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Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On November 5, 2018, Datawatch Corporation (“Datawatch”),
Altair Engineering Inc., a Delaware corporation (“Parent”) and Dallas Merger Sub, Inc., a Delaware corporation and
a wholly-owned subsidiary of Parent (“Purchaser”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The
Merger Agreement provides that, subject to the terms of the Merger Agreement, Purchaser will commence a tender offer (the “Offer”)
to purchase all of the outstanding shares (the “Shares”) of Datawatch common stock, $0.01 par value, at a price of
$13.10 per share, without interest and subject to any required withholding taxes (the “Offer Price”).
Consummation of the Offer is subject to various conditions set
forth in the Merger Agreement, including, but not limited to (i) at least one Share more than 50 percent of the Shares then
outstanding being tendered into the Offer, (ii) the receipt of required approvals, waivers and consents, and (iii) other
conditions set forth in Annex I to the Merger Agreement. The Offer is not subject to any financing condition.
The Offer will expire at midnight, on the 20
th
business
day (calculated in accordance with the rules of the Securities Exchange Act of 1934) following the commencement date of the
Offer unless extended in accordance with the terms of the Offer and the Merger Agreement and the applicable rules and regulations
of the United States Securities and Exchange Commission (the “SEC”).
Following consummation of the Offer, Purchaser will merge with
and into Datawatch with Datawatch surviving as a wholly-owned subsidiary of Parent (the “Merger”). At the effective
time of the Merger (the “Effective Time”), each outstanding Share that is not tendered and accepted pursuant to the
Offer (other than the Shares owned both at the commencement of the Offer and at the Effective Time by Datawatch or by a direct
or indirect subsidiary of Datawatch, Shares irrevocably accepted for purchase in the Offer, Shares owned both at the commencement
of the Offer and at the Effective Time by Purchaser, Parent or any other direct or indirect wholly owned subsidiary of Parent,
and Shares as to which appraisal rights have been perfected in accordance with applicable law) will be cancelled and converted
into the right to receive the Offer Price, without interest and subject to any required withholding taxes, on the terms and conditions
set forth in the Merger Agreement.
The Merger Agreement provides that
the Merger will be governed by Section 251(h) of the Delaware General Corporation Law (the “DGCL”) and will
be effected by Purchaser and Datawatch as soon as practicable following the consummation of the Offer without a stockholders meeting
pursuant to the DGCL.
At the Effective Time, equity awards
previously granted pursuant to Datawatch’s Third Amended and Restated 2011 Equity Compensation and Incentive plan (as amended,
supplemented or modified, the “Plan”) shall be cancelled with the following effect:
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Each outstanding, unexpired and unexercised option (each, a “Company Option”) to purchase Shares issued pursuant
to the Plan shall be cancelled and, in exchange therefor, each former holder thereof shall be entitled to receive a payment in
cash (net of any applicable withholding taxes and without interest) in an amount equal to the product of (i) the total number
of Shares subject to such Company Option immediately prior to such cancellation and (ii) the excess, if any, of the Offer
Price over the exercise price per Share subject to such Company Option immediately prior to such cancellation.
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Each outstanding award of restricted stock units (each, a “Company RSU”) for Shares granted under the Plan that
is vested or that, by the terms of the applicable Plan or award agreement, would automatically become vested as a result of the
Merger, shall be cancelled and, in exchange therefor, each former holder thereof shall be entitled to receive a payment in cash
(subject to any applicable withholding taxes and without interest) equal to the product of (i) the total number of Shares
vested and otherwise then issuable pursuant to the Company RSU immediately prior to such cancellation and (ii) the Offer Price.
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Each outstanding Company RSU for Shares granted under the Plan that is not vested after giving effect to any vesting that is
contingent upon the Merger having been consummated shall be cancelled and, in exchange therefor, each former holder thereof shall
be entitled to receive a payment in cash (subject to any applicable withholding taxes and without interest) from Parent equal to
the product of (i) the total number of Shares unvested pursuant to the Company RSU immediately prior to such cancellation
and (ii) the Offer Price, with payment made on or after the vesting date when the corresponding portion of the Company RSU
would otherwise have vested in accordance with its terms had it not been cancelled, but only if such conditions to vesting are
satisfied prior to such vesting date.
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The Merger Agreement contains customary representations and
warranties by Parent, Purchaser and Datawatch. The Merger Agreement also contains customary covenants and agreements, including
with respect to the operations of the business of Datawatch and its subsidiaries between signing and closing, restrictions on responses
by Datawatch with respect to alternative transactions, governmental filings and approvals and other matters.
The Merger Agreement generally prohibits Datawatch’s solicitation
of proposals relating to alternative business combination transactions and restricts Datawatch’s ability to furnish information
to, or participate in any discussions or negotiations with, any third party with respect to any such transaction, subject to certain
exceptions.
The Merger Agreement contains termination rights for each of
Purchaser, Parent and Datawatch, and further provides that upon termination of the Merger Agreement under specified circumstances
Datawatch may be required to pay Purchaser a termination fee of approximately $6.1 million.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1
and is incorporated herein by reference. The foregoing description of the Merger Agreement is qualified in its entirety by reference
to the full text of the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding
its terms. It is not intended to provide any other factual information about Datawatch, Parent or Purchaser. In particular, the
assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in a confidential
disclosure letter provided by the parties thereto in connection with the signing of the Merger Agreement. This disclosure letter
contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger
Agreement. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk
between Datawatch, Parent and Purchaser, rather than establishing matters of fact. Accordingly, the representations and warranties
in the Merger Agreement may not constitute the actual state of facts about Datawatch, Parent or Purchaser.
Tender and Support Agreement
Concurrently with the execution of the Merger Agreement, Michael
A. Morrison, James Eliason, Ken Tacelli, Christopher T. Cox, Richard de J. Osborne, David C. Mahoney, Thomas H. Kelly, Donald Friedman,
Joan C. McArdle, Randy Seidl, Colin Mahony and entities affiliated with such individuals, if applicable, who in the aggregate directly
or indirectly own 1,817,324 Shares, representing approximately14.3% of the Shares outstanding as of October 31, 2018, entered into
Tender and Support Agreements with Purchaser and Parent (each, a “Tender and Support Agreement”), which provide, among
other things, that such stockholders will tender their Shares in the Offer. The Tender and Support Agreements will terminate
upon termination of the Merger Agreement and certain other specified events. The foregoing description of the Tender and Support
Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the form of Tender
and Support Agreement, which is attached as Exhibit 99.1 hereto and incorporated herein by reference.