of operation for the nine month periods ended October 31, 1995 and 1994 and the years ended December 31, 1994, 1993 and 1992. Excalibur was incorporated on February 11, 1980 as a New Mexico corporation and reincorporated on September 26, 1989 as a Delaware corporation. The Company's principal executive offices are located at 2000 Corporate Ridge, Suite 1095, McLean, Virginia, 22102, telephone number (703) 790-2110. - 5 - RISK FACTORS ------------ A prospective investor should carefully consider all of the information contained in this Prospectus and, in particular, the following: MARKETING ACCEPTANCE OF PRODUCTS AND HISTORICAL OPERATING LOSSES. The Company believes that its future profitability will depend on its ability to effectively market existing and newly-developed software products through a balanced multi-channel distribution network. There can be no assurance that the expenses incurred in connection with the development, introduction and promotion of enhanced or new products will not exceed the Company's expectations, or that these products will generate revenues sufficient to offset these expenses. The Company has operated at a loss for each of the past three fiscal years. The Company reported a net loss of approximately $995,000 on revenue of approximately $12,905,000 for the nine months ended October 31, 1995 as compared to a net loss of approximately $7,067,000 on revenue of approximately $8,813,000 for the nine months ended October 31, 1994. In addition, the Company incurred a net loss of approximately $9,388,000 on revenue of approximately $12,638,000 for the fiscal year ended January 31, 1995, a net loss of approximately $8,319,000 on revenue of approximately $12,285,000 for the fiscal year ended January 31, 1994 and a net loss of approximately $8,249,000 on revenue of approximately $8,506,000 for the fiscal year ended January 31, 1993. These losses reflect the Company's expenditures associated with building a marketing organization to sell software products released in 1993 and 1994 and further developing software products during such years. The Company will continue to invest in these programs and, accordingly, operating losses may continue for at least the next 12 months. RELATIONSHIP WITH IBM. In July and August 1993, the Company entered into Cooperative Marketing Agreements with IBM under which IBM made guaranteed sales commitments to the Company for fiscal 1994 and fiscal 1995. Revenues in fiscal 1995 and 1994 from sales generated by IBM represented 12% and 13%, respectively, of total revenues. A decision by IBM to limit or discontinue its relationship with the Company could result in a significant loss of revenue to the Company. LACK OF PATENT PROTECTION. The Company has not applied for patents on most of its technology. The Company regards its software as proprietary and relies primarily on a combination of copyright, trademark and trade secret laws of general applicability, employee confidentiality and invention assignment agreements, distribution and OEM software protection agreements and other intellectual property protection methods to safeguard its technology and software products. The Company also relies upon its efforts to design and produce new products, and upon improvements to existing products, to maintain a competitive position in the marketplace. The Company has no assurance that its technology will remain proprietary. COMPETITION. Competition in the computer and communications industry in general, and the computer software industry in particular, is intense. The Company's competitors include many companies which are larger and more established and have substantially more resources than the Company. - 6 - DEPENDENCE ON COMPUTER MANUFACTURERS. The Company's computer software products are designed to work specifically with manufacturers' computer systems; however, the Company has no agreement with the manufacturers of those computers by which it may ensure that the computers will not be redesigned in a manner incompatible with the Company's products. DEPENDENCE ON KEY PERSONNEL. The Company's business is substantially dependent upon the active participation and technical expertise of its executive officers and key personnel. The Company's ability to maintain a competitive position in light of technological developments will depend, in large part, on its ability to attract and retain highly qualified personnel, of which there can be no assurance. The Company has acquired $1 million life insurance policies on the lives of each of Patrick Condo, its Chief Executive Officer, James W. Dowe III, the Company's chief scientist, and the Company's chief engineer. In August, 1995 the Company reported that J.M. Kennedy, its Chief Executive Officer at that time, was temporarily unable to fulfill his duties due to what has been reported to the Company as a stroke. During Mr. Kennedy's absence, Mr. Condo assumed his responsibilities. On November 15, 1995, Mr. Kennedy resigned as Chief Executive Officer and Mr. Condo was elected to replace him. RELATIONSHIP WITH DIGITAL EQUIPMENT CORPORATION. Since entering into a distribution agreement with Digital Equipment Corporation ("Digital") in April 1990, the Company has been highly dependent on sales of its software products through Digital to its customers, although the percentage of the Company's total revenues from Digital declined dramatically in fiscal 1994. During fiscal 1995, 1994 and 1993, revenues from Digital represented approximately 3%, 8% and 30%, respectively, of the Company's total revenues. A decision by Digital to discontinue or further limit its relationship with the Company could result in a significant loss of revenue to the Company. RELATIONSHIP WITH NIKKEI INFORMATION SYSTEMS CO., LTD. A portion of the Company's revenue is earned in connection with its research and development arrangement with Nikkei Information Systems Co., Ltd. ("NIS"). During fiscal 1995, 1994 and 1993 revenues attributable to NIS represented approximately 3%, 6% and 12%, respectively, of the Company's total revenues. Revenue from NIS is expected to continue to decline as a percentage of the Company's total revenues. A decision by NIS to discontinue or limit its relationship with the Company could result in a significant loss of revenue to the Company. RELATIONSHIP WITH PRC, INC. In February 1993, the Company signed an agreement with PRC, Inc. ("PRC"), a systems integrator, providing for a minimum of $2 million in revenues from PRC, payable periodically over two and a half years. For the fiscal years ended January 31, 1995 and 1994, the revenue recognized by the Company under this contract represented 3% and 9%, respectively, of total revenues. A decision by PRC to limit or discontinue its relationship with the Company could result in a significant loss of revenue to the Company. - 7 - VOTING CONTROL BY PRINCIPAL SHAREHOLDER. Allen & Company Incorporated ("Allen"), certain officers and shareholders of Allen and certain persons who might be deemed to be related persons of Allen together beneficially own approximately 39.4% of the outstanding shares of Common Stock of the Company. Accordingly, Allen may be deemed to be an "affiliate" of the Company within the meaning of the Securities Act of 1933. As a result of such ownership interest, Allen and such other persons may be able to effectively control the outcome of certain matters requiring a shareholder vote, including offers to acquire the Company and election of directors. In addition, Richard M. Crooks, Jr., the Chairman of the Board of Directors of the Company, is a director of and consultant to Allen. AUTHORIZATION OF PREFERRED STOCK. The Company's Certificate of Incorporation authorizes the issuance of one million shares of Preferred Stock with such designations, rights and preferences as may be determined from time to time by the Company's Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of the Company's Common Stock. Although the Company has no present intention of issuing any shares of Preferred Stock, it can give no assurance that it will not issue Preferred Stock in the future. See "Description of Capital Stock - Preferred Stock". CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Certificate of Incorporation, its Stock Option Plan and Delaware law could have the effect, either alone or in combination with each other, of making more difficult, or discouraging an acquisition of the Company deemed undesirable by its Board of Directors. Under the Company's Certificate of Incorporation there are approximately 4,500,000 unreserved shares of Common Stock and 950,000 shares of Preferred Stock available for future issuance without shareholder approval as of January 31, 1996, after giving effect to the issuance of the shares of Common Stock covered by this Prospectus. The existence of authorized but unissued capital stock, together with the continued voting control of the Company by Allen could have the foregoing effect of discouraging an acquisition of the Company. Under the Company's Stock Option Plans, as amended (the "Plans"), in the event of a change in control, stock appreciation rights ("SARs") and limited SARs outstanding for at least six months and any stock options which are not then exercisable will become fully exercisable and vested. The Plans may have the effect of significantly increasing the costs of acquiring the Company in a hostile takeover. The Company is subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation, such as the Company, from engaging in a wide range of specified transactions with any person who becomes a 15% stockholder, under certain circumstances, within three years after such person became an "interested shareholder." STOCK OPTIONS OUTSTANDING. As of January 31, 1996, the Company had outstanding stock options to purchase an aggregate of 2,416,112 shares of Common Stock at exercise prices ranging from $1.04 to $26.21 per share. These options are likely to be exercised, if at all, at a time when the Company otherwise could obtain a price for the sale of shares of Common Stock which is higher than the option exercise price per share. Such exercise or the possibility of such exercise may impede the Company if it later seeks financing through the sale of additional securities. - 8 - FUTURE SALES OF COMMON STOCK. Of the Company's shares of Common Stock currently outstanding, a substantial number of such shares are "restricted securities" as that term is defined under Rule 144 under the Securities Act, which, under certain circumstances, may be sold without registration with the Commission under the Securities Act. An aggregate of approximately 933,189 shares of the Company's Common Stock subject to exercisable stock options are presently being offered for sale under the Company's registered stock option plan. The Company is unable to predict the effect that sales of Common Stock made under Rule 144 or pursuant to the stock options described above, or otherwise, may have on the then prevailing market price of Common Stock. INCREASED ACCOUNTS RECEIVABLE. Historically, the Company has generated the majority of its revenue in the last month of a quarter, which creates a higher receivable at the end of a reporting period, as measured by the average sales per day in accounts receivable. Consequently, the amount reported as accounts receivable generally declines as the following quarter unfolds. The average days sales outstanding at October 31, 1995, January 31, 1995 and October 31, 1994 were 97 days, 97 days and 108 days, respectively. The average days sales outstanding may be overstated due to annual maintenance contracts sold, which are booked to accounts receivable and deferred revenue and are recognized ratably over the twelve-month period. Maintenance revenues represented 20% of total revenues at January 31, 1995 up from 11% of total revenues at January 31, 1994. Maintenance revenues represented 21% of total revenues in the nine month periods ended October 31, 1995 and 1994. The Company's normal payment terms are net 30 days, but the average collection time is about 60 days, including international receivables, which tend to have longer payment cycles. The Company has not had any significant bad debt expense charges. However, in the event that the Company were unable to collect its outstanding accounts receivable, the amount of bad debt expense could increase. PLAN OF DISTRIBUTION -------------------- This Prospectus relates to the sale by the Selling Shareholders of 350,000 fully paid and non-assessable shares of the Company's Common Stock, par value $.01 per share. The Shares may be sold from time to time by the Selling Shareholders in the over-the-counter market at then prevailing market prices or in privately negotiated transactions. Although the Company ultimately expects that all 350,000 Shares may be sold, the actual number of Shares that will be sold cannot be determined. In offering the Shares, the Selling Shareholders and any selling broker or dealer may be deemed to be statutory "underwriters" within the meaning of Section 2(11) of the Securities Act in connection with such sales. The Company has advised the Selling Shareholders that they, because they may be deemed to be statutory underwriters, will be subject to the Prospectus delivery requirements under the Securities Act. The Company has also advised the - 9 - Selling Shareholders that in the event of a "distribution" of their shares, such Selling Shareholders, any selling broker or dealer and any "affiliated purchasers" may be subject to Rule 10b-6 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), until its participation in that distribution is completed. A "distribution" is defined in Rule 10b-6(c)(5) as an offering of securities "that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods." The Company has also advised the Selling Shareholders that Rule 10b-7 under the Exchange Act prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing the price of Common Stock in connection with this offering. Any shares covered by this Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this Prospectus. The Company will pay all the expenses, estimated to be $25,000 in connection with this offering, other than underwriting commissions and discounts and counsel fees and expenses of the Selling Shareholders. USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Shares by the Selling Shareholders. DILUTION The net tangible book value of the Company as of October 31, 1995 was approximately $11,476,744 or $.99 per common share. Since the shares are being offered by the Selling Shareholders, there is no increase in net tangible book value per common share to existing shareholders by virtue of the sale. Without taking into account any changes in net tangible book value after October 31, 1995 or shares issued after that date, the Company had as of that date an aggregate of 11,571,899 shares of Common Stock outstanding with a net tangible book value of $.99 per share. Assuming a sale at the anticipated offering price set forth below, this will represent an immediate dilution of $27.01 per share to new shareholders. The following table illustrates this dilution per share: Anticipated offering price per share $28.00 Net tangible book value per common share before offering (1)......... $.99 Net tangible book value per common share after offering.............. $.99 Dilution per share to new shareholders(2) $27.01 ====== - 10 - The calculations above do not take into account the exercise of outstanding stock options. On January 31, 1996, there were outstanding stock options to purchase an aggregate of 2,416,112 shares of Common Stock at exercise prices ranging from $1.04 to $26.21 per share. To the extent that these stock options are exercised, there will be further dilution to new shareholders. (1) Net tangible book value per common share represents the amount of total tangible assets less total liabilities and preferred stock, divided by the number of shares of Common Stock outstanding at that date. (2) Dilution is determined by subtracting net tangible book value per common share after the offering from the amount paid by an investor for a share of Common Stock. SELLING SHAREHOLDERS On March 6, 1996, the Company sold 350,000 of its shares of Common Stock to five institutional investors in a private placement in consideration for the payment of $8,750,000. The Company agreed as part of that transaction to file a Registration Statement within 30 days covering the shares which the Company would use its reasonable best efforts to cause to become effective expeditiously. The following table sets forth the number of shares of Common Stock of the Company beneficially owned by the Selling Shareholders on March 31, 1996, the number of Shares covered by this Prospectus and the amount and percentage ownership by the Selling Shareholder after the offering. All shares are beneficially owned and the sole voting and investment power is held by the person named. None of the Selling Shareholders has had any material relationship with the Company during the past three years other than the ownership of shares of Common Stock. - 11 - Number of Shares of Common Number of Stock Shares Percentage of Beneficially Covered by Number of Class of Owned on this Shares to be Beneficial Name March 31, Prospectus Retained Ownership 1996 Drake and Company as nominee for Citibank N.A. 280,000 150,000 130,000 less than 1% The Cypress Partners 90,000 90,000 0 -- L.P. Cypress International 10,000 10,000 0 -- Partners Limited Scudder Development 297,200 50,000 247,200 2% Fund Essex Investment Mgmt. 97,625 50,000 47,625 less than 1% Co. Inc. =============================================================================== - 12 - DESCRIPTION OF CAPITAL STOCK ---------------------------- The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01 per share, of which 49,587 shares are designated as Cumulative Convertible Preferred Stock. At January 31, 1996, 11,953,268 shares of Common Stock were issued and outstanding and no shares of Preferred Stock were issued or outstanding, except for 27,180 shares of Cumulative Convertible Preferred Stock. Common Stock - ------------ The issued and outstanding shares of Common Stock are, and the Shares being offered hereby by the Selling Shareholders are, validly issued, fully paid and non-assessable. The holders of outstanding shares of Common Stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the Board of Directors may from time to time determine. The Company has not paid any dividends and does not expect to pay cash dividends on its Common Stock in the foreseeable future. All shares of Common Stock have equal voting rights and, when validly issued and outstanding, have one vote per share in all matters to be voted upon by the shareholders. Cumulative voting in the election of directors is not allowed, which means that the holders of more than 50% of the outstanding shares can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any directors. The shares have no pre-emptive, subscription, conversion or redemption rights. Upon liquidation, dissolution or winding-up of the Company, the holders of Common Stock are entitled to receive pro rata the assets of the Company which are legally available for distribution to shareholders. Preferred Stock - --------------- The Board of Directors of the Company has the authority to issue 950,413 shares of Preferred Stock in one or more series and to fix the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of all shares of each such series, including, without limitation, dividend rates, conversion rights, voting rights, redemption and sinking fund provisions, liquidation preferences and the number of shares constituting each such series, without any further vote or action by the shareholders. The Company's 49,587 shares of Cumulative Convertible Preferred Stock are convertible into shares of Common Stock at the rate of ten shares of Common Stock per share of Cumulative Convertible Preferred Stock. Holders of the - 13 - Cumulative Convertible Preferred Stock are entitled to receive cumulative dividends at $0.50 per share per annum payable annually on April 1, if declared by the Board of Directors, in cash or shares of Common Stock (to be determined by the Board), valued at the lower of $1.00 per share or the market price on the date of declaration. In the event of voluntary liquidation, dissolution or winding-up of the Company, or upon any distribution of assets, whether voluntary or involuntary, holders of the Cumulative Convertible Preferred Stock would have a liquidation preference of $10.00 per share, plus accrued and unpaid dividends. The issuance of Preferred Stock could decrease the amount of earnings and assets available for distribution to holders of Common Stock or adversely affect the rights and powers, including voting rights, of the holders of Common Stock and could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company without further action by the shareholders. The Company has no present plans to issue any shares of Preferred Stock or Cumulative Convertible Preferred Stock. Certain Anti-Takeover Provisions - -------------------------------- Under the Company's Certificate of Incorporation, there are approximately 4,500,000 unreserved shares of Common Stock, 950,413 shares of Preferred Stock and 22,407 shares of Cumulative Convertible Preferred Stock available for future issuance without shareholder approval, as of January 31, 1996, after giving effect to the issuance of the shares of Common Stock covered by this Prospectus. The existence of authorized but unissued capital stock, together with the continued voting control of the Company by Allen (see "Risk Factors -- Voting Control by Principal Shareholder"), could have the effect, either alone or in combination with each other, of making more difficult or discouraging an acquisition of the Company deemed undesirable by its Board of Directors. Under the Company's Stock Option Plan, as amended (the "Plan"), in the event of a change in control, stock appreciation rights ("SARs") and limited SARs outstanding for at least six months and any stock options which are not then exercisable will become fully exercisable and vested. The Plan may have the effect of significantly increasing the costs of acquiring the Company in a hostile takeover. The Company is subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation, such as the Company, from engaging in a wide range of specified transactions with any person who becomes a 15% stockholder, under certain circumstances, within three years after such person became an "interested shareholder." Because Allen & Company Incorporated's stock ownership in the Company, which otherwise would cause it to be such an "interested stockholder," antedates the 1987 effective date of Section 203, Allen is not subject to the prohibitions of such Section. Transfer Agent - -------------- The transfer agent and registrar for the Common Stock is American Securities Transfer, Inc. of Denver, Colorado. - 14 - EXPERTS ------- The audited financial statements and schedules of Excalibur Technologies Corporation incorporated by reference in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in giving said report. The financial statements of ConQuest Software, Inc. ("ConQuest") as of and for the year ended December 31, 1993 incorporated in this Prospectus by reference to the Company's Current Report on Form 8-K dated November 9, 1995, have been incorporated in reliance on the report (which contains an explanatory paragraph relating to ConQuest's ability to continue as a going concern as described in Note 1 to the financial statements) of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of ConQuest as of and for the year ended December 31, 1994 incorporated in this Prospectus by reference to the Company's Current Report on Form 8-K dated November 9, 1995, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report (which contains an explanatory paragraph relating to ConQuest's ability to continue as a going concern as described in Note 1 to the financial statements) with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in giving said report. LEGAL MATTERS ------------- The validity of the Common Stock offered hereby will be passed upon for the Company by Tenzer Greenblatt LLP, The Chrysler Building, 405 Lexington Avenue, 23rd Floor, New York, New York 10174. Members of that firm beneficially own an aggregate of 25,000 shares of the Company's Common Stock. Jay H. Diamond, a partner in such law firm, is a Director of the Company. - 15 - -----END PRIVACY-ENHANCED MESSAGE-----