UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No.
)
Filed by
the Registrant
x
Filed by
a party other than the Registrant
o
Check the
appropriate box:
o
Confidential,
For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
(Name of
Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of filing fee (Check the appropriate box):
(1)
|
Title
of each class of securities to which transaction
applies:
|
(2)
|
Aggregate
number of securities to which transaction
applies:
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
(4)
|
Proposed
maximum aggregate value of
transaction:
|
o
Fee paid previously with preliminary materials:
(1) Amount
previously paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
DATAWATCH
CORPORATION
271
Mill Road
Quorum
Office Park
Chelmsford,
Massachusetts 01824
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On March 19, 2010
_____________
The
Annual Meeting of Stockholders of Datawatch Corporation will be held at the
offices of Choate, Hall & Stewart LLP, Two International Place, Boston, MA
02110
,
on March 19, 2010
at 11:00 am., 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 22, 2010, 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 A. 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 their 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
|
Chelmsford,
Massachusetts
January
28, 2010
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
271
Mill Road
Quorum
Office Park
Chelmsford,
Massachusetts 01824
PROXY
STATEMENT
January
28, 2010
This
proxy statement is furnished in connection with the solicitation of proxies by
the Board of Directors of Datawatch Corporation (the “Company” or “Datawatch”)
for use at the Annual Meeting of Stockholders of the Company to be held at the
offices of Choate, Hall & Stewart LLP, Two International Place, Boston, MA
02110, on March 19, 2010, at 11:00 a.m., local time, and any adjournments
thereof (the “Meeting”).
Only
stockholders of record at the close of business on January 22, 2010 will be
entitled to notice of and to vote at the Meeting. As of that date, 5,925,839
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 22, 2010 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 does not vote on a 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. 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 Kenneth P. Bero, Thomas H. Kelly, Richard de J.
Osborne, Terry W. Potter, William B. Simmons 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 Kenneth P. Bero and Murray P. Fish, 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, 2009, 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 16, 2010.
PRINCIPAL
HOLDERS OF VOTING SECURITIES
The
following table sets forth as of January 22, 2010, certain information regarding
beneficial ownership of the Common Stock (i) by each person who, to the
knowledge of the Company, beneficially owned more than 5% of the shares of
Common Stock outstanding at such date; (ii) by each director of the Company;
(iii) by each executive officer identified in the Summary Compensation Table on
page 15 of this proxy statement; and (iv) by all current directors and executive
officers of the Company as a group.
Name
and Address
of
Beneficial Owner(1)
|
|
Number
of Shares Beneficially
Owned
|
|
Percentage
of Shares of
Common
Stock(2)
|
James
Wood(3)
|
939,230
|
|
15.76%
|
Richard
de J. Osborne(4)
|
331,002
|
|
5.56%
|
John
H. Kitchen, III(5)
|
149,989
|
|
2.48%
|
Kenneth
P. Bero(6)
|
69,071
|
|
1.15%
|
David
T. Riddiford(7)
|
50,802
|
|
*
|
Terry
W. Potter(8)
|
44,390
|
|
*
|
Murray
P. Fish(9)
|
27,301
|
|
*
|
Thomas
H. Kelly(10)
|
22,834
|
|
*
|
Robert
W. Clemens(11)
|
20,223
|
|
*
|
Daniel
F. Incropera(12)
|
15,369
|
|
*
|
Harvey
C. Gross (13)
|
12,717
|
|
*
|
William
B. Simmons(14)
|
7,500
|
|
*
|
|
|
|
|
All
current directors and executive
officers
as a group (12 persons)(15)
|
1,690,424
|
|
26.74%
|
WC
Capital, LLC(3)
c/o
James Wood
116
East Saddle River Road
Saddle
River, New Jersey 07458
|
689,966
|
|
11.64%
|
Kevin
C. Howe(16)
5416
Arbor Hollow
McKinney,
Texas 75070
|
581,932
|
|
9.82%
|
Doug
Pauly & Katie Pauly Comm Prop(17)
1509
First Street
Wenatchee,
WA 98801
|
507,694
|
|
8.57%
|
KVO
Capital Management LLC(18)
44
S. Main Street, Box 17
Hanover,
NH 03755
|
401,939
|
|
6.78%
|
(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, 271 Mill Road, Quorum
Office Park, Chelmsford, Massachusetts
01824.
|
(2)
|
The
number of shares of Common Stock deemed outstanding includes (i) 5,925,839
shares of Common Stock outstanding as of January 22, 2010 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 22, 2010.
|
(3)
|
Includes
211,651 shares of Common Stock,
35,112 options
that may be exercised within 60 days of January 22, 2010 and 2,501
restricted stock units. 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 held
by WC Capital, LLC.
|
(4)
|
Includes
157,131 shares of Common Stock, 28,000 options that may be exercised
within 60 days of January 22, 2010 and 2,501 restricted stock units. Also
includes 143,370 shares of Common Stock 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.
|
(5)
|
Includes
21,276 shares of Common Stock, 125,713
options that may
be exercised within 60 days of January 22, 2010 and 3,000 restricted stock
units.
|
(6)
|
Includes
666 shares of Common Stock, 65,071 options that may be exercised within 60
days of January 22, 2010 and 3,334 restricted stock
units.
|
(7)
|
Includes
16,745 shares of Common Stock, 31,556 options that may be exercised within
60 days of January 22, 2010 and 2,501 restricted stock units. Included in
total options are 1,778 options that are due to expire on March 29,
2010.
|
(8)
|
Includes
10,333 shares of Common Stock, 31,556 options that may be exercised within
60 days of January 22, 2010 and 2,501 restricted stock
units. Included in total options are 1,778 options that are due
to expire on March 29, 2010.
|
(9)
|
Includes
500 shares of Common Stock, 23,801
options that may
be exercised within 60 days of January 22, 2010 and 3,000 restricted stock
units.
|
(10)
|
Includes
4,999 shares of Common Stock, 15,334
options that may
be exercised within 60 days of January 22, 2010 and 2,501 restricted stock
units.
|
(11)
|
Includes
500 shares of Common Stock, 16,723
options that may
be exercised within 60 days of January 22, 2010 and 3,000 restricted stock
units.
|
(12)
|
Includes
166 shares of Common Stock, 14,369
options that may
be exercised within 60 days of January 22, 2010 and 834 restricted stock
units.
|
(13)
|
Includes
500 shares of Common Stock, 9,217 options that may be exercised within 60
days of January 22, 2010 and 3,000 restricted stock
units.
|
(14)
|
Includes
4,167 shares of Common Stock and 3,333
restricted stock
units. Mr. Simmons does not hold any
options.
|
(15)
|
Includes
396,452
options that may
be exercised within 60 days of January 22,
2010.
|
(16)
|
Includes
114,000 shares of Common Stock owned by Mercury Fund VI, Ltd., 225,461
shares owned by Mercury Fund VII, Ltd. and 242,471 shares owned by Mercury
Fund VIII, Ltd. Mr. Howe exercises voting and disposition power over such
shares on behalf of Mercury Management, L.L.C., the General Partner of
Mercury Ventures, Ltd. and Mercury Ventures II, Ltd. Mercury Ventures,
Ltd. is the General Partner of Mercury Fund VI, Ltd. Mercury Ventures II,
Ltd. is the General Partner of Mercury Fund VII, Ltd. and Mercury Fund
VIII, Ltd. Share amounts obtained based on a Schedule 13G/A filed by these
entities on January 23, 2009.
|
(17)
|
Includes
334,594 shares held by Doug Pauly & Katie Pauly Comm Prop and 135,000
shares held by Northern Fruit Company, Inc. Also includes 38,100 shares
held by Katie Kavanaugh Pauly IRA Etrade Custodian. Share
amounts obtained based on a non-objecting beneficial owner
report generated as of December 31, 2009. As of the date
of this Proxy Statement, the Company does not have information as to (i)
whether beneficial ownership of any of these shares has been
disclaimed, (ii) who holds voting and dispositive power over these
shares or (iii) whether these shares continued to be beneficially owned by
such persons or entities and in such amounts as of January 22,
2010.
|
(18)
|
Includes
365,421 shares held in private accounts over which KVO has both voting and
dispositive power pursuant to contract, which voting and dispositive power
is revocable on or after December 31, 2010. Also includes 36,518 shares
held in a private account on behalf of Mr. Robert B. Ashton, a portfolio
manager of KVO, over which KVO has both voting and dispositive power
pursuant to contract until Mr. Ashton terminates his employment with KVO,
at which time the right to vote and dispose of such shares will revert to
him. Share amounts obtained based on a Schedule 13D filed by
this entity on September 1, 2009.
|
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 seven (7) but will be reduced to six (6) as of the
date of the Annual Meeting.
Prior to
the Meeting, Kenneth P. Bero, Thomas H. Kelly, Richard de J. Osborne, Terry
W. Potter, David T. Riddiford, William B. Simmons and James Wood were the
directors of the Company. All of these individuals were elected as directors at
the Company’s Annual Meeting of Stockholders held on March 20, 2009. Six (6) of
the existing directors are being nominated for re-election at the Meeting. Mr.
Riddiford is not standing for re-election as a director at the Annual 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.
Director
Nominees
Kenneth
P. Bero,
President, Chief
Executive Officer and Director
. Mr. Bero, age 56, was appointed President
and Chief Executive Officer of Datawatch effective January 1, 2008. Previously
Mr. Bero was Chief Operating Officer and Senior Vice President of Sales and
Business Operations. Mr. Bero joined Datawatch in June 2006 as Vice President of
Enterprise Sales. In January of 2007, Mr. Bero was promoted to Senior Vice
President, Enterprise Solutions with responsibility for leading the Company’s
worldwide sales strategy, including managing the Company’s direct sales force
and improving its customer relationship development. Also on October 19, 2007,
Mr. Bero was appointed to the Board of Directors. Prior to Datawatch, Mr. Bero
served as Vice President, North American Channel Sales at Business Objects and
Chief Operating Officer and Executive Vice President of Sales and Marketing at
NAVIDEC.
Thomas H.
Kelly,
Director
. Mr.
Kelly, age 60, joined the Board of Directors in October 2004. Until June 1,
2007, Mr. Kelly was Vice President of Corporate Business Development at
Schering-Plough Corporation, a pharmaceutical company. Prior to holding that
position, 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 75, has been a director of the Company and
Chairman of the Board of Directors of the Company since January 2001. From 1985
to 1999, Mr. Osborne was Chairman of the Board of Directors and Chief Executive
Officer of ASARCO Incorporated, which is an integrated producer of copper and
other metals. Mr. Osborne is also a director of NACCO Industries,
Inc. Mr. Osborne was previously a director of Schering-Plough Corp.
and of Goodrich Corp.
Terry W.
Potter,
Director
. Dr.
Potter, age 62, 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 a 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.
William
B. Simmons,
Director
.
Mr. Simmons, age 58, has been a director of the Company since July 2007. Mr.
Simmons represented Datawatch as outside legal counsel for more than 15 years,
both as a partner at the Boston law firm, Choate Hall & Stewart LLP
(“Choate”) from February 2005 through June 2007 and as Of Counsel at Choate from
June 2007 through December 2009 and, prior to joining Choate, as a partner at
Testa Hurwitz & Thibeault LLP, including representing the Company during its
initial public offering and for numerous other transactions.
James
Wood,
Director
. Mr.
Wood, age 80, has been a director of the Company since January 2001. From 1980
to 1997, Mr. Wood was Chairman of the Board of Directors 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
Meetings
. The Board of
Directors met six times during the fiscal year ended September 30, 2009 and took
action by written consent two times. Each director attended at least 75% of the
meetings of the Board and of the committees of the Board on which he served. The
Company does not have a policy with regard to attendance by Board members at
stockholder meetings; however directors are encouraged to attend the Annual
Meeting of Stockholders. All of the Directors attended the Annual Meeting of
Stockholders last year.
Independence
. The Board of
Directors has determined that, other than Mr. Bero, who serves as an executive
officer of the Company, each director is “independent”, meeting all applicable
independence requirements promulgated by the Securities and Exchange Commission
(the “SEC”), including Rule 10A-3(b)(1) pursuant to the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and the independence standards of The
NASDAQ Stock Market. In making this determination, the Board of Directors
considered relationships, transactions and/or arrangements with each of the
directors, including with respect to Mr. Simmons those discussed in the section
entitled “Certain Relationships and Related Party Transactions” in this proxy
statement, and affirmatively determined that none of such directors has a
relationship that, in the opinion of the Board of Directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director.
Committees
. Under the
Company’s 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 three standing committees: an Audit
Committee, a Compensation and Stock Committee and a Corporate Governance and
Nominating Committee (the “Nominating Committee”). The members of each committee
are appointed by the Board based on the recommendation of the Nominating
Committee, and are set forth below in this proxy statement. Actions taken by any
committee of the Board are reported to the Board, usually at the next Board
meeting following a committee meeting. The charters of the Audit Committee, the
Compensation and Stock Committee and the Nominating Committee are available on
the Company’s website, www.datawatch.com and located under the “About Us”
tab and the “Investor Relations” and “Corporate Governance” links. The Board
annually conducts a self-evaluation of each of its committees. All members of
all committees are independent directors.
Audit Committee
. The Audit
Committee is composed of Thomas H. Kelly, Terry W. Potter, and David T.
Riddiford, with Mr. Riddiford serving as Chairman at the beginning of the year
ended September
30, 2009
and Mr. Kelly assuming that role as of January 21, 2009. Mr. Riddiford is not
standing for re-election as a director at the Annual Meeting. Each such member
is considered “independent” pursuant to the rules promulgated by the SEC and The
NASDAQ Stock Market, as discussed above and, in the business judgment of the
Board of Directors, independent for purposes of being an independent member of
an audit committee under such rules. In addition, the Board of Directors has
determined that Mr. Kelly qualifies as an audit committee “financial expert” as
defined by the SEC. The Audit Committee evaluates and selects the Company’s
independent registered public accounting firm, reviews the audited financial
statements and discusses the adequacy of the Company’s internal controls and
procedures with management and the independent registered public accounting
firm. 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 independent registered
public accounting firm. The Audit Committee conducted three formal meetings
during the fiscal year ended September 30, 2009 and took action by written
consent once. The responsibilities of the Audit Committee and its activities in
the fiscal year ended September 30, 2009 are more fully described in the Audit
Committee Report contained in this proxy statement.
Compensation and Stock
Committee
. The Compensation and Stock Committee is composed of Thomas H.
Kelly, Terry W. Potter, David T. Riddiford and James Wood, with Mr. Wood serving
as Chairman. Each is “independent” as defined by the SEC and The NASDAQ Stock
Market, as discussed above. Mr. Riddiford is not standing for re-election as a
director at the Annual Meeting. The Compensation and Stock Committee, which,
among other things, reviews and makes recommendations concerning executive
compensation and administers the Company’s 1996 Stock Plan, the Company’s 1996
International Employee Non-Qualified Stock Option Plan and the Company’s 2006
Equity and Compensation Incentive Plan, conducted one formal meeting during the
fiscal year ended September 30, 2009 and took action by written consent three
times. The responsibilities of the Compensation and Stock Committee and its
activities in the fiscal year ended September 30, 2009 are more fully described
in the Compensation Discussion and Analysis contained in this proxy
statement.
Corporate Governance and Nominating
Committee
. 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 is “independent” pursuant to the rules promulgated by the SEC and The
NASDAQ Stock Market, as discussed above. Mr. Riddiford is not standing for
re-election as a director at the Annual Meeting. The Nominating Committee was
formed for the purposes of identifying director candidates and providing nominee
recommendations to the Board, overseeing compliance with corporate governance
policies and adopting, and monitoring compliance with, the Company’s Code of
Ethics. With respect to recommending director nominees, the Nominating Committee
identifies Board candidates through numerous sources, including recommendations
from existing Board members, executive officers, and stockholders, and has
policies concerning 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 Nominating Committee’s
evaluation includes a review of the nominee’s judgment, experience,
independence, understanding of the Company’s industry or other related
industries, and such other factors as the Nominating Committee concludes are
pertinent in light of the current needs of the Board, including without
limitation the Board’s belief 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. The
Nominating Committee did not conduct any formal meetings during the fiscal year
ended September 30, 2009 but took action by written consent once. In January
2010, the Nominating Committee recommended Messrs. Bero, Kelly, Potter, and
Simmons and the Board approved such nominees for election at the Meeting.
Messrs. Wood and Osborne were nominated by WC Capital, LLC, a stockholder of the
Company, as described below.
Stockholder
Nominations and Recommendations of Director Candidates
WC
Capital, LLC, which beneficially owns approximately 11.64% of the Company’s
Common Stock, 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 for election at the Meeting. Other stockholders wishing to
suggest candidates to the Nominating Committee for consideration as potential
director nominees may do so by submitting the name of the stockholder making the
recommendation, the name of the individual recommended for consideration as a
director nominee and a written statement from the stockholder making the
recommendation stating why such candidate would be able to fulfill the duties of
a director to the Nominating and Corporate Governance Committee, Datawatch
Corporation, at Datawatch Corporation, 271 Mill Road, Quorum Office Park,
Chelmsford, MA 01824. Stockholders wishing to nominate directors may do so by
submitting a written notice to the Chief Executive Officer of Datawatch. The
procedures are summarized in the section entitled “Stockholder Proposals” in
this proxy statement. All nominees must, at a minimum, have substantial or
significant business or professional experience or an understanding of
technology, finance, marketing, financial reporting, international business or
other disciplines relevant to the business of the Company and be free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Board or of a
Board committee. The Nominating Committee did not receive any stockholder
nominee recommendations for this Meeting.
Policies
and Procedures Regarding Related Person Transactions
The
Company By-laws provide that for the Company to enter into certain proposed
transactions with any of its executive officers, directors and principal
stockholders, including their immediate family members and affiliates, the
transaction must be (i) authorized by a majority of the disinterested members of
the Board of Directors or one of its committees after the disclosure of material
facts, (ii) approved in good faith by a vote of the stockholders after the
disclosure of the material facts, or (iii) fair to the Company and authorized by
the Board of Directors, a committee thereof, or the stockholders.
The
Company’s current practice is to have disinterested members of the Company’s
Audit Committee, whose members are independent, review the terms of any and all
such proposed material related party transactions. The results of this review
are then communicated to the entire Board of Directors. In approving or
rejecting the proposed related party transaction, the Audit Committee and the
Board of Directors consider the facts and circumstances available and deemed
applicable to the situation, including the risks, costs and benefits to the
Company, the terms of the transaction, the availability of alternate sources for
comparable services and products, and, if applicable, the impact on a director’s
independence. Agreements are approved only that, in light of known
circumstances, are in or are not inconsistent with the Company’s best interests,
as the Audit Committee and the Board of Directors determine in the good faith
exercise of their discretion.
Certain
Relationships and Related Person Transactions
William
B. Simmons, one of the Company’s directors, was a partner through June 2007 and
was Of Counsel from June 2007 through December 2009 of Choate, Hall &
Stewart LLP, which provides various legal services to Datawatch. During the
fiscal year ended September 30, 2009, the Company paid Choate, Hall &
Stewart LLP approximately $221,000 in fees and expenses for legal services. The
Company anticipates that Choate will continue to provide services in the current
fiscal year.
Compensation
of Directors
During
the fiscal year ended September 30, 2009, directors who were employees of the
Company received no cash compensation for their services as directors. Directors
who were not employees of the Company (the “Non-Employee Directors”) received
$15,000 per year for their service as a member of the Company’s Board of
Directors.
Directors
are eligible to receive awards under the Company’s 2006 Equity and Compensation
Plan. Prior to the fiscal year ended September 30, 2007, Non-Employee Directors
received automatic grants of stock options pursuant to the Company’s
Non-Employee Director Stock Option Policy upon election to the
Board and
an annual grant thereafter. Pursuant to this policy, Non-Employee Directors
received an option to purchase 5,334 shares of Common Stock on the date the
director was first elected to the Board of Directors and an option to purchase
5,000 shares of Common Stock on the date of the Company’s Annual Meeting of
Stockholders in each successive year. Options vest over three years in twelve
equal quarterly installments beginning three months from the date of grant. The
exercise price per share for all options was equal to the fair market value per
share of the Common Stock on the date of grant. During the fiscal year ended
September 30, 2007, the Company’s Non-Employee Director Stock Option Policy was
terminated. Under the current policy, each Non-Employee Director annually
receives a grant of 2,500 restricted stock units on the date of the Annual
Meeting and an individual elected to the Board of Directors for the first time
receives a grant of 2,500 restricted stock units upon his or her initial
election. Pursuant to this policy regarding new directors, Mr. Simmons
received a grant of 2,500 restricted stock units upon his election in July 2007.
The restricted stock units vest in one-third increments on the first, second and
third anniversaries of the date of grant.
Director
Compensation
Name(1)
(a)
|
|
Fees
Earned or Paid in Cash ($)(2)
(b)
|
|
Stock
Awards ($)(3)
(c)
|
|
Option
Awards ($)(4)
(d)
|
|
Total
($)
(e)
|
|
|
|
|
|
|
|
|
|
Robert
W. Hagger
|
|
$7,500
|
|
$1,468
|
|
$0
|
|
$8,968
|
Thomas
H. Kelly
|
|
$15,000
|
|
$5,923
|
|
$1,984
|
|
$22,907
|
Richard
de J. Osborne
|
|
$15,000
|
|
$5,923
|
|
$1,984
|
|
$22,907
|
Terry
W. Potter
|
|
$15,000
|
|
$5,923
|
|
$1,984
|
|
$22,907
|
David
T. Riddiford
|
|
$15,000
|
|
$5,923
|
|
$1,984
|
|
$22,907
|
William
B. Simmons
|
|
$15,000
|
|
$8,283
|
|
$0
|
|
$23,283
|
James
Wood
|
|
$15,000
|
|
$5,923
|
|
$1,984
|
|
$22,907
|
(1)
|
Mr.
Bero, the current President and Chief Executive Officer, did not receive
director compensation in 2009 as he was an employee of the Company during
the entire fiscal year. The compensation received by Mr. Bero as an
employee of the Company is shown in the Summary Compensation
Table.
|
(2)
|
The
annual retainer for 2009 was $15,000 for each Non-Employee director.
Effective March 20, 2009, Mr. Hagger was no longer a director of the
Company and therefore received 50% of the annual retainer in fiscal
2009.
|
(3)
|
The
amounts in column (c) reflect compensation expense for restricted stock
unit grants recognized for financial reporting purposes (exclusive of any
assumptions for forfeitures) under Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718, Stock
Compensation (formerly, FASB Statement 123R) (“ASC 718”), for the fiscal
year ended September 30, 2009. During fiscal 2009, awards of
2,500 restricted stock units were granted to each of the Non-Employee
Directors.
|
(4)
|
The
amounts in column (d) reflect the dollar amount recognized on outstanding
options for financial statement reporting purposes for the fiscal year
ended September 30, 2009 and computed in accordance with ASC 718 but do
not take into consideration the effect of estimated forfeitures. For a
discussion of the assumptions underlying this valuation, please see Part
II, Item 7 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Critical Accounting Policies in the Annual
Report on Form 10-K for the fiscal year ended September 30,
2009.
|
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.
Stockholder-Board
Communications
To direct
stockholder communications to the Board of Directors (or to a specified
individual director), stockholders may send such communication to the attention
of the Chairman of the Board (or the specified individual director) at Datawatch
Corporation, 271 Mill Road, Quorum Office Park, Chelmsford, MA
01824.
AUDIT
COMMITTEE REPORT
The Audit
Committee of Datawatch Corporation (the “Company”) is composed of Messrs. Kelly,
Potter and Riddiford, with Mr. Riddiford serving as Chairman at the beginning of
the fiscal year ended September 30, 2009 and Mr. Kelly assuming the role as of
January 21, 2009. None of the members are officers or employees of the Company,
and each is otherwise independent of the Company (as independence is defined by
the Securities and Exchange Commission (the “SEC”) and in the listing standards
of The NASDAQ Stock Market for purposes of being a member of an audit
committee). In addition, the Audit Committee has at least one financial expert,
Mr. Kelly, serving on the Audit Committee, as such term is defined by the SEC.
The Audit Committee operates under a written charter adopted by the Board of
Directors, which is available on the Company’s website, www.datawatch.com and
located under the “Investor Relations” and “Corporate Governance” sections of
the “About Us” link.
The Audit
Committee has reviewed the audited financial statements of the Company at
September 30, 2008 and September 30, 2009, and for each of the previous three
years ended September 30, 2009 and has discussed them with both management and
Deloitte & Touche LLP, the Company’s independent registered public
accounting firm. 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 accounting principles generally accepted in
the U.S., 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
Deloitte & Touche LLP, with and without management present, to discuss the
results of the accountants’ audit, 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
Deloitte & Touche LLP required by applicable requirements of the Public
Company Accounting Oversight Board regarding Deloitte & Touche LLP’s
communications with the Audit Committee concerning independence, 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, 2009 for filing with the
SEC.
Respectfully
submitted by the Audit Committee.
|
THE
AUDIT COMMITTEE
Thomas
H. Kelly,
Chairman
David
T. Riddiford
Terry
W. Potter
|
INFORMATION
CONCERNING EXECUTIVE OFFICERS
Kenneth
P. Bero
, President, Chief
Executive Officer and Director
, age 56, was appointed President and Chief
Executive Officer of the Company effective January 1, 2008. Prior thereto, and
since April 1, 2007, Mr. Bero held the position of Chief Operating Officer &
Senior Vice President of Sales. Previously, Mr. Bero had been Senior Vice
President of Enterprise Solutions. In April 2006, Mr. Bero joined the Company as
Vice President of Enterprise Sales for North America. Prior to joining
Datawatch, Mr. Bero served as Vice President, North American Channel Sales at
Business Objects S.A., an international provider of business intelligence
software and services. Previous roles include the position of Chief Operating
Officer and Executive Vice President of Sales and Marketing at NAVIDEC, a Nasdaq
listed software development and services company. Mr. Bero was also appointed a
Director of the Company effective October 19, 2007.
Murray P.
Fish
, Chief Financial Officer,
Vice President of Finance, Treasurer and Assistant Secretary
, age 58, was
appointed Chief Financial Officer, Vice President of Finance, Treasurer and
Assistant Secretary on March 26, 2007. Prior to joining Datawatch, Mr. Fish
served as Chief Financial Officer of Cymfony, Inc., a marketing business
intelligence company owned by TNS-MI. From 2003 until 2005, Mr. Fish
was the principal consultant at M.P. Fish Associates, where he provided
financial consulting services to large public and private organizations. From
1998 until 2003, Mr. Fish was the Chief Financial Officer and a Director at
Network-1 Security Solutions, Inc., a Nasdaq listed software development and
services company.
John H.
Kitchen, III
, Chief
Marketing Officer, Senior Vice President and Secretary
, age 54, was
appointed Chief Marketing Officer & Senior Vice President effective April 1,
2007. Prior thereto, and since July 2001, Mr. Kitchen held the position of
Senior Vice President of Desktop & Server Solutions. From July 2000
until July 2001, Mr. Kitchen was the Company’s Vice President of Marketing.
Prior to July 2000, and since March 1998, Mr. Kitchen was the
Company’s Director of Marketing. Prior to that, Mr. Kitchen was a marketing
consultant to the Company.
Harvey C.
Gross
, Vice President, Product
Management and Development
, age 60, was appointed Vice President, Product
Management and Development on October 1, 2008. Mr. Gross joined the Company in
February 2007. Prior to joining Datawatch, Mr. Gross was the principal
consultant at HG & Associates, a content management consulting company
serving a variety of companies in business, technology and the federal
government, and was a principal consultant at eVisory, a leading industry
consulting group. From 1996 to 2005, Mr. Gross was Chief Technology Officer at
Lason, Inc., an international business process outsourcing firm. Other roles
included Senior Vice President at Virtual Image Technologies, Inc., a regional
document management service company, and Senior Vice President of Product
Development at 360 Services, Inc.
Robert W.
Clemens
, Vice President,
Worldwide Sales
, age 52, was appointed Vice President of Worldwide Sales
on January 1, 2008. Mr. Clemens served as Vice President of North American sales
from April 2007 until December 2007. Prior to joining Datawatch, Mr. Clemens was
the Director of Sales at Zantaz, a provider of infrastructure software. From
2005 to 2006, Mr. Clemens was Vice President, Worldwide Sales at GaleForce
Solutions, a provider of financial services software, and from 1999 to 2005, he
was Director of North American Channel Sales at Business Objects, a provider of
enterprise software. Mr. Clemens also served in a variety of executive and
senior level sales positions at companies such as NeTpower, Ashton-Tate/Borland
and more.
Daniel F.
Incropera
, Corporate
Controller & Vice President
, age 45, was appointed Corporate
Controller & Vice President on September 7, 2007. Mr. Incropera has served
as the Company’s Controller since October 2006. From 2003 until joining the
Company, Mr. Incropera served as Controller of Pennichuck Corporation, a
publicly traded company that operates several water utility and real estate
investment subsidiaries. From 2002 until 2003, Mr. Incropera was the
Assistant Controller at Concord Communications, Inc., a Nasdaq listed software
company which provided network service management
solutions.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The
Compensation and Stock Committee is responsible for discharging the Board’s
responsibilities relating to the compensation of the Company’s officers and key
employees and in this regard has the responsibility to establish a compensation
policy for officers and key employees designed to (i) enhance the profitability
of the Company and increase shareholder value, (ii) reward officers and key
employees for their contribution to the Company’s growth and profitability, and
(iii) provide competitive compensation that will attract and retain qualified
officers and key employees. In addition, the Compensation and Stock Committee
considers and takes action with respect to the adoption, amendment,
administration and termination of compensation, welfare, benefit, pension and
other plans (including the grant of options under stock option plans) related to
compensation of current and former employees of the Company and designs
incentive compensation plans to allow the Company to attract and retain talented
personnel and align the pay of such personnel with the long-term interests of
shareholders.
The
individuals who served as the Company’s Chief Executive Officer and Chief
Financial Officer during the fiscal year ended September 30, 2009, as well as
other individuals included in the Summary Compensation Table on page 15, are
referred to as “named executive officers” throughout this Compensation
Discussion and Analysis.
Compensation
Philosophy
The
Compensation and Stock Committee believes the most effective compensation
package for named executive officers is one designed to reward achievement of
individual and corporate objectives, provide incentives for short-term,
medium-term and long-term financial and strategic goals and align the interests
of management with those of the stockholders by providing incentives for
improving shareholder value. There is no pre-established policy or target for
the allocation between either cash and non-cash or short-term, medium-term and
long-term incentive compensation; however, a significant percentage of total
compensation is allocated to performance-based incentive compensation, both in
the form of cash programs and equity participation. The Compensation and Stock
Committee has not, to date, used a third-party compensation consultant. However,
third-party compensation surveys are used in setting certain elements of
compensation, as discussed in the section entitled “Elements of Compensation”
below.
Role
of Executive Officers in Setting Compensation Decisions
Regarding
most compensation matters, the President and Chief Executive Officer’s
responsibility is to provide recommendations to the Compensation and Stock
Committee based on an analysis of market standards and trends and an evaluation
of the contribution of each executive officer to the Company’s performance. The
Compensation and Stock Committee considers, but retains the right to accept,
reject or modify such recommendations. Although the President and Chief
Executive Officer attends portions of the meetings of the Compensation and Stock
Committee, neither the President and Chief Executive Officer nor any other
members of management is present during executive sessions of the Compensation
and Stock Committee. Moreover, the President and Chief Executive Officer is not
present when decisions with respect to his compensation are made. The
Compensation and Stock Committee may, but does not currently, delegate any of
its functions to others in setting compensation for the named executive
officers, provided however, that management may be responsible for the
implementation of certain compensation programs established by the Compensation
and Stock Committee.
Elements
of Compensation
Subject
to variation where appropriate, the elements of compensation to named executive
officers include:
•
|
base
salary, which is determined on an annual
basis;
|
•
|
annual
or other time-based cash incentive compensation;
and
|
•
|
long-term
incentive compensation in the form of options and other
awards.
|
Base Salary
. In setting base
salary for the named executive officers, the Compensation and Stock Committee
considers recommendations from the President and Chief Executive Officer, which,
for new hires, tend to reflect the current recruitment market and negotiations
with the specific individual. For existing named executive officers, for whom
base salaries are typically reviewed in October or November of each year, the
recommendations are designed to recognize each named executive officer’s
participation and performance in meeting corporate performance goals over the
prior fiscal year, to take into consideration promotions or increased
responsibilities and, to a lesser extent, to reflect market trends. With respect
to the latter consideration, the Company has used compensation surveys of
technology companies with up to $30 million in revenue prepared by Culpepper
& Associates, Inc. Although the Company seeks to structure its compensation
program to attract and retain key personnel, recommendations to the Compensation
and Stock Committee, particularly with respect to base salary, are typically in
the lower range in these compensation surveys, given the higher revenue stream
of the companies surveyed as compared to the revenue history of Datawatch. This
allows the Company to reduce its overall cost structure and to achieve
systematic improvement in the financial performance of the business. Economic
and business conditions affecting the Company are also considerations in setting
base salary vis-à-vis market standards. Neither payouts under performance-based
incentive compensation plans nor equity grants in any given year have had any
impact as to determinations of the base salaries of the named executive
officers.
Cash Incentive Compensation
.
On an annual basis, the Compensation and Stock Committee determines the
appropriate level and mix of performance-based cash incentive compensation. In
recent years, these incentives have included sales incentive plans for named
executive officers charged with driving increases in sales year to year and
officer bonus plans designed to motivate officers to improve certain performance
metrics of the Company. Rewards are paid for achievement, such as quarterly
payouts for increases in revenue under the sales incentive plans, attainment of
management objectives and annual bonuses paid for improvements to net
income under the officer bonus plans.
Equity Incentive
Compensation
. The Compensation and Stock Committee believes that
equity-based participation provides the named executive officers with strong
economic interest in maximizing stock price appreciation over the long term.
Equity-based awards are made pursuant to the Company’s equity incentive plans.
The Compensation and Stock Committee considers cost to the Company in
determining the form of award and, as a result, routinely grants stock options
and restricted stock units. In determining the size of an option or restricted
stock unit grant to a named executive officer, both upon initial hire and on an
ongoing basis, the Compensation and Stock Committee considers competitive market
factors, the size of the equity incentive plan pool, cost to the Company, the
level of equity held by other officers and individual contribution to corporate
performance. Although there is no set target level for holding options or stock
ownership, the Compensation and Stock Committee recognizes that the equity based
component ensures additional focus by the named executive officers on stock
price performance and enhances executive retention. Accordingly, the exercise
price of stock options is tied to the fair market value of the Company’s Common
Stock on the date of grant and such options typically vest quarterly over a
three-year period. Restricted stock unit grants typically vest annually over a
three-year period.
Datawatch
does not have a program, plan or practice to select equity grant dates in
connection with the public release of favorable or negative news.
Benefits
. The named executive
officers are entitled to participate in benefit plans which are generally
available to all employees, including health, dental, life, accidental
disability and dismemberment and, for each of these benefits plans, the Company
makes contributions to the premiums paid to such plans. The Company does not
offer any kind of deferred compensation, nor does it offer retirement benefits
other than a 401(k) defined contribution plan. The Company typically does not
match contributions made by executive officers and other employees to the 401(k)
plan.
Severance Agreements
. The
Company believes that the severance agreements of certain of its executive
officers are necessary to retain the executive officers by protecting them
against involuntary termination of their employment or being forced out of the
Company. The agreements are designed to provide income security to the executive
officers and to facilitate the Company’s ability to attract and retain
executives as the Company competes for talent in a marketplace in which such
protections are standardized practice. For more information about the severance
arrangements of our named executive officers, see the “Executive Agreements and
Severance Arrangements” section of this proxy statement.
Compensation
of Named Executive Officers
Two
executive officers received base salary increases during the fiscal year ended
September 30, 2009. Effective October 1, 2008, Mr. Bero’s base salary increased
from $250,000 to $285,000 and Mr. Incropera’s base salary increased from
$125,000 to $135,000.
Mr. Gross
became an executive officer of the Company on October 17, 2008 upon his
appointment as Vice President of Enterprise Product Management and
Development.
With
respect to performance based incentive compensation, the Compensation and Stock
Committee approved the 2009 Corporate Officers Compensation Plan on November 21,
2008. The Corporate Officers Compensation Plan provided that up to 15% of the
Company’s net income was available for bonus payments to the Company’s executive
officers, with the amounts, if any, paid to individual executives to be
determined in the sole discretion of the Compensation and Stock Committee.
Payments of bonuses to the named executive officers in fiscal 2009 represented
approximately 13% of the Company’s net income and were distributed based on the
number of months of participation in the plan and individual contribution to
Company results, or for officers in positions not directly contributing to net
income, satisfaction of other management objectives. Payments pursuant to the
2009 Corporate Officers Compensation Plan were as follows:
Named
Executive Officer
|
Payment
- 2009
|
Kenneth
P. Bero
|
|
$
|
101,766
|
|
Murray
P. Fish
|
|
$
|
50,403
|
|
John
H. Kitchen, III
|
|
$
|
28,178
|
|
Harvey
C. Gross
|
|
$
|
18,301
|
|
Daniel
F. Incropera
|
|
$
|
13,856
|
|
Robert
W. Clemens
|
|
$
|
5,000
|
|
In
addition to distributions under the Corporate Officers Compensation Plan, the
Company made bonus payments during fiscal 2009 based on the achievement of
certain quarterly management business objectives to Mr. Fish, Mr. Kitchen, Mr.
Gross and Mr. Incropera during fiscal 2009. Quarterly amounts paid pursuant to
these bonuses were as follows: $10,000 for Mr. Fish and Mr. Gross,
$5,000 for Mr. Kitchen and $3,500 for Mr. Incropera. These bonus plans were
approved by the Compensation and Stock Committee. All management business
objectives were determined based on recommendations made by the Chief Executive
Officer to the Compensation and Stock Committee and were based on each
employee’s position, overall compensation and targeted performance objectives
for that position. The Compensation and Stock Committee retained discretion to
adjust these targets during the year, including discretion to reflect unusual or
non-recurring items. The payments under these bonus plans were measured and paid
on a quarterly basis.
The
following awards of stock options and restricted stock units were granted to the
named executive officers on February 3, 2009:
Named
Officer
|
|
Options
Shares Granted
|
Restricted
Stock Units Granted
|
Kenneth
P. Bero
|
|
6,000
|
2,000
|
Robert
W. Clemens
|
|
4,000
|
1,500
|
Murray
P. Fish
|
|
4,000
|
1,500
|
Harvey
C. Gross
|
|
4,000
|
1,500
|
John
H. Kitchen III
|
|
4,000
|
1,500
|
|
|
1,500
|
500
|
These
grants were made primarily to bring the level of equity participation in the
Company of these particular officers to an appropriate level vis-à-vis the
Company’s other executive officers, to further promote the goals of increasing
shareholder value and, to a lesser extent, for retention purposes.
Accounting
and Tax Implications
In
December 2004, the Financial Accounting Standards Board issued FASB Statement
No. 123(R),
Share-Based
Payment
(“FAS 123(R)”), (currently Accounting Standards Codification
(ASC) Topic 718, Stock Compensation)(
“
ASC 718
”
)which requires
all companies to treat the fair value of stock options granted to employees as
an expense. As a result of this standard, effective for periods beginning after
January 1, 2006, the Company has been required to record compensation expense
equal to the fair value of each stock option granted. ASC 718 requirements
reduce the attractiveness of granting stock options because of the additional
expense associated with these grants, which have impacted and will continue to
negatively impact the Company’s results of operations. The Compensation and
Stock Committee has determined that stock options remain an important piece of
the compensation philosophy, and to date, options continue to be considered as
part of the compensation package of the named executive officers. However, the
stock option component generally has been reduced since implementation of FAS
123(R).
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.
SUMMARY COMPENSATION
TABLE
Name
and Principal Position(1)
(a)
|
|
Fiscal
Year
(b)
|
|
|
Salary
(c)
|
|
|
|
Bonus
(d)
|
|
|
|
Stock
Awards
(2)
(e)
|
|
|
|
Option
Awards (3) (f)
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
(g)
|
|
|
|
All
Other Compensation
(h)
|
|
|
|
Total
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
P. Bero
|
|
2009
|
|
$
|
285,000
|
|
|
|
—
|
|
|
$
|
703
|
|
|
$
|
67,391
|
|
|
$
|
101,766(10)
|
|
|
$
|
676(17)
|
|
|
$
|
455,536
|
|
President and
CEO(4)
|
|
2008
|
|
$
|
237,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
69,746
|
|
|
$
|
60,404(10)
|
|
|
$
|
606(17)
|
|
|
$
|
368,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Kitchen,
III
|
|
2009
|
|
$
|
190,000
|
|
|
|
—
|
|
|
$
|
527
|
|
|
$
|
1,573
|
|
|
$
|
48,178(11)
|
|
|
$
|
517(17)
|
|
|
$
|
240,795
|
|
CMO(5)
|
|
2008
|
|
$
|
190,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
5,620
|
|
|
$
|
28,793(11)
|
|
|
$
|
487(17)
|
|
|
$
|
224,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murray P.
Fish
|
|
2009
|
|
$
|
170,000
|
|
|
|
—
|
|
|
$
|
527
|
|
|
$
|
22,711
|
|
|
$
|
90,403(12)
|
|
|
$
|
465(17)
|
|
|
$
|
284,106
|
|
CFO(6)
|
|
2008
|
|
$
|
170,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
21,858
|
|
|
$
|
43,450(12)
|
|
|
$
|
437(17)
|
|
|
$
|
235,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel F.
Incropera
|
|
2009
|
|
$
|
135,000
|
|
|
|
—
|
|
|
$
|
176
|
|
|
$
|
11,051
|
|
|
$
|
27,856(13)
|
|
|
$
|
368(17)
|
|
|
$
|
174,451
|
|
Corporate
Controller(7)
|
|
2008
|
|
$
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
10,374
|
|
|
$
|
23,483(13)
|
|
|
$
|
189(17)
|
|
|
$
|
159,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert W.
Clemens
|
|
2009
|
|
$
|
180,000
|
|
|
$
|
5,000(14)
|
|
|
$
|
527
|
|
|
$
|
18,721
|
|
|
$
|
122,998(15)
|
|
|
$
|
491(17)
|
|
|
$
|
327,737
|
|
VP–Worldwide
Sales(8)
|
|
2008
|
|
$
|
175,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
17,325
|
|
|
$
|
95,773(15)
|
|
|
$
|
447(17)
|
|
|
$
|
288,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harvey C.
Gross
|
|
2009
|
|
$
|
150,000
|
|
|
|
—
|
|
|
$
|
527
|
|
|
$
|
11,357
|
|
|
$
|
58,301(16)
|
|
|
$
|
18,644(18)
|
|
|
$
|
238,829
|
|
VP-Product
Management and Development (9)
|
|
2008
|
|
$
|
145,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
9,960
|
|
|
$
|
42,519(16)
|
|
|
$
|
45,076(18)
|
|
|
$
|
242,555
|
|
(1)
|
The
title presented reflects the principal position held by each named
executive officer as of September 30,
2009.
|
(2)
|
The
amounts in column (e) reflect compensation expense for restricted stock
unit grants recognized for financial reporting purposes (exclusive of any
assumptions for forfeitures) under Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718, Stock
Compensation (formerly, FASB Statement 123R) (“ASC 718”) for the fiscal
year ended September 30, 2009. For a discussion of the assumptions
underlying this valuation, please see Part II, Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of Operations –
Critical Accounting Policies in the Company’s Annual Report on Form 10-K
for the fiscal year ended September 30,
2009.
|
(3)
|
The
amounts in column (f) represent the dollar amounts recognized for
financial statement reporting purposes for the fiscal year ended September
30, 2009 calculated in accordance with ASC 718 but do not take into
consideration the effect of estimated forfeitures. For a discussion of the
assumptions underlying this valuation, please see Part II, Item 7 -
Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Policies in the Company’s Annual Report
on Form 10-K for the fiscal year ended September 30,
2009.
|
(4)
|
Mr.
Bero’s term as Chief Executive Officer commenced on January 1, 2008. He
previously held the position of Chief Operating Officer and Senior Vice
President.
|
(5)
|
Mr.
Kitchen’s term as Chief Marketing Officer and Senior Vice President
commenced on April 1, 2007. He previously held the position of Senior Vice
President of Desktop & Server
Solutions.
|
(6)
|
Mr.
Fish’s term as Chief Financial Officer, Vice President of Finance,
Treasurer and Assistant Secretary commenced on March 26,
2007.
|
(7)
|
Mr.
Incropera’s term as Corporate Controller and Vice President commenced on
September 7, 2007. He previously held the position of
Controller.
|
(8)
|
Mr.
Clemens’ term as Vice President of Worldwide Sales commenced on January 1,
2008. He previously held the position of Vice President of North American
Sales.
|
(9)
|
Mr.
Gross’ term as Vice President of Product Management and Development
commenced on October 17, 2008.
|
(10)
|
For
fiscal 2009, such amount represents a payment to Mr. Bero of $101,766
pursuant to the Corporate Officers Compensation Plan. For
fiscal 2008, such amount includes payments to Mr. Bero of $343 under the
Executive Sales Incentive Plan, and $60,061 pursuant to the Corporate
Officers Compensation Plan.
|
(11)
|
For
fiscal 2009, such amount includes a payment to Mr. Kitchen of $28,178
pursuant to the Corporate Officers Compensation Plan and $20,000 for
individual performance in fiscal 2009. For fiscal 2008, such amount
includes payments to Mr. Kitchen of $28,450 pursuant to the Corporate
Officers Compensation Plan and $343 under the Executive Sales Incentive
Plan.
|
(12)
|
For
fiscal 2009, such amount includes a payment to Mr. Fish of $50,403
pursuant to the Corporate Officers Compensation Plan and $40,000 for
individual performance in fiscal 2009. For fiscal 2008, such
amount includes a payment to Mr. Fish of $28,450 pursuant to the Corporate
Officers Compensation Plan and $15,000 for individual performance in
fiscal 2008.
|
(13)
|
For
fiscal 2009, such amount includes a payment to Mr. Incropera of $13,856
pursuant to the Corporate Officers Compensation Plan and $14,000 for
individual performance in fiscal 2009. For fiscal 2008, such
amount includes a payment to Mr. Incropera of $9,483 pursuant to the
Corporate Officers Compensation Plan and $14,000 for individual
performance in fiscal 2008.
|
(14)
|
Such
amount represents a discretionary bonus approved by the Compensation and
Stock Committee and distributed from the Corporate Officers Compensation
Plan.
|
(15)
|
For
fiscal 2009, such amount represents payment to Mr. Clemens of $ 122,998
pursuant to his fiscal 2009 sales commission plan. For fiscal 2008, such
amount represents payment to Mr. Clemens of $95,773 pursuant to his fiscal
2008 sales commission plan.
|
(16)
|
For
fiscal 2009, such amount includes a payment to Mr. Gross of $18,301
pursuant to the Corporate Officers Compensation Plan and $40,000 for
individual performance in fiscal 2009. For fiscal 2008, such amount
includes payments of $40,000 for individual performance in fiscal 2008 and
$2,519 pursuant to his fiscal 2008 commission
plan.
|
(17)
|
Such
amounts consist solely of the payment of life insurance
premiums.
|
(18)
|
For
fiscal 2009, such amount includes housing and relocation costs of $18,232
and payment of a life insurance premium of $412. For fiscal 2008, such
amount includes housing and relocation costs of $44,664 and payment of a
life insurance premium of $412.
|
GRANTS
OF PLAN-BASED AWARDS
Name
(a)
|
|
Date
of Grant (b)
|
|
|
All
Other Stock Awards: Number of Shares of Stock or
Units
(#)
(c)
|
|
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
(d)
|
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
(e)(1)
|
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards(2)
(f)
|
|
Kenneth
P. Bero
|
|
|
2-3-09
|
|
|
|
2,000
|
|
|
|
6,000
|
|
|
$
|
1.61
|
|
|
$
|
1,981
|
|
Murray
P. Fish
|
|
|
2-3-09
|
|
|
|
1,500
|
|
|
|
4,000
|
|
|
$
|
1.61
|
|
|
$
|
1,380
|
|
Robert
W. Clemens
|
|
|
2-3-09
|
|
|
|
1,500
|
|
|
|
4,000
|
|
|
$
|
1.61
|
|
|
$
|
1,380
|
|
John
H. Kitchen III
|
|
|
2-3-09
|
|
|
|
1,500
|
|
|
|
4,000
|
|
|
$
|
1.61
|
|
|
$
|
1,380
|
|
Harvey
C. Gross
|
|
|
2-3-09
|
|
|
|
1,500
|
|
|
|
4,000
|
|
|
$
|
1.61
|
|
|
$
|
1,380
|
|
Daniel
F. Incropera
|
|
|
2-3-09
|
|
|
|
500
|
|
|
|
1,500
|
|
|
$
|
1.61
|
|
|
$
|
495
|
|
(1)
|
The
stock awards and option grants made to the named executive officers in
fiscal 2009 are intended to qualify as restricted stock units and
incentive stock options and, as such, each award or option were issued
with an exercise price equal to 100% of fair market value. Pursuant to the
2006 Equity and Compensation Incentive Plan, from which all of the stock
awards and options were granted, “fair market value” means the average of
the high and low prices of the Company’s common stock on the NASDAQ Stock
Market on the date of grant.
|
(2)
|
The
amounts reflected in the “Grant Date Fair Value of Stock and Options
Awards” column reflect the dollar amounts recognized for financial
statement reporting for the fiscal year ended September 30, 2009 and
computed in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 718, Stock Compensation
(formerly, FASB Statement 123R) (“ASC 718”) but do not take into
consideration the effect of estimated forfeitures. For a discussion of the
assumptions underlying this valuation, please see Part II, Item 7
-Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Critical Accounting Policies in the annual report on Form
10-K for the fiscal year ended September 30, 2009. Regardless of the value
placed on a stock option for financial reporting purposes, the actual
value of such option will depend upon the market value of the common stock
at such future date as the option is
exercised.
|
Narrative
Disclosure to Grants of Plan-Based Awards Table
Restricted
stock unit awards disclosed in the Grants of Plan-Based Awards Table above vest
annually over a three year period beginning one year from the date of
grant. Options disclosed in the Grants of Plan-Based Awards Table
above vest every quarter over a three year period beginning three months from
the date of grant. Vesting of some or all options may be accelerated upon a
change of control or an acquisition in accordance with the Company’s equity
compensation plans.
The
following table sets forth summary information regarding the outstanding equity
awards at September 30, 2009 granted to each named executive
officer:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
(a)
|
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
(1)
(b)
|
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)
(c)
|
|
Option
Price
($)
(d)
|
|
|
Option
Expiration
Date
(e)
|
|
Number
of Shares of Units of
Stock
that have Not Vested (4)
(#)
(f)
|
|
|
Market
Value of Shares of Units of Stock that have Not Vested (4)
($)
(g)
|
|
Kenneth
P. Bero
|
|
|
15,000
|
|
|
0
|
|
$
|
3.83
|
|
|
4/22/2016(2)
|
|
|
2,000
|
|
|
$
|
3,210
|
|
|
|
|
9,174
|
|
|
826
|
|
$
|
2.49
|
|
|
10/19/2013(3)
|
|
|
|
|
|
|
|
|
|
|
|
27,700
|
|
|
19,748
|
|
$
|
5.025
|
|
|
10/20/2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
1,490
|
|
|
1,062
|
|
$
|
5.025
|
|
|
10/20/2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
5,000
|
|
$
|
1.605
|
|
|
02/4/2016(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
W. Clemens
|
|
|
5,838
|
|
|
2,494
|
|
$
|
3.315
|
|
|
4/25/2014(3)
|
|
|
1,500
|
|
|
$
|
2,408
|
|
|
|
|
5,838
|
|
|
4,162
|
|
$
|
5.025
|
|
|
10/20/2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
3,332
|
|
$
|
1.605
|
|
|
2/4/2016(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
H. Kitchen, III
|
|
|
6,668
|
|
|
0
|
|
$
|
5.2735
|
|
|
6/9/2010(2)
|
|
|
1,500
|
|
|
$
|
2,408
|
|
|
|
|
33,334
|
|
|
0
|
|
$
|
1.3725
|
|
|
6/7/2011(2)
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
0
|
|
$
|
0.74
|
|
|
3/9/2012(2)
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
0
|
|
$
|
1.695
|
|
|
7/24/2013(2)
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
0
|
|
$
|
2.60
|
|
|
11/22/2013(2)
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
0
|
|
$
|
3.22
|
|
|
10/28/2014(2)
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
0
|
|
$
|
4.50
|
|
|
11/17/2015(2)
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
3,332
|
|
$
|
1.605
|
|
|
2/4/2016(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murray
P. Fish
|
|
|
12,500
|
|
|
2,500
|
|
$
|
2.975
|
|
|
3/27/2014(3)
|
|
|
1,500
|
|
|
$
|
2,408
|
|
|
|
|
7,506
|
|
|
2,494
|
|
$
|
5.27
|
|
|
6/27/2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
3,332
|
|
$
|
1.605
|
|
|
2/4/2016(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
F. Incropera
|
|
|
9,174
|
|
|
826
|
|
$
|
2.49
|
|
|
10/19/2013(3)
|
|
|
500
|
|
|
$
|
803
|
|
|
|
|
2,912
|
|
|
2,088
|
|
$
|
5.025
|
|
|
10/20/2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
1,250
|
|
$
|
1.605
|
|
|
2/3/2016(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harvey
C. Gross
|
|
|
5,838
|
|
|
4,162
|
|
$
|
5.025
|
|
|
10/19/2014(3)
|
|
|
1,500
|
|
|
$
|
2,408
|
|
|
|
|
668
|
|
|
3,332
|
|
$
|
1.605
|
|
|
02/4/2016(3)
|
|
|
|
|
|
|
|
|
(1)
|
Options
vest every quarter over a three year period beginning three months from
the date of grant. Vesting of some or all options may be accelerated upon
a change of control or an acquisition in accordance with the Company’s
equity compensation plans.
|
(2)
|
Each
option award has a ten year term. Therefore, the grant date for each such
award is the date ten years prior to the date
shown.
|
(3)
|
Each
option award has a seven year term. Therefore, the grant date for each
such award is the date seven years prior to the date
shown.
|
(4)
|
Restricted
stock unit awards vest annually over a three year period beginning one
year from the date of grant.
|
The
following table summarizes the option exercises and vesting of stock awards for
each of the named executive officers for fiscal 2009:
OPTION
EXERCISES AND STOCK VESTED TABLE
|
|
Stock
Awards
|
Name
|
|
Number
of
Shares
Acquired
on
Vesting (1)
(#)
|
|
|
Value
Realized
on
Vesting(2)
($)
|
|
|
|
|
|
|
|
|
David
T. Riddiford
|
|
|
1,667
|
|
|
$
|
1,630
|
|
Terry
W. Potter
|
|
|
1,667
|
|
|
$
|
1,630
|
|
Thomas
H. Kelly
|
|
|
1,667
|
|
|
$
|
1,630
|
|
Richard
de J. Osborne
|
|
|
1,667
|
|
|
$
|
1,630
|
|
William
B. Simmons
|
|
|
1,667
|
|
|
$
|
2,384
|
|
James
Wood
|
|
|
1,667
|
|
|
$
|
1,630
|
|
Robert
W. Hagger(3)
|
|
|
833
|
|
|
$
|
891
|
|
|
(1)
|
Represents
number of restricted stock units that vested during fiscal
2009.
|
|
(2)
|
The
value realized upon vesting of the restricted stock units shown in the
table above was calculated as the product of the closing price of a share
of our common stock on the vesting date multiplied by the number of shares
vested.
|
|
(3)
|
Mr.
Hagger resigned as a director of the company effective March 20,
2009.
|
Executive
Agreements and Severance Arrangements
The Board
of Directors has approved severance agreements by the Company with each of
Messrs. Kitchen, Fish, Bero and Incropera. Each executive severance 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
severance 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 agreements as including a material
diminution in the nature or scope of such officer’s responsibilities, duties or
authority. As a condition to the receipt by an officer of any payment or benefit
under an executive severance agreement, the officer must first execute a valid,
binding and irrevocable general release in favor of the Company and in a form
reasonably acceptable to the Company, and must be in compliance with the terms
of the officer’s Proprietary Information, Inventions and Non-Competition
Agreement with the Company. The executive severance agreements for
Mr. Kitchen, Mr. Bero, Mr. Fish and Mr. Incropera were executed on April
25, 2002, April 19, 2007, March 26, 2007 and February 1, 2007,
respectively.
Each
stock option agreement pursuant to which each named executive officer holds the
unexercised stock options disclosed herein provides that all such unvested
options shall accelerate and become fully vested and exercisable upon a change
in control of the Company.
COMPENSATION
COMMITTEE REPORT
The
Company’s Compensation and Stock Committee currently consists of Messrs. Kelly,
Potter, Riddiford and Wood, with Mr. Wood serving as Chairman. The Compensation
and Stock Committee has reviewed and discussed the Compensation Discussion and
Analysis above with the Company’s management and, based on this review and
discussion, has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Submitted
by the Compensation and Stock Committee of the Board of Directors:
|
James
Wood,
Chairman
Thomas
H. Kelly
Terry
W. Potter
David
T. Riddiford
|
Compensation
Committee Interlocks and Insider Participation
No person
who served as a member of the Compensation and Stock Committee was, during the
fiscal year ended September 30, 2009, 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.
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, 2009, including the 1996
Stock Plan, the 1996 International Employee Non-Qualified Stock Option Plan (the
“International Plan”) and the Company’s 2006 Equity and Compensation Incentive
Plan (the “2006 Stock Plan”). The 1996 Stock Plan and the 2006 Stock Plan have
previously been approved by the Company’s stockholders. The International Plan,
which has not been approved by the Company’s stockholders, provided 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. The International Plan was terminated on October 4, 2006 and no
further grants may be made under it. The 1996 Stock Plan was terminated on
December 9, 2006 and no further grants may be made under it.
|
Plan
Category
|
|
Number
of
Securities
to be
issued
upon
exercise
of
outstanding
options,
warrants
and
rights
|
|
Weighted
average
exercise
price
of
outstanding
options,
warrants
and
rights(3)
|
|
Number
of
securities
remaining
available
for
future
issuance
|
|
|
Equity
compensation plans
approved
by security holders
|
|
|
585,965
|
(1)
|
|
$3.053
|
|
|
330,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans
not
approved by security holders
|
|
|
2,329
|
(2)
|
|
$2.267
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
588,294
|
|
|
$3.050
|
|
|
330,667
|
|
|
(1)
|
Of
these shares, 249,325 were granted under the 2006 Stock Plan and 336,640
were granted under the 1996 Stock Plan. 330,667 shares remain available
for grant under the 2006 Stock
Plan.
|
(2)
|
Of
these shares, all 2,329 shares were granted under the International
Plan.
|
(3)
|
Weighted
average exercise prices do not include restricted stock units as these do
not contain exercise prices.
|
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 was not approved by the Company’s stockholders. The
International Plan provided 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, that were not officers or directors
of the Company. A maximum of 88,888 shares of Common Stock were originally
reserved for issuance under the International Plan upon the exercise of NQSOs.
All NQSOs outstanding as of January 22, 2010 are still exercisable according to
their terms. The International Plan was administered by the Compensation and
Stock Committee, which, subject to the terms of the International Plan, had 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. 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 expires 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 either became fully exercisable at the time
of grant or became exercisable in such installments as the Compensation and
Stock Committee specified. 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.
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, 2004
through September 30, 2009, 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 October 1, 2004 in the
Company’s Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends, if any.
|
9/30/04
|
|
9/30/05
|
|
9/29/06
|
|
9/28/07
|
|
9/30/08
|
|
9/30/09
|
Datawatch
Corporation
|
100.00
|
|
62.91
|
|
45.87
|
|
79.74
|
|
31.54
|
|
42.29
|
SIC
Code Index
|
100.00
|
|
109.99
|
|
120.37
|
|
138.42
|
|
120.08
|
|
121.19
|
NASDAQ
Market Index
|
100.00
|
|
113.76
|
|
120.37
|
|
135.45
|
|
105.67
|
|
108.34
|
(1)
|
The
stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used in the graph was obtained
from Morningstar, Inc., a source believed to be reliable, but the Company
is not responsible for any errors or omissions in such
information.
|
Notwithstanding
anything to the contrary set forth in any of the Company’s previous or future
filings made under the Securities Act or the Exchange Act, that might
incorporate by reference this proxy statement or future filings made by the
Company under those statutes, the Compensation Committee Report, the Audit
Committee Report, the Charters of the Audit, Compensation and Stock, Nominating
and Corporate Governance Committees, reference to the independence of the Audit
Committee members and of other Board members and the preceding Stock Performance
Graph are not “soliciting material” and are not deemed filed with the Securities
and Exchange Commission and shall not be deemed incorporated by reference into
any of those such prior filings or into any future filings made by the Company
under those statutes.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires Datawatch’s directors,
executive officers and holders of more than 10% of the Company’s 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 the Company’s 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 the Company’s review of the copies of such filings
received by us with respect to the fiscal year ended September 30, 2009, and
written representations from certain of the Company’s 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, 2009.
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 30, 2010. 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
14, 2010. For any proposal that is not submitted for inclusion in the proxy
statement for the fiscal year ended September 30, 2010 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 14, 2010, 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 14, 2010. Notices of
intention to present proposals at the next annual meeting should be addressed
to: Chief Executive Officer, Datawatch Corporation, 271 Mill Road, Quorum Office
Park, Chelmsford, MA 01824. 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
REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP served as the Company’s independent registered public
accounting firm through January 7, 2010, including for the fiscal year ended
September 30, 2009. Representatives of Deloitte & Touche LLP are not
expected to be present at the Annual Meeting, and as a result will not have the
opportunity to make a statement if they desire to do so and will not be
available to respond to questions from stockholders.
The fees
billed during the 2008 and 2009 fiscal years by Deloitte & Touche LLP for
services provided to us were as set forth below. The fees billed during fiscal
2008 and fiscal 2009 included fees for some services provided for fiscal 2007
and fiscal 2008, respectively.
|
|
2008
|
|
|
2009
|
|
Audit
Fees(1):
|
|
$
|
634,283
|
|
|
$
|
516,427
|
|
Tax
Fees(2):
|
|
|
35,028
|
|
|
|
13,396
|
|
Total
|
|
$
|
669,311
|
|
|
$
|
529,823
|
|
(1)
|
Audit
Fees consisted of audit work performed in the preparation of financial
statements, as well as work generally only the independent auditor can
reasonably be expected to provide, such as services related to statutory
audits, comfort letters, consents and assistance with and reviews of
quarterly financial statements and other documents filed with the
Securities and Exchange Commission.
|
(2)
|
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.
|
All
services rendered by Deloitte & Touche LLP in fiscal year 2009 were
permissible under applicable laws and regulations, and were pre-approved by the
Audit Committee.
Change
in Independent Registered Public Accounting Firm
On
January 7, 2010, the Company dismissed Deloitte & Touche LLP as its
independent registered public accounting firm. The dismissal of Deloitte &
Touche LLP was approved by the Company’s Audit Committee. The reports of
Deloitte & Touche LLP on the Company’s financial statements as of and for
the fiscal years ended September 30, 2009 and 2008 did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principle. During the Company’s fiscal
years ended September 30, 2009 and 2008 and through January 7, 2010 there were
no disagreements with Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to the satisfaction of Deloitte & Touche
LLP, would have caused them to make reference to the subject matter of the
disagreement in connection with their reports on the financial statements for
such years. During the Company’s fiscal years ended September 30, 2009 and 2008
and through January 7, 2010 there were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K. The Company furnished a copy of the
disclosures herein to Deloitte & Touche LLP and requested that Deloitte
& Touche LLP furnish it with a letter addressed to the Securities and
Exchange Commission stating whether or not it agrees with the above statements.
A copy of such letter, dated January 8, 2010, was filed as Exhibit 16.1 to the
Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 8, 2010 (File No. 000-19960), and is incorporated by
reference herein.
On
January 7, 2010, the Company’s Audit Committee engaged UHY LLP as its new
independent registered public accounting firm to audit the Company’s financial
statements for the Company’s fiscal year ending September 30, 2010. The decision
to engage UHY LLP as the Company’s independent registered public accounting firm
was the result of a competitive selection process. Prior to the
engagement of UHY LLP, neither the Company nor anyone on behalf of the Company
consulted with UHY LLP during the Company’s fiscal years ended September 30,
2009 and 2008 and through January 7, 2010, in any manner regarding any of the
matters or events set forth in Item 304(a)(2) of Regulation S-K. UHY LLP leases
all its personnel, who work under the control of UHY LLP partners, from
wholly-owned subsidiaries of UHY Advisers, Inc., in an alternative practice
structure. Representatives of UHY 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.
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 will approve the specific terms of engagement once an
independent registered public accounting firm has been selected, which will
provide for the provision
of
specific services. During the year, circumstances may arise when it may become
necessary to engage the independent registered public accounting firm 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
registered public accounting firm.
CODE
OF ETHICS AND BUSINESS CONDUCT POLICY
The Board
of Directors adopted a Code of Ethics and Business Conduct Policy on January 23,
2004 applicable to all employees and directors of the Company. The Code of
Ethics and Business Conduct Policy is posted on the Company’s website,
www.datawatch.com and located under the “About Us” tab and the “Investor
Relations” and “Corporate Governance” links. Any amendments to or waivers of the
Code of Ethics and Business Conduct Policy 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 Datawatch’s 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.
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
either to Investor Relations, Datawatch Corporation, 271 Mill Road, Quorum
Office Park, Chelmsford, MA 01824 or to investor@datawatch.com 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.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR
THE SHAREHOLDER MEETING TO BE HELD ON MARCH 19, 2010
This
proxy statement and the Company’s 2009 Annual Report are available online at
https://materials.proxyvote.com/237917.
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.
FORM
OF PROXY CARD
ANNUAL
MEETING OF STOCKHOLDERS OF
DATAWATCH
CORPORATION
March
19, 2010
NOTICE OF INTERNET AVAILABILITY OF
PROXY MATERIAL
:
The
Notice of Meeting, Proxy Statement, Proxy Card
are
available at - https://materials.proxyvote.com/237917
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
|
Please
detach along perforated line and mail in the envelope
provided.
|
|
PLEASE SIGN,
DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE
ý
|
|
|
|
|
1.
To elect the
nominees as Directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and
qualified.
|
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.
|
|
|
|
|
|
NOMINEES:
|
|
|
|
|
o
|
FOR
ALL NOMINEES
|
m
|
Kenneth
P. Bero
|
|
|
|
|
|
m
m
|
Thomas
H. Kelly
Richard
de J. Osborne
|
|
|
|
|
o
|
WITHHOLD
AUTHORITY
|
m
|
Terry
W. Potter
|
PLEASE
MARK, SIGN, DATE AND PROMPTLY
|
|
|
|
|
|
FOR
ALL NOMINEES
|
m
|
William
B. Simmons
|
RETURN
THIS
PROXY.
|
|
|
|
|
|
m
|
James Wood
|
|
|
|
|
o
|
FOR
ALL EXCEPT
|
|
|
|
|
|
|
(See
instructions below)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTION:
To withhold
authority to vote for any individual nominee(s), mark
“FOR ALL EXCEPT”
and
fill in the circle next to each nominee you wish to withhold, as shown
here:
m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
of
Stockholder
|
|
Date:
|
|
Signature
of
Stockholder
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Please
sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please
give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DATAWATCH
CORPORATION
Proxy
for Annual Meeting of Stockholders
March
19, 2010
SOLICITED
BY THE BOARD OF DIRECTORS
The
undersigned hereby appoints KENNETH P. BERO and MURRAY P. FISH, 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 19, 2010, at 11:00 a.m. Eastern time,
at
the
offices of Choate, Hall & Stewart, Two International Place, Boston, MA
02110, and at any
adjournments
thereof, upon matters set forth in the Notice of Annual Meeting of Stockholders
and
Proxy
Statement dated January 28, 2010, a copy of which has been received by the
undersigned.
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
Datawatch Corp. (delisted) (NASDAQ:DWCH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Datawatch Corp. (delisted) (NASDAQ:DWCH)
Historical Stock Chart
From Jul 2023 to Jul 2024