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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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]
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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
DATAWATCH CORPORATION
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(Name of Registrant as Specified in Its Charter)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transactions applies:
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previously. Identify the previous filing and registration statement number, or
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DATAWATCH CORPORATION
175 Cabot Street
Suite 503
Lowell, Massachusetts 01854
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 11, 2005
-----------
The Annual Meeting of Stockholders of Datawatch Corporation will be
held at the offices of Choate, Hall & Stewart LLP, 53 State Street, Boston, MA
02109, on Friday, March 11, 2005 at 11:00 a.m., local time, to consider and act
upon the following matters:
1. To elect six members of the Board of Directors to serve until the next
annual meeting and until their successors have been elected and
qualified; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on January 19,
2005, the record date fixed by the Board of Directors, are entitled to notice of
and to vote at the meeting and any adjournment thereof.
IF YOU PLAN TO ATTEND:
Please call Carol Beauchamp at 978-275-8235 if you plan to attend.
Please bring valid picture identification, such as a driver's license or
passport. Stockholders holding stock in brokerage accounts ("street name"
holders) will also need to bring a copy of a brokerage statement reflecting
stock ownership as of the record date. Cameras, cell phones, recording devices
and other electronic devices will not be permitted at the meeting.
By Order of the Board of Directors
JOHN H. KITCHEN, III,
Secretary
Lowell, Massachusetts
January 28, 2005
THE BOARD OF DIRECTORS WELCOMES STOCKHOLDERS WHO WISH TO ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR
COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE
THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
DATAWATCH CORPORATION
175 Cabot Street
Suite 503
Lowell, Massachusetts, 01854
PROXY STATEMENT
January 28, 2005
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Datawatch Corporation (the "Company")
for use at the Annual Meeting of Stockholders of the Company to be held at the
offices of Choate, Hall & Stewart LLP, 53 State Street, Boston, MA 02109, on
March 11, 2005, at 11:00 a.m., Eastern time, and any adjournments thereof (the
"Meeting").
Only stockholders of record at the close of business on January 19,
2005 will be entitled to notice of and to vote at the Meeting. As of that date,
5,303,344 shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") were outstanding and entitled to vote at the Meeting.
Stockholders are entitled to cast one vote for each share held of record at the
close of business on January 19, 2005 on each matter submitted to a vote at the
Meeting. Any stockholder may revoke a proxy at any time prior to its exercise by
filing a later-dated proxy or a written notice of revocation with the Secretary
of the Company, or by voting in person at the Meeting. If a stockholder is not
attending the Meeting, any proxy or notice should be returned in time for
receipt no later than the close of business on the day preceding the Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker non-votes are counted as present or represented
for purposes of determining the presence or absence of a quorum. A "non-vote"
occurs when a broker holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner. Directors are elected by a plurality of the votes cast by stockholders
entitled to vote at the Meeting. All other matters being submitted to
stockholders require the affirmative vote of the majority of shares present in
person or represented by proxy at the Meeting and entitled to vote on the
subject matter. An automated system administered by the Company's transfer agent
tabulates the votes. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter and, therefore, with respect to votes
on specific proposals will have the effect of negative votes. Broker "non-votes"
are not so included.
At the Meeting, a proposal to elect Robert W. Hagger, Thomas H. Kelly,
Richard de J. Osborne, Terry W. Potter, David T. Riddiford and James Wood as
directors will be subject to a vote of stockholders. Where a choice has been
specified on the proxy with respect to the foregoing proposal, the shares
represented by the proxy will be voted in accordance with the specifications,
and will be voted FOR if no specification is indicated.
The Board of Directors of the Company knows of no other matters to be
presented at the Meeting. If any other matter should be presented at the Meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of Robert W. Hagger and John J. Hulburt, each of
whom is named as attorney-in-fact in the proxies.
An Annual Report to Stockholders, containing audited financial
statements of the Company for the fiscal year ended September 30, 2004, is being
mailed together with this proxy statement to all stockholders entitled to vote.
This proxy statement and the accompanying notice and form of proxy will be first
mailed to stockholders on or about February 5, 2005.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of January 19, 2005, certain
information regarding beneficial ownership of the Company's Common Stock (i) by
each person who, to the knowledge of the Company, beneficially owned more than
5% of the shares of Common Stock of the Company outstanding at such date; (ii)
by each director of the Company; (iii) by each executive officer identified in
the Summary Compensation Table on page 8; and (iv) by all current directors and
executive officers of the Company as a group.
Number of Shares Percentage of
Name and Address Beneficially Shares of
of Beneficial Owner (1) Owned Common Stock(2)
----------------------- --------------- ---------------
Robert W. Hagger (3) 255,556 4.63%
John Kitchen (4) 141,359 2.61%
H. Calvin G. Mackay (5) 84,573 1.57%
Alan R. MacDougall (6) 68,366 1.27%
Thomas H. Kelly (7) 445 *
Richard de J. Osborne (8) 288,494 5.43%
Terry W. Potter (9) 30,328 *
David T. Riddiford (10) 43,848 *
James Wood (11) 916,722 17.22%
116 East Saddle River Road
Saddle River, New Jersey 07458
Christopher Cox (12) 689,966 13.02%
c/o WC Capital, LLC
116 East Saddle River Road
Saddle River, New Jersey 07458
WC Capital, LLC 689,966 13.02%
c/o James Wood
116 East Saddle River Road
Saddle River, New Jersey 07458
Diker Micro-Value Fund, L.P. 573,448 10.82%
c/o Diker Management LLC
745 Fifth Avenue, Suite 1409
New York, NY 10151-0099
2
Number of Shares Percentage of
Name and Address Beneficially Shares of
of Beneficial Owner (1) Owned Common Stock(2)
----------------------- --------------- ---------------
Osmium Partners 330,464 6.23%
c/o Osmium Partners, LLC
44 Montgomery Street
Suite 3700
San Francisco, CA 94104-4810
All current directors and executive 1,829,691 31.03%
officers as a group (9 persons)(13)
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*Less than one percent.
(1) Unless otherwise indicated, each stockholder referred to above has sole
voting and investment power with respect to the shares listed and the
address of each stockholder is: c/o Datawatch Corporation, 175 Cabot
Street, Suite 503, Lowell, MA 01854.
(2) The number of shares of Common Stock deemed outstanding includes (i)
5,303,344 shares of Common Stock outstanding as of January 19, 2005 and
(ii) with respect to each individual, the number of options to purchase
shares of Common Stock which may be exercised by such individual within
60 days of January 19, 2005.
(3) Includes 215,556 options that may be exercised within 60 days of
January 19, 2005.
(4) Includes 121,581 options that may be exercised within 60 days of
January 19, 2005.
(5) Includes 84,573 options that may be exercised within 60 days of January
19, 2005.
(6) Includes 67,698 options that may be exercised within 60 days of January
19, 2005. Mr. MacDougall resigned as an executive officer of the
Company effective on January 10, 2005.
(7) Includes 445 options that may be exercised within 60 days of January
19, 2005.
(8) Includes 143,370 shares held by Carnegie Hill Associates, LLC. Mr.
Osborne is the Managing Principal of Carnegie Hill Associates, LLC and
may be deemed a beneficial owner of the shares held by Carnegie Hill
Associates, LLC. Mr. Osborne disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein. Includes
43,908 shares owned jointly with Mr. Osborne's spouse. Includes 12,992
options that may be exercised within 60 days of January 19, 2005.
(9) Includes 30,328 options that may be exercised within 60 days of January
19, 2005.
(10) Includes 39,218 options that may be exercised within 60 days of January
19, 2005.
(11) Includes 20,104 options that may be exercised within 60 days of January
19, 2005. Also includes 689,966 shares held by WC Capital, LLC. Mr.
Wood, as a Managing Principal of WC Capital, LLC, shares the power to
vote and dispose of all 689,966 shares of the Common Stock of the
Company held by WC Capital, LLC.
(12) As a Managing Principal of WC Capital, LLC, Mr. Cox shares the power to
vote and dispose of all 689,966 shares of the Common Stock of the
Company held by WC Capital, LLC.
(13) Includes 592,495 options that may be exercised within 60 days of
January 19, 2005.
3
PROPOSAL I
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office for
the ensuing year until the next annual meeting of stockholders and until their
successors have been elected and qualified. The directors are elected by a
plurality of votes cast by stockholders. The Company's By-Laws state that the
number of directors constituting the entire Board of Directors shall be
determined by resolution of the Board of Directors. The number of directors
currently fixed by the Board of Directors is six (6). This number may be changed
by resolution of the Board of Directors.
Prior to the Meeting, Robert W. Hagger, Thomas H. Kelly, Richard de J.
Osborne, Terry W. Potter, David T. Riddiford and James Wood were the directors
of the Company. Messrs. Hagger, Osborne, Potter, Riddiford and Wood were elected
as directors at the Company's Annual Meeting of Stockholders held on March 5,
2004. Thomas H. Kelly was elected as director on October 27, 2004 by the Board
of Directors. These six (6) existing directors are being nominated for
re-election at the March 11, 2005 meeting.
No proxy may be voted for more people than the number of nominees
listed below. Shares represented by all proxies received by the Board of
Directors and not so marked as to withhold authority to vote for any individual
director (by writing that individual director's name where indicated on the
proxy) or for all directors will be voted FOR the election of all the nominees
named below (unless one or more nominees are unable or unwilling to serve). The
Board of Directors knows of no reason why any such nominee would be unable or
unwilling to serve, but if such should be the case, proxies may be voted for the
election of some other person.
Set forth below is information relating to the director nominees:
Robert W. Hagger, President, Chief Executive Officer and Director. Mr.
Hagger, age 56, has been the President, Chief Executive Officer and a director
of the Company since July 2001. Prior to becoming President and Chief Executive
Officer, Mr. Hagger was the Company's Senior Vice President of International
Operations from November 1997 through July 2001. From March 1997 to November
1997, Mr. Hagger was Managing Director of the Company's wholly-owned subsidiary,
Datawatch International Limited. From 1993 through November 1997, Mr. Hagger was
founder and Managing Director of Insight Strategy Management, Ltd.
Thomas H. Kelly, Director. Mr. Kelly, age 55, joined the Board of
Directors in October 2004. Mr. Kelly is vice president of Corporate Business
Development at Schering-Plough Corporation. Mr. Kelly was vice president and
corporate controller at Schering-Plough, a position he had held since joining
that corporation in 1991. Previously, he had been a senior partner with the
accounting firm of Deloitte & Touche LLP.
Richard de J. Osborne, Chairman of the Board. Mr. Osborne, age 70, has
been Chairman of the Board of Directors of the Company since January 2001. From
1985 to 1999, Mr. Osborne was Chairman of the Board and Chief Executive Officer
of ASARCO Incorporated, which is an integrated producer of copper and other
metals. Mr. Osborne is a director of Schering-Plough Corporation and NACCO
Industries, Inc.
Terry W. Potter, Director. Dr. Potter, age 57, has been a director of
the Company since April 1998. Since January 1998, Dr. Potter has been the
President of Venture Solutions and Development, Inc., which provides consulting
services to high technology start-up companies, spin-outs, and Fortune 100
companies. Prior to 1992, Dr. Potter was worldwide director of New Ventures for
Digital Equipment Corporation. From 1992 to 1997 he was the President of Modular
Group, the parent company of Advanced Modular Solutions, and from 1994 to 1997
he was the President of Advanced Modular Solutions, a wholly-owned subsidiary of
Modular Group which develops client-server computers and solutions. Dr. Potter
is the co-founder of Discover Why, Inc., which was founded in 1997.
4
David T. Riddiford, Director. Mr. Riddiford, age 69, has been a
director of the Company since 1989. Since 1987, Mr. Riddiford has been a general
partner of Pell, Rudman Venture Management, L.P., which is the general partner
of PR Venture Partners, L.P., a venture capital affiliate of Pell, Rudman & Co.,
Inc., an investment advisory firm. Mr. Riddiford is also a director of Vicor
Corporation.
James Wood, Director. Mr. Wood, age 74, has been a director of the
Company since January 2001. From 1980 to 1997, Mr. Wood was Chairman of the
Board and Chief Executive Officer of The Great Atlantic & Pacific Tea Company,
Inc. and its Co-Chief Executive Officer from 1997 to 1998 and continued as
non-executive Chairman from 1998 to 2001.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE NOMINEES LISTED ABOVE
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met seven times during the fiscal year ended
September 30, 2004 and took action by written consent three times. Each director
attended at least 75% of the meetings of the Board and of the committees of the
Board on which he served. Other than Mr. Hagger, each director is "independent"
as defined in the listing standards of The NASDAQ Stock Market. In addition, no
director, except for Mr. Hagger, (i) is a former executive of the Company or any
of its affiliates; (ii) is a relative of a current employee of the Company or
any of its affiliates; (iii) is a relative of a former executive of the Company
or any of its affiliates; (iv) has provided professional services to the Company
or any of its affiliates or to its officers, either currently or within the past
year; (v) has any transactional relationship with the Company or any of its
affiliates (other than solely in his capacity as a director, including stock
option compensation); (vi) has an "interlocking relationship," as defined by the
Securities and Exchange Commission, with any members of the Board of Directors
of the Company; (vii) is a founder of the Company but not currently an employee;
(viii) is employed by a significant customer or supplier; (ix) is a trustee,
director or employee of a charitable or non-profit organization that received
grants or endowments from the Company or any of its affiliates or (x) has been
the subject of an attestation by the Board of Directors that he is not
independent.
Under our by-laws, the Board of Directors may designate committees
composed of members of the Board to exercise the power and authority of the
Board in the management of the business and affairs of the Company, subject to
limitations imposed by law. The Board of Directors has a standing Audit
Committee, as that term is defined in Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, composed of Thomas H. Kelly, Terry W. Potter, and David T.
Riddiford, with Mr. Riddiford serving as Chairman, each of whom is "independent"
as defined in the listing standards of The NASDAQ Stock Market and the rules of
the Securities and Exchange Commission. The Board of Directors has determined
that Mr. Kelly qualifies as an audit committee "financial expert" as defined by
the Securities and Exchange Commission. The Audit Committee evaluates and
selects our independent auditors, reviews the audited financial statements and
discusses the adequacy of our internal controls and procedures with management
and the auditors. The Audit Committee also supervises the relationship between
the Company and its outside auditors, reviews the scope of both audit and
non-audit services and related fees, and determines the independence of the
outside auditors. The Audit Committee conducted six formal meetings during the
fiscal year ended September 30, 2004 and took action by written consent two
times. In accordance with the rules and regulations of the Securities and
Exchange Commission and The NASDAQ Stock Market, the Audit Committee Report can
be found on page 8. The Board of Directors has a standing Compensation and Stock
Committee, composed of Thomas H. Kelly, Terry W. Potter, David T. Riddiford and
James Wood, with Mr. Wood serving as Chairman, each of whom is "independent" as
defined in the listing standards of The NASDAQ Stock Market and the rules of the
Securities and Exchange Commission. The Compensation and Stock Committee, which
reviews and makes recommendations concerning executive compensation and
administers the Company's 1996 Stock Plan and the Company's 1996 International
Employee Non-Qualified Stock Option Plan conducted
5
four formal meetings during the fiscal year ended September 30, 2004 and took
action by written consent two times.
In January 2004, the Board of Directors established a Corporate
Governance and Nominating Committee ("Nominating Committee") for purposes of
nominating directors and for all other purposes outlined in the Nominating
Committee Charter. The Nominating Committee has policies concerning the
identification of candidates, including candidates recommended by stockholders;
the evaluation of candidates; the recommendation to the Board of candidates for
the Board's selection as director nominees; and the recommendation of candidates
for the Board's selection as nominees for appointment to the committees of the
Board. The assessment will include a review of the nominee's judgment,
experience, independence, understanding of the Corporation's or other related
industries, and such other factors as the Committee concludes are pertinent in
light of the current needs of the Board. The Board believes that its membership
should reflect a diversity of experience, gender, race, ethnicity and age. The
Nominating Committee will select qualified nominees and review its
recommendations with the Board, which will decide whether to invite the nominee
to join the Board. The Chairman of the Board should extend the Board's
invitation to join the Board. The Nominating Committee is composed of Thomas H.
Kelly, Terry W. Potter, David T. Riddiford and James Wood, with Mr. Wood serving
as Chairman, each of whom is "independent" as defined in the listing standards
of The NASDAQ Stock Market and the rules of the Securities and Exchange
Commission. The Nominating Committee met one time in fiscal 2004. Additionally,
WC Capital, LLC is entitled to nominate two directors to the Board pursuant to
the previously filed Investment Agreement, dated January 12, 2001, among WC
Capital, LLC, Carnegie Hill Associates, LLC and the Company. WC Capital, LLC has
nominated James Wood and Richard de J. Osborne to serve as directors, and the
Nominating Committee has nominated the remaining four director nominees.
STOCKHOLDER-BOARD COMMUNICATIONS
For stockholder communications directed to the Board of Directors,
stockholders may send such communication to the attention of the Chairman of the
Board at Datawatch Corporation, 175 Cabot Street, Suite 503, Lowell, MA 01854.
6
AUDIT COMMITTEE REPORT
The Audit Committee is composed of Messrs. Kelly, Potter and Riddiford,
with Mr. Riddiford serving as Chairman. None of the members are officers or
employees of the Company, and each is otherwise independent of the Company (as
independence is defined in the National Association of Securities Dealers'
listing standards). In addition, the Audit Committee has at least one financial
expert serving on the Audit Committee. Mr. Kelly is a financial expert as
defined by the Securities and Exchange Commission. The Audit Committee operates
under a written charter adopted by the Board of Directors.
The Audit Committee has reviewed the audited financial statements of
the Company at September 30, 2003 and September 30, 2004, and for each of the
previous three years ended September 30, and has discussed them with both
management and Deloitte & Touche LLP, the Company's independent auditors. The
Audit Committee has reviewed with Deloitte & Touche LLP, who are responsible for
expressing an opinion on the conformity of the Company's financial statements
with generally accepted accounting principles, the accountants' judgments as to
matters related to the conduct of the audit for the Company's financial
statements and such other matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees), as currently
in effect. The Audit Committee has met with the Deloitte & Touche LLP, with and
without management present, to discuss the results of the accountants'
examinations, evaluations of the Company's internal controls, and the overall
quality of the Company's financial reporting. The Audit Committee has received
the written disclosures and the letter from the Deloitte & Touche LLP required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), as currently in effect, and has discussed with Deloitte &
Touche LLP that firm's independence. Based on its review of the financial
statements and these discussions, the Audit Committee concluded that it would be
reasonable to recommend, and on that basis did recommend, to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 2004 for
filing with the Securities and Exchange Commission.
Respectfully submitted by the Audit Committee.
THE AUDIT COMMITTEE
David T. Riddiford, Chairman
Thomas H. Kelly
Terry W. Potter
7
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth summary information concerning the
annual and long-term compensation for services rendered in all capacities to the
Company for the fiscal years ended September 30, 2004, 2003 and 2002 to (i) the
Company's current Chief Executive Officer and (ii) each executive officer of the
Company, other than the Chief Executive Officer, who was serving as such at
September 30, 2004 and whose annual compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
---------------------------------------- Compensation
Annual Compensation Awards (3)
---------------------------------------- -------------------
------------------------------------ Fiscal --------- ----------- Other Annual Number of All Other
Name and Principal Positions(s) Year Salary($) Bonus($)(1) Compensation(2) Options/SARs (#)(3) Compensation($)(4)
------------------------------------ ------ --------- ----------- --------------- ------------------- ------------------
Robert W. Hagger (5) 2004 236,250 35,000 15,000(6) 20,000 851
President, Chief Executive Officer 2003 236,248 -- 15,000(7) 60,000 988
and Director 2002 225,000 62,000 56,152(8) 80,000 838
John Kitchen (9) 2004 168,000 24,000 -- 14,000 605
Senior Vice President of Desktop 2003 168,000 -- -- 20,000 653
& Server Solutions and Secretary 2002 160,000 50,000 -- 40,000 709
Alan R. MacDougall (10) 2004 136,500 30,000 -- 16,000 475
Senior Vice President of Finance, 2003 132,000 -- -- 30,000 564
Chief Financial Officer, Treasurer 2002 115,540 33,000 -- 30,000 695
and Assistant Secretary
H. Calvin G. Mackay (11) 2004 168,000 24,000 2,288(12) 14,000 605
Senior Vice President for 2003 168,000 -- -- 10,000 741
Enterprise Software 2002 133,333 33,000 32,363(13) 73,334 558
------------
(1) Bonuses are reported in the year earned, regardless of when they are
paid.
(2) Excludes perquisites and other personal benefits, the aggregate annual
amount of which does not exceed the lessor of $50,000 or 10% of the
annualized salary reported for the Named Officer.
(3) The Company did not grant any restricted stock awards or stock
appreciation rights or make any long-term incentive plan payouts during
fiscal years ended September 30, 2004, 2003 or 2002.
(4) Amount represents the dollar value of group-term life insurance
premiums and excess life insurance premiums paid by the Company for the
benefit of the Named Officer.
(5) Mr. Hagger served as Senior Vice President of International Operations
until July 9, 2001 when he assumed the position of President, Chief
Executive Officer and director.
(6) Amount for fiscal year 2004 represents a $15,000 in car allowance.
(7) Amount for fiscal year 2003 represents a $15,000 in car allowance.
8
(8) Amount for fiscal year 2002 includes $36,135 in relocation expenses,
$14,517 in car allowances and $5,500 for tax preparation services.
(9) Mr. Kitchen became an executive officer when he was elected Vice
President of Marketing effective as of July 1, 2000. Effective as of
July 9, 2001, Mr. Kitchen became Senior Vice President for Desktop &
Server Solutions and Secretary of the Company.
(10) Mr. MacDougall became an executive officer when he was elected Vice
President of Finance, Chief Financial Officer and Treasurer on December
16, 2000.
(11) Mr. Mackay became an executive officer when he was elected Senior Vice
President for Enterprise Software in December 2001.
(12) Amount for fiscal year 2004 includes airfare for Mr. Mackay's family to
go with him to pick up his renewed VISA.
(13) Amount for fiscal year 2002 includes $22,596 in relocation expenses,
$8,967 in car allowances and $800 for tax preparation services.
9
OPTIONS GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options during the
fiscal year ended September 30, 2004 to the Named Officers who are listed in the
Summary Capitalization Table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants(2) Option Term(3)
----------------------------------------------------------------------- -----------------------
Number of Percent of Total
Securities Options/SARs Exercise or
Underlying Granted to Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ----------- ------------------ -------------- ------------ --------- ---------
Robert Hagger 20,000 19.61% $2.60 11/20/13 32,703 82,875
John Kitchen 14,000 13.73% $2.60 11/20/13 22,892 58,012
Alan R. MacDougall 16,000 15.69% $2.60 11/20/13 26,162 66,300
H. Calvin G. Mackay 14,000 13.73% $2.60 11/20/13 22,892 58,012
------------------
(1) No stock appreciation rights ("SARs") were granted by the Company in
the fiscal year ended September 30, 2003.
(2) Stock options were granted under the Company's 1996 Stock Plan at an
exercise price equal to the fair market value of the Company's Common
Stock on the date of grant. The options have a term of 10 years from
the date of grant and become exercisable over three years in twelve
equal quarterly installments beginning three months from the date of
grant.
(3) Amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the
expiration of their term assuming the specified compounded rates of
appreciation (5% and 10%) on the Company's Common Stock over the term
of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on
the timing of such exercise and the future performance of the Company's
Common Stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected
will be received by the individuals.
10
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase our common stock held by each Named Officer, including (i) the number
of shares of common stock purchased upon exercise of such options in fiscal year
2004, (ii) the net value realized upon such exercise, (iii) the number of
unexercised options outstanding at September 30, 2004 and (iv) the value of such
unexercised options at September 30, 2004:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
SEPTEMBER 30, 2004 OPTION/SAR VALUES
Number of Value of Unexercised
Unexercised Options held at In-the-Money Options at
Shares September 30, 2004(#) September 30, 2004($)(2)
Acquired on Value ----------------------------------- ---------------------------------
Name Exercise (#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------------- ----------- ------------- ----------- -------------
Robert Hagger -- -- 188,050 60,842 391,929 135,049
John Kitchen -- -- 108,820 30,518 209,996 65,693
Alan R. MacDougall -- -- 55,868 36,170 137,700 74,397
H. Calvin G. Mackay -- -- 73,480 23,854 226,686 50,666
------------------
(1) Amounts disclosed in this column do not reflect amounts actually
received by the Named Officers but are calculated based on the
difference between the fair market value of the Company's Common Stock
on the date of exercise and the exercise price of the options. The
Named Officers will receive cash only if and when they sell the Common
Stock issued upon exercise of the options, and the amount of cash
received by such individuals is dependent on the price of the Company's
Common Stock at the time of such sale.
(2) Represents the difference between the option exercise price of
in-the-money options and the fair market value per share of Common
Stock at 2004 fiscal year-end ($3.95 per share as quoted on the Nasdaq
National Market at the close of trading on September 30, 2004)
multiplied by the number of shares underlying the option.
EQUITY COMPENSATION PLAN INFORMATION
------------------------------------
The following table provides information about the common stock that
may be issued upon the exercise of options, warrants and rights under all of the
Company's existing equity compensation plans as of September 30, 2004, including
the 1996 Stock Plan, the 1996 Non-Employee Director Stock Option Plan (the
"Non-Employee Director Plan"), the 1987 Stock Plan (the "1987 Stock Plan"), and
the 1996 International Employee Non-Qualified Stock Option Plan (the
"International Plan"). The 1996 Stock Plan has previously been approved by the
Company's stockholders. The Non-Employee Director Plan was approved by the
Company's stockholders and provided for the grant of nonqualified options to
non-employee directors. The Non-Employee Director Plan was replaced by the
Company's Non-Employee Director Stock Option Policy under the 1996 Stock Plan in
February 2000 and no further grants may be made under the Non-Employee Director
Plan. The 1987 Stock Plan, which was approved by the Company's stockholders,
provided for grants of options and other stock rights to employees, directors
and consultants. The 1987 Stock Plan was terminated in December 1996 and no
further grants may be made under it. The International Plan, which has not been
approved by the Company's stockholders, provides for the grant of non-qualified
stock options to employees or consultants of any of the Company's foreign
subsidiaries and is described in further detail under the table below.
11
Number of Securities to be
issued upon exercise of Weighted average exercise
outstanding options, warrants price of outstanding options, Number of securities remaining
Plan Category and rights warrants and rights available for future issuance
---------------------------------- ------------------------------- ------------------------------ --------------------------------
Equity compensation plans
approved by security holders 862,584(1) $2.16 145,210
Equity compensation plans not
approved by security holders 57,386(2) $2.44 10,706
Total 919,970 $2.17 155,916
(1) Of these shares, 844,804 were granted under the 1996 Stock Plan and 17,780
under the Non-Employee Director Plan. 145,210 shares remain available for grant
under the 1996 Stock Plan.
(2) Of these shares, all 57,386 shares were granted under the International
Plan.
DESCRIPTION OF THE COMPANY'S INTERNATIONAL PLAN
The Company's International Plan was adopted by the Board of Directors
of the Company in October 1996 but has not been approved by the Company's
stockholders. The International Plan is intended to provide incentives in the
form of non-qualified stock options ("NQSOs") to employees and consultants of
subsidiaries of the Company incorporated outside of the United States, who are
not officers or directors of the Company. A maximum of 88,888 shares of Common
Stock are reserved for issuance under the International Plan upon the exercise
of NQSOs. As of September 30, 2004, 10,706 shares of Common Stock remained
available for issuance under the International Plan. Currently 43 employees and
consultants are eligible to participate in the International Plan. The
International Plan is administered by the Compensation and Stock Committee,
which, subject to the terms of the International Plan, has the authority to
determine the persons to whom NQSOs are granted, the exercise price per share
and other terms, provisions and restrictions governing such NQSOs. NQSOs may be
granted under the International Plan at any time prior to October 4, 2006. The
exercise price per share of NQSOs granted cannot be less than the minimum legal
consideration required under the laws of the State of Delaware or the laws of
any jurisdiction in which the Company may be organized. Each NQSO shall expire
as of the date specified by the Compensation and Stock Committee, but not more
than ten years from the date of grant.
Each NQSO granted under the International Plan may either be fully
exercisable at the time of grant or may become exercisable in such installments
as the Compensation and Stock Committee may specify. Each NQSO may be exercised
from time to time, in whole or in part, up to the total number of shares with
respect to which it is then exercisable. Subject to certain restrictions, the
Compensation and Stock Committee has the right to accelerate the date that any
installment of any NQSO becomes exercisable. Payment of the exercise price of an
NQSO granted under the International Plan may be made in cash or by check or, if
authorized by the Compensation and Stock Committee, (i) by tendering shares of
Common Stock of the Company having a fair market value equal as of the date of
the exercise to the cash exercise price of the NQSO, (ii) by delivery of a
personal recourse, interest bearing note, (iii) through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the NQSO and an authorization to
the broker or selling agent to pay that amount to the Company or (iv) by any
combination of the above.
If a NQSO optionee under the International Plan ceases to be employed
by the Company other than by reason of death or disability, no further
installments of his or her NQSOs will become exercisable, and vested NQSOs shall
generally terminate after the passage of three months from the date of
termination of employment (but no later than their specified expiration dates).
If an optionee ceases to be employed by the Company by reason of disability, or
if an optionee dies, any NQSO held by the optionee may be exercised, to the
extent exercisable on the date of disability or death, by the optionee or the
optionee's estate, personal representative or beneficiary, at any time within
180 days from the date of the optionee's disability or death (but not later than
the specified expiration date of the NQSO). NQSO holders under the International
Plan are protected against dilution in the event of a stock dividend, stock
split, consolidation, merger, recapitalization, reorganization or similar
transaction.
12
The Board of Directors may from time to time adopt amendments to the
International Plan and may terminate the International Plan, at any time. Any
shares subject to a NQSO granted under the International Plan which for any
reason expires or terminates unexercised, may again be available for future NQSO
grants. Unless terminated sooner, the International Plan will terminate on
October 4, 2006 (except as to NQSOs outstanding on that date).
EXECUTIVE AGREEMENTS AND SEVERANCE ARRANGEMENTS
The Company's subsidiary Datawatch International Limited (formerly
Workgroup Systems Limited) entered into a Contract of Employment with Robert W.
Hagger dated February 24, 1997, as amended on July 15, 1999 (the "Original
Hagger Employment Agreement"), which provided that Mr. Hagger's employment may
be terminated with cause immediately upon notice to Mr. Hagger or terminated
without cause provided he is given at least 12 months notice. On July 9, 2001,
in connection with Mr. Hagger's promotion to Chief Executive Officer and
President of the Company, the Board of Directors approved an Employment
Agreement (the "Hagger Employment Agreement") with Mr. Hagger, which agreement
supercedes and terminates in its entirety the Original Hagger Employment
Agreement.
The Hagger Employment Agreement, which was for an initial two-year term
and expiring on July 9, 2003, was automatically extended for one year on July 9,
2003, and again on July 9, 2004, and sets forth Mr. Hagger's responsibilities,
compensation and benefits. In addition, the Hagger Employment Agreement provides
that in the event the Company terminates Mr. Hagger's employment for reasons
other than for "Cause" or Mr. Hagger elects to terminate his employment with the
Company for "Good Reason", Mr. Hagger is entitled to severance payments equal to
his then current monthly base salary, payable on a monthly basis for the greater
of (i) the number of months remaining under the term of the Hagger Employment
Agreement or (ii) 12 months. The Hagger Employment Agreement also provides that
if upon or after the expiration of the Hagger Employment Agreement Mr. Hagger is
an at-will employee of the Company and the Company terminates Mr. Hagger's
employment without "Cause", then Mr. Hagger is entitled to severance payments
equal to his then current monthly base salary, payable on a monthly basis for 12
months. "Cause" is defined in the Hagger Employment Agreement as (i) the failure
to render services to the Company in accordance with the Hagger Employment
Agreement, (ii) gross negligence, dishonesty, or breach of fiduciary duty, (iii)
fraud, embezzlement or substantial disregard of the rules or policies of the
Company, (iv) acts which would tend to generate significant adverse publicity
toward the Company, (v) the commission of a felony, or (vi) breach of the terms
of the Proprietary Information and Inventions Agreement between the Company and
Mr. Hagger. "Good Reason" is defined in the Hagger Employment Agreement as (i) a
material diminution in the nature or scope of Mr. Hagger's responsibilities,
duties or authority or (ii) a relocation of Mr. Hagger to a location, other than
a relocation to England, that is greater than fifty (50) miles from Lowell,
Massachusetts.
The Board of Directors approved severance agreements by the Company
(each, an "Executive Agreement") with each of H. Calvin G. Mackay, John Kitchen
and Alan R. MacDougall. In each case, the Executive Agreement provides that in
the event the Company terminates the officer's employment for reasons other than
for "Cause" or the officer elects to terminate his employment with the Company
for "Good Reason", such officer is entitled to severance payments equal to his
then current monthly base salary, payable on a monthly basis for six months
following his termination date. "Cause" is defined in the Executive Agreements
as (i) the willful and continuing failure or refusal to render services in
accordance with his obligations, (ii) gross negligence, dishonesty, or breach of
fiduciary duty, (iii) fraud, embezzlement or substantial disregard of the rules
or policies of the Company, (iv) acts which would tend to generate significant
adverse publicity toward the Company, (v) the commission of a felony, or (vi)
breach of the terms of the Proprietary Information and Inventions Agreement
between the Company and the officer. "Good Reason" is defined in the Executive
Agreement as including a material diminution in the nature or scope of such
officer's responsibilities, duties or authority. The Executive Agreement for Mr.
Mackay was executed by the Company and Mr. Mackay on December 1, 2001. The
Executive Agreements for Mr. Kitchen and Mr.MacDougall, respectively, were
executed on April 25, 2002.
13
NON-EMPLOYEE DIRECTOR INDEMNIFICATION ARRANGEMENTS
In addition to the protections afforded the directors of the Company
with respect to indemnification under the Company's By-Laws, the Company has
entered into indemnification agreements with each of its non-employee directors.
These agreements require the Company to, among other things, indemnify each of
its non-employee directors for any and all expenses (including attorney fees),
judgments, penalties, fines and amounts paid in settlement which are actually
and reasonably incurred by such individual, in connection with any threatened,
pending or completed proceeding arising out of the individual's status as a
director of the Company. In addition, the agreements require the Company to
advance expenses incurred by the individual in connection with any proceeding
against the individual with respect to which he or she may be entitled to
indemnification by the Company.
14
COMPENSATION AND STOCK COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Committee is responsible for (i)
establishing and administering the base salaries and cash bonuses of the
Company's executive officers and (ii) administering and making recommendations
and awards under the Company's 1996 Stock Plan and the Company's 1996
International Employee Non-Qualified Stock Option Plan. The Compensation and
Stock Committee is composed exclusively of directors who are not also officers
or employees of the Company.
The Company's executive compensation policies are designed to provide
levels of cash and equity compensation that will reward and retain experienced
executives who will contribute to the achievement of the Company's performance
objectives in the competitive and rapidly changing business environment in which
the Company operates. The executive compensation program is designed to achieve
these goals through a combination of base salary, cash bonuses and long-term
incentive compensation in the form of stock options. As noted above, both the
cash compensation and equity compensation components of the Company's executive
compensation program are determined by the Compensation and Stock Committee.
CASH COMPENSATION. Base salary compensation levels for each of the
Company's executive officers are determined by evaluating the individual
officer's responsibilities, experience and performance, as well as generally
available information regarding salaries paid to executive officers with
comparable qualifications at companies in businesses comparable to the Company.
Cash bonuses, if any, are determined annually and are based on the Company's
achievement of targeted measures of financial performance, including revenue,
profit and cost saving goals, and, in certain cases, the achievement of
non-financial objectives in the officer's area of responsibility. In determining
compensation levels paid to its executive officers, the Compensation and Stock
Committee also takes into account certain subjective factors such as the
executive's ability to provide leadership, to develop the Company's business, to
promote the Company's image with its customers and stockholders, and to manage
the Company's continuing growth. For fiscal year 2004, the Compensation and
Stock Committee determined that based on the Company's performance, cash bonuses
would be paid to the Company's executive officers. For information regarding the
Company's executive officers' fiscal 2004 compensation, see the table captioned
"Summary Compensation Table" contained elsewhere in this proxy statement.
EQUITY COMPENSATION. Long-term incentive compensation in the form of
stock option grants is designed to encourage the Company's executive officers
and other employees to remain with the Company and promote the Company's
business and to align the interests of the Company's executive officers and
other employees more closely with those of the Company's stockholders by
allowing those executives and employees to share in long-term appreciation in
the value of the Company's Common Stock. It is the Company's policy to grant
stock options to executive officers and certain employees at the time they join
the Company in an amount consistent with such executive's or employee's position
and level of seniority. In addition, the Compensation and Stock Committee will
occasionally make additional option grants to the Company's executive officers
and employees. When establishing stock option grant levels, the Compensation and
Stock Committee considers both individual and general corporate performance,
recommendations of the Chief Executive Officer, existing levels of stock
ownership, previous option grants and current option holdings, including the
number of unvested options and the then current value of such unvested options,
and the current price of the Company's Common Stock. Options are generally
granted at fair market value and become exercisable ratably over a three-year
period. The number of options granted to certain of the most highly compensated
executive officers of the Corporation in fiscal 2004 is set forth on the table
captioned "Option/SAR Grants in Last Fiscal Year" contained elsewhere in this
proxy statement. For information relating to the total options held by each of
the Company's executive officers at September 30, 2004, see the table captioned
"Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values" contained elsewhere in this proxy statement.
15
CEO COMPENSATION. Compensation during fiscal 2004 for the Company's
President and Chief Executive Officer, Robert W. Hagger, was determined in
accordance with the policies applicable to the other executive officers of the
Company described above. In addition to his base salary for fiscal 2004, the
Compensation and Stock Committee, in November 2003, granted Mr. Hagger stock
options to purchase an aggregate of 20,000 shares of Common Stock at an exercise
price of $2.60 per share pursuant to the Company's 1996 Stock Plan. The
Compensation and Stock Committee believes that Mr. Hagger's annual compensation
was competitive with the compensation paid by other companies in its industry to
their chief executive officers. In addition to achievement of performance
targets in accordance with the Company's executive compensation policies, the
Compensation and Stock Committee determined the Chief Executive Officer's cash
compensation based upon the Company's overall performance, the performance of
his management team, the compensation paid at competing companies and the
Company's prospects, among other objective and subjective factors. The
Compensation and Stock Committee does not find it practicable to quantify or
assign relative weight to the factors on which the Chief Executive Officer's
compensation was based. Mr. Hagger's annual compensation for the fiscal year
ended September 30, 2004, is reflected in the table captioned "Summary
Compensation Table" contained elsewhere in this proxy statement.
TAX CONSIDERATIONS. In general, Section 162(m) of the Internal Revenue
Code of 1986, as amended, (the "Code"), prevents publicly held corporations from
deducting, for federal income tax purposes, compensation paid in excess of $1
million to certain executives. This deduction limitation does not apply,
however, to compensation that constitutes "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder. The Compensation and Stock Committee has
considered these requirements and it is the present intention of the committee
that, so long as it is consistent with the Company's overall compensation
objectives, substantially all tax deductions attributable to executive
compensation will not be subject to the deduction limitations of Section 162(m)
of the Code.
Respectfully submitted by the Compensation and Stock Committee.
THE COMPENSATION AND STOCK COMMITTEE
James Wood, Chairman
Thomas H. Kelly
Terry W. Potter
David T. Riddiford
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has established a Compensation and
Stock Committee currently consisting of Messrs. Kelly, Potter, Riddiford and
Wood, with Mr. Wood serving as Chairman. No person who served as a member of the
Compensation and Stock Committee was, during the fiscal year ended September 30,
2004, an officer or employee of the Company or any of its subsidiaries, was
formerly an officer of the Company or any of its subsidiaries, or had any
relationship requiring disclosure herein. No executive officer of the Company
served as a member of the compensation committee of another entity (or other
committee of the Board of Directors performing equivalent functions or, in the
absence of any such committee, the entire Board of Directors), one of whose
executive officers served as a member of the Compensation and Stock Committee of
the Company.
17
COMPENSATION OF DIRECTORS
During the fiscal year ended September 30, 2004, directors who were
employees of the Company received no cash compensation for their services as
directors. Directors who are not employees of the Company (the "Non-Employee
Directors") receive $15,000 per year for their service as a member of the
Company's Board of Directors.
All directors are eligible to receive stock options under the Company's
1996 Stock Plan. In addition, all Non-Employee Directors are eligible to receive
stock options pursuant to the Non-Employee Director Stock Option Policy (the
"Director Option Policy") described below.
NON-EMPLOYEE DIRECTOR STOCK OPTION POLICY
In February 2000 the Board of Directors adopted the Director Option
Policy. The Director Option Policy is administered by the Board of Directors and
provides for the grant of options to purchase Common Stock to non-employee
directors. The Director Option Policy authorizes the automatic grant, without
further action by the Board of Directors, (a) of an option to purchase 5,334
shares of Common Stock under the Company's 1996 Stock Plan to each person who
becomes a Non-Employee Director on the date such person is first elected to the
Board of Directors (the "First Grant Date") and (b) of an option to purchase
5,000 shares of Common Stock to each person who is a Non-Employee Director on
the date of the Company's Annual Meeting of Stockholders in each successive year
(the "Annual Grant"). Options granted to Non-Employee Directors under the
Director Option Policy vest over three years in twelve equal quarterly
installments beginning three months from the date such options are granted.
Notwithstanding this vesting schedule, the Director Option Policy also provides
that in the event of any change in control of the Company (as defined in the
Director Option Policy) all options granted under the Director Option Policy
that are outstanding but unvested automatically become exercisable in full.
The exercise price per share for all options that are granted under the
Director Option Policy will be equal to the fair market value per share of the
Common Stock on the date of grant. The term of each option will be for a period
of ten years from the date of grant. Options may not be assigned or transferred
except by will or by the laws of descent and distribution and are exercisable to
the extent vested only while the optionee is serving as a director of the
Company or (i) if the optionee has served as a director of the Company for less
than five years, within twelve months after the optionee ceases to serve as a
director of the Company or (ii) if the optionee has served as a director of the
Company for five years or more, within twenty-four months after the optionee
ceases to serve as a director of the Company; except that if a director dies or
becomes disabled while he or she is serving as a director of the Company, the
option automatically becomes fully vested and is exercisable until the scheduled
expiration date of the option.
18
STOCK PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
stockholder return on the Company's Common Stock during the period from
September 30, 1999 through September 30, 2004, with the cumulative total return
on (i) an SIC Index that includes all organizations in the Company's Standard
Industrial Classification (SIC) Code 7372-Prepackaged Software (the "SIC Code
Index") and (ii) the Media General Market Weighted Nasdaq Index Return (the
"Nasdaq Market Index"). The comparison assumes that $100 was invested on
September 30, 1999 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends, if any.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
DATAWATCH CORPORATION, SIC CODE INDEX
AND NASDAQ MARKET INDEX (1)(2)
[GRAPH OMITTED]
ASSUMES $100 INVESTED ON OCT. 01, 1999
ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING SEPT. 30, 2004
9/30/99 9/30/00 9/30/01 9/29/02 9/28/03 9/30/04
------- ------- ------- ------- ------- -------
Datawatch Corporation 100.00 118.80 24.87 87.78 169.33 175.56
SIC Code Index 100.00 124.27 54.31 41.37 59.98 61.70
NASDAQ Market Index 100.00 136.79 56.05 45.09 69.11 73.27
--------------------
(1) This graph is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily
indicative of future price performance. Information used in the graph
was obtained from Media General Financial Services, Inc., Richmond,
Virginia, a source believed to be reliable, but the Company is not
responsible for any errors or omissions in such information.
19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock,
referred to herein as Reporting Persons, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of our common stock. Such persons are required by regulations of the
Securities and Exchange Commission to furnish us with copies of all such
filings. Based on our review of the copies of such filings received by us with
respect to the fiscal year ended September 30, 2004, and written representations
from certain of our directors and executive officers, we believe that all
Reporting Persons complied with all Section 16(a) filing requirements for the
fiscal year ended September 30, 2004.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement
to be furnished to all stockholders entitled to vote at the next annual meeting
of stockholders of the Company must be received at the Company's principal
executive offices not later than close of business on September 29, 2005. The
deadline for providing timely notice to the Company of matters that stockholders
otherwise desire to introduce at the next annual meeting of stockholders of the
Company is December 13, 2005. For any proposal that is not submitted for
inclusion in the proxy statement for the fiscal year to end September 30, 2005
but is instead sought to be presented directly at the next annual meeting, SEC
rules permit management to vote proxies in its discretion if the Company: (1)
receives notice of the proposal before the close of business on December 13,
2005, and advises stockholders in the next proxy statement about the nature of
the matter and how management intends to vote on such matter; or (2) does not
receive notice of the proposal prior to the close of business on December 13,
2005. Notices of intention to present proposals at the next annual meeting
should be addressed to Robert W. Hagger, Chief Executive Officer, Datawatch
Corporation, 175 Cabot Street, Suite 503, Lowell, MA 01854. In order to curtail
controversy as to the date on which a proposal was received by the Company, it
is suggested that proponents submit their proposals by Certified Mail - Return
Receipt Requested.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected the firm of
Deloitte & Touche LLP as our independent auditors for the 2005 fiscal year.
Deloitte & Touche LLP has served as our independent auditors since the Company's
inception. Representatives of Deloitte & Touche LLP are expected to be present
at the Annual Meeting. They will have the opportunity to make a statement if
they desire to do so and will also be available to respond to appropriate
questions from stockholders.
The fees billed during the 2003 and 2004 fiscal years by Deloitte &
Touche LLP for services provided to us are as set forth below. The fees billed
during fiscal 2003 and fiscal 2004 included fees for some services provided for
fiscal 2002 and fiscal 2003, respectively.
2003 2004
---- ----
Audit Fees (1): $ 240,664 $ 195,923
Audit-Related Fees (2): -- 6,423
Tax Fees (3): 80,138 80,392
All Other Fees (4): -- --
--------- ---------
Total $ 320,802 $ 282,738
(1) Audit Fees consisted of audit work performed for the audit of our
consolidated financial statements, as well as work generally only the
independent auditor can reasonably be expected to provide, such as
statutory audits, comfort letters, consents and assistance with and review
of documents filed with the Securities and Exchange Commission. The
aggregate fees billed by Deloitte & Touche LLP for professional services
for the fiscal 2003 audit of the Company's annual financial statements and
the
20
review of the quarterly reports on Form 10-Q totaled $195,751 of which
$124,080 and $71,671 were billed in fiscal 2003 and 2004, respectively.
During fiscal 2004, the aggregate fees billed by Deloitte & Touche LLP for
professional services for the fiscal 2004 audit of the Company's annual
financial statements and the review of the quarterly reports on Form 10-Q
totaled $124,252; the estimated fees remaining to be billed by Deloitte &
Touche LLP for professional services for the fiscal 2004 audit of the
Company's annual financial statements total approximately $121,000.
(2) Audit-Related Fees consist of fees related to assurance and related
services that are reasonably related to the performance of the audit and
review of the Company's financial statements.
(3) Tax Fees consisted of fees related to tax compliance, tax planning and tax
advice. This includes preparation of tax returns for the Company, refund
claims, payment planning, taxpayer registration and tax audit assistance.
(4) All Other Fees consists of all other products and services provided by the
principal accountant that are not reflected in any of the previous three
categories.
All services rendered by Deloitte & Touche LLP in fiscal year 2004 were
permissible under applicable laws and regulations, and were pre-approved by the
Audit Committee.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITOR
Consistent with the requirements of the Securities and Exchange
Commission regarding auditor independence, the Audit Committee has
responsibility for appointing, setting compensation and overseeing the work of
the independent auditor. The Audit Committee has approved the engagement of
Deloitte & Touche LLP on the specific terms set forth in an engagement letter
and has approved the provision of certain other specific services. During the
year, circumstances may arise when it may become necessary to engage the
independent auditor for additional services not contemplated in the original
pre-approval. In those instances, the Audit Committee requires specific
pre-approval by the Audit Committee or by one or more of its members before
engaging the independent auditor.
CODE OF ETHICS
The Board of Directors adopted a Code of Ethics on January 23, 2004
applicable to all employees and directors of the Company. The Code of Ethics is
posted on the Investors page of our website at www.datawatch.com. Any amendments
to or waivers of the Code of Ethics that apply to the Company's principal
executive officer, principal financial officer or principal accounting officer
and that relates to any element of the definition of the term "code of ethics,"
as that term is defined by the Securities and Exchange Commission, will be
posted on our website at the address above.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and
in addition to soliciting stockholders by mail through its regular employees,
the Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of a nominee and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by officers and employees of the Company or by certain
outside proxy solicitation services may also be made of some stockholders in
person or by mail, telephone or telegraph following the original solicitation.
21
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
In some cases, only one copy of the proxy statement and the annual
report is being delivered to multiple stockholders sharing an address. However,
this delivery method, called "householding," is not being used if the Company
has received contrary instructions from one or more of the stockholders. The
Company will deliver promptly, upon written or oral request, a separate copy of
this proxy statement and the annual report to a stockholder at a shared address
to which a single copy of the documents were delivered. To request a separate
delivery of these materials now or in the future, a stockholder may submit a
written request to Investor Relations, Datawatch Corporation, 175 Cabot Street,
Suite 503, Lowell, MA 01854 or an oral request by calling the Company's Investor
Relations group at (978) 441-2200, ext. 8323. Additionally, any stockholders who
are presently sharing an address and receiving multiple copies of the proxy
statement and annual report and who would prefer to receive a single copy of
such materials may instruct the Company accordingly by directing that request to
the Company in the manner provided above.
OTHER BUSINESS
The Board of Directors knows of no business that will be presented for
consideration at the meeting other than those items stated above. If any other
business should come before the Meeting, votes may be cast pursuant to proxies
in respect to any such business in the best judgment of the person or persons
acting under the proxies.
22
DATAWATCH CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 11, 2005
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT W. HAGGER and JOHN J. HULBURT,
and each or both of them, proxies, with full power of substitution to vote all
shares of stock of Datawatch Corporation (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Company to be
held on Friday, March 11, 2005, at 11:00 a.m. Eastern time, at the offices of
Choate, Hall & Stewart, 53 State Street, Boston, MA 02109, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting of
Stockholders and proxy Statement dated January [ ], 2005, a copy of which has
been received by the undersigned.
SEE REVERSE
SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[X] Please mark votes as in this example.
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1. To elect Robert W. Hagger, Thomas H. Kelly, Richard de J.
Osborne, Terry W. Potter, David T. Riddiford and James Wood as
Directors to serve until the next Annual Meeting of Stockholders
or until their successors are duly elected and qualified.
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FOR WITHHELD
[ ] [ ]
INSTRUCTIONS: To withhold your vote for any
individual nominee write the nominee's name on the space
provided below.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
(Please sign exactly as your name appears hereon.
If signing as attorney, executor, trustee or
guardian, please give your full title as such. If
stock is held jointly, each owner should sign.
Please read reverse side before signing.)
Signature: _____________________ Date_____________
Signature: _____________________ Date_____________