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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
USDATA CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-- MAY 29, 2001 --
Dear USDATA Stockholder:
The 2001 annual meeting of stockholders of USDATA Corporation will be held on
Tuesday, May 29, 2001, at 11:00 a.m. local time, at our headquarters located at
2435 North Central Expressway, Richardson, TX 75080-2722. You will find
directions to the meeting on our web site at www.usdata.com.
Only stockholders who owned stock at the close of business on April 24, 2001 can
vote at this meeting or any adjournments that may take place. At the meeting, we
will:
o elect six directors,
o request approval of a proposal to issue additional shares of Series C-1
Preferred Stock and warrants to purchase shares of Series C-2 Preferred
Stock,
o request approval of an amendment to our certificate of incorporation to
amend the terms of the existing Series A Preferred Stock and Series B
Preferred Stock, and
o attend to any other business properly presented at the meeting.
We also will report on USDATA's 2000 business results and other matters of
interest to our stockholders. You will have an opportunity at the meeting to ask
questions, make comments and meet our management team.
All stockholders are cordially invited to attend the meeting. No admission
tickets are required. Whether or not you expect to attend the meeting, please
fill in, date and sign the accompanying proxy card and mail it promptly in the
enclosed envelope.
OUR BOARD OF DIRECTORS IS A VITAL RESOURCE. NO MATTER HOW MANY SHARES YOU HOLD,
WE CONSIDER YOUR VOTE IMPORTANT, AND WE ENCOURAGE YOU TO VOTE AS SOON AS
POSSIBLE.
This proxy statement, accompanying proxy card and 2000 annual report are being
mailed to stockholders beginning on or about May 1, 2001 in connection with the
solicitation of proxies by the board of directors of USDATA Corporation.
Please contact Robert A. Merry, President and Chief Executive Officer, at (972)
680-9700 with any questions or concerns.
Sincerely,
/s/ ROBERT A. MERRY
Robert A. Merry
President and Chief Executive Officer
May 1, 2001
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QUESTIONS AND ANSWERS
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Q: WHO IS ENTITLED TO VOTE?
A: Stockholders of record as of the close of business on April 24, 2001 may
vote at the annual meeting.
Q: HOW MANY SHARES CAN VOTE?
A: On April 12, 2001, there were 14,075,055 shares of common stock issued and
outstanding, 50,000 shares of Series A Preferred Stock issued and
outstanding, 265,000 shares of Series B Preferred Stock issued and
outstanding and 37,500 shares of Series C-1 Preferred Stock issued and
outstanding. Holders of common stock may cast one vote for each share of
common stock owned and holders of preferred stock may cast one vote for
each share of common stock into which their shares of preferred stock may
be converted.
Q: WHAT MAY I VOTE ON?
A: You may vote on the election of six directors who have been nominated to
serve on our board of directors, the proposal to issue additional shares of
Series C-1 Preferred Stock and warrants to purchase shares of Series C-2
Preferred Stock, and the proposal to approve the amendment to our
certificate of incorporation to amend the terms of the existing Series A
Preferred Stock and Series B Preferred Stock.
Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The board recommends a vote FOR each board nominee, FOR the proposal to
issue additional shares of Series C-1 Preferred Stock and warrants to
purchase shares of Series C-2 Preferred Stock, and FOR the proposal to
approve the amendment to our certificate of incorporation to amend the
terms of the existing Series A Preferred Stock and Series B Preferred
Stock.
Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive, mark the boxes indicating how
you wish to vote, and return the proxy card in the prepaid envelope
provided.
If you sign your proxy card but do not mark any boxes showing how you wish
to vote, your shares will be voted as recommended by the board of
directors.
Your proxy may be revoked by notice in writing to Robert A. Merry, our
President and Chief Executive Officer, at any time, or by advising Mr.
Merry at the meeting that you wish to revoke your proxy and vote your
shares in person. Your attendance at the meeting will not constitute an
automatic revocation of the proxy.
Q: WHAT IF I HOLD MY USDATA SHARES IN A BROKERAGE ACCOUNT?
A: If you hold your USDATA shares through a broker, bank or other nominee, you
will receive a voting instruction form directly from them describing how to
vote your shares. This form will, in most cases, offer you the following
three ways to vote:
1. by telephone,
2. via the Internet, or
3. by returning the form to your broker.
Q: WHAT IF I WANT TO CHANGE MY VOTE?
A: You may change your vote at any time before the meeting in any of the
following three ways:
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1. notifying Robert A. Merry, our President and Chief Executive Officer,
in writing,
2. voting in person at the meeting, or
3. submitting a proxy card with a later date.
If you hold your shares through a broker, bank or other nominee and wish to
vote at the meeting, you must obtain a legal proxy from that nominee
authorizing you to vote at the meeting. We will be unable to accept a vote
from you at the meeting without that form. If you hold your shares directly
and wish to vote at the meeting, no additional forms will be required.
Q: HOW WILL DIRECTORS BE ELECTED?
A: The six nominees receiving the highest number of affirmative votes at a
meeting at which a quorum is present will be elected as directors.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSAL TO ISSUE ADDITIONAL SHARES OF
SERIES C-1 PREFERRED STOCK AND WARRANTS TO PURCHASE SHARES OF SERIES C-2
PREFERRED STOCK?
A: To approve the proposal to issue additional shares of Series C-1 Preferred
Stock and warrants to purchase shares of Series C-2 Preferred Stock, a
quorum must be present and voting on the proposal and a majority of the
votes cast with respect to our common stock must be in favor of the
proposal. For the purpose of determining a majority of the votes cast with
respect to our common stock, shares of our Series C Preferred Stock will
not be counted. In addition, holders of a majority of the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, voting as a separate class, must vote in favor of the
proposal.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSAL TO AMEND OUR CERTIFICATE OF
INCORPORATION TO AMEND THE TERMS OF THE EXISTING SERIES A PREFERRED STOCK
AND SERIES B PREFERRED STOCK?
A: To approve the proposal to amend our certificate of incorporation to amend
the terms of the existing Series A Preferred Stock and Series B Preferred
Stock, a quorum must be present and voting on the proposal and a majority
of the votes cast with respect to the common stock must be in favor of the
proposal. In addition, holders of a majority of the outstanding shares of
Series A Preferred Stock, voting as a separate class, and the holders of a
majority of the outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, voting as a separate class,
must vote in favor of the proposal.
Q: WHO WILL COUNT THE VOTES?
A: A representative of USDATA will count the votes and act as the inspector of
elections.
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Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares may be registered differently or may be in more than one
account. We encourage you to have all accounts registered in the same name
and address (whenever possible). You may obtain information about how to do
this by contacting our transfer agent at:
Mellon Investor Services
85 Challenger Road
Ridgefield Park, NJ 07660
(toll-free telephone 800-526-0801)
If you provide Mellon Investor Services with photocopies of the proxy cards
that you receive or with the account numbers that appear on each proxy
card, it will be easier for Mellon Investor Services to combine your
accounts.
You also can find information on transferring shares and other useful
stockholder information on their web site at www.mellon-investor.com.
Q: WHAT IS A QUORUM?
A: A quorum is a majority of the outstanding shares entitled to be cast on a
matter. The shares may be represented at the meeting either in person or by
proxy. To hold the meeting, there must be a quorum present.
Q: WHAT IS THE EFFECT IF I ABSTAIN OR FAIL TO GIVE INSTRUCTIONS TO MY BROKER?
A: If you submit a properly executed proxy, your shares will be counted as
part of the quorum even if you abstain from voting or withhold your vote
for a particular director.
Broker non-votes also are counted as part of the quorum. A broker non-vote
occurs when banks, brokers or other nominees holding shares on behalf of a
stockholder do not receive voting instructions from the stockholder by a
specified date before the meeting. In this event, banks, brokers and other
nominees may vote those shares on matters deemed routine. The election of
directors is considered a routine matter. The proposal to issue additional
shares of Series C-1 Preferred Stock and warrants to purchase shares of
Series C-2 Preferred Stock and the proposal to approve the amendment to our
certificate of incorporation are considered non-routine matters. Therefore,
brokers, banks or other nominees will not be able to vote on these matters
without instructions from the stockholder. This will result in a "broker
non-vote" on these matters equal to the number of shares for which the
brokers do not receive specific voting instructions.
Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders and have the effect of negative votes. A
"withheld" vote is treated the same as an abstention. Broker non-votes are
not counted for purposes of determining whether a proposal has been
approved.
Q: WHO CAN ATTEND THE MEETING?
A: All stockholders are encouraged to attend the meeting. Admission tickets
are not required.
Q: ARE THERE ANY EXPENSES ASSOCIATED WITH COLLECTING THE STOCKHOLDER VOTES?
A: We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and other materials to our stockholders. We do not anticipate hiring
an agency to solicit votes at this time.
Q: WHAT IS A STOCKHOLDER PROPOSAL?
A: A stockholder proposal is your recommendation or requirement that we or our
board of directors take action on a matter that you intend to present at a
meeting of stockholders. However, under the proxy rules we have the ability
to exclude certain matters
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proposed, including those that deal with matters relating to our ordinary
business operations.
Q: CAN ANYONE SUBMIT A STOCKHOLDER PROPOSAL?
A: To be eligible to submit a proposal, you must have continuously held at
least $2,000 in market value, or 1%, of our common stock for at least one
year by the date you submit your proposal. You also must continue to hold
those securities through the date of the meeting.
Q: IF I WISH TO SUBMIT A STOCKHOLDER PROPOSAL FOR THE ANNUAL MEETING IN 2002,
WHAT ACTION MUST I TAKE?
A: If you wish us to consider including a stockholder proposal in the proxy
statement for the annual meeting in 2002, you must submit the proposal, in
writing, so that we receive it no later than January 1, 2002. The proposal
must meet the requirements established by the Securities and Exchange
Commission. Send your proposal to:
Robert A. Merry
President and CEO
USDATA Corporation
2435 North Central Expressway
Richardson, TX 75080-2722
As to any proposal presented by a stockholder at the annual meeting that
has not been included in the proxy statement, management proxies will be
allowed to use their discretionary voting authority unless we receive
notice of such proposal no later than March 15, 2002.
Q: WHO ARE USDATA'S LARGEST STOCKHOLDERS?
A: As of April 12, 2001, Safeguard Scientifics, Inc. (Safeguard) beneficially
owns 36.0%, SCP Private Equity Partners II, L.P. (SCP) beneficially owns
43.5%, Technology Leaders I beneficially owns 6.9%, Technology Leaders II
beneficially owns 6.9%, and our directors and executive officers as a group
beneficially own 2.9%, of our common stock. At April 12, 2001, no other
stockholder owned more than 5% of our stock.
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ELECTION OF DIRECTORS
ITEM 1 ON THE PROXY CARD
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Directors are elected annually and serve a one-year term. There are six nominees
for election this year. Each nominee is currently serving as a director and has
consented to serve until the next annual meeting if elected, and until his
successor is elected and qualified. You will find detailed information on each
nominee below. If any director is unable to stand for re-election after
distribution of this proxy statement, the board may reduce its size or designate
a substitute. If the board designates a substitute, proxies voting on the
original director candidate will be cast for the substituted candidate. Under
the terms of an investors' rights agreement we entered into with certain of our
investors, the holders of the Series C Preferred Stock may nominate one director
to the board of directors. The holders of the Series C Preferred Stock have
nominated Mr. Churchill pursuant to these terms.
THE BOARD RECOMMENDS A VOTE FOR EACH NOMINEE. THE SIX NOMINEES WHO RECEIVE THE
HIGHEST NUMBER OF AFFIRMATIVE VOTES WILL BE ELECTED AS DIRECTORS.
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WINSTON J. CHURCHILL Director since 2000
Age 60
Mr. Churchill has been managing general partner of SCP Private Equity Partners
since its inception, and has over 24 years of experience in private equity
investment. Mr. Churchill founded Churchill Investment Partners, Inc. in 1989
and CIP Capital, L.P., a venture capital fund, in 1990. Prior to that, he was a
managing general partner of a private investment firm, which specialized in
leverage buyouts on behalf of Bessemer Securities Corporation. Mr. Churchill is
a director of a number of companies, both public and private, including Tucker
Anthony Sutro, Inc., Amkor Technology, Inc. and Visalign, LLC, where he serves
as chairman. Mr. Churchill has served on USDATA's board since October 2000 and
in February 2001 was elected Chairman of the Board and to the compensation
committee to serve as its Chairman.
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CHRISTOPHER J. DAVIS Director since 2001
Age 49
Mr. Davis has held the position of Vice President, Strategic Development at
Safeguard Scientifics, Inc. since March 2000. From September 1995 until March
2000, Mr. Davis was an independent consultant and private investor in several
early stage technology-oriented companies. Prior to September 1995, Mr. Davis
served as President and Chief Executive Officer of LFC Financial Corporation, a
privately held merchant banking company engaged in complex financing
transactions. Mr. Davis is a director of a number of companies, both public and
private, including eMerge Interactive, Inc. Mr. Davis has served as a member of
the board of directors of USDATA since February 2001.
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JAMES W. DIXON Director since 1994
Age 54
Mr. Dixon has served as chief executive officer of Broadreach Consulting, Inc.,
an Internet professional services company, since 1997. From 1987 to 1996, Mr.
Dixon served as chief executive officer and chairman of CompuCom Systems, Inc.,
a provider of technology management services and information technology
products. Mr. Dixon is a director of AER Energy, Inc.
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ELECTION OF DIRECTORS (CONT.)
ITEM 1 ON THE PROXY CARD
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ROBERT A. MERRY Director since 1997
Age 51
Mr. Merry has served as president and chief executive officer of USDATA since
July 1997. From June 1995 to July 1997, Mr. Merry served as president of the
Process Manufacturing Strategic Business Unit of Electronic Data Systems (EDS).
From March 1992 to June 1995, Mr. Merry served as vice president and regional
sales manager of manufacturing of EDS.
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JACK L. MESSMAN Director since 1994
Age 61
Mr. Messman has served as president and chief executive officer for Cambridge
Technology Partners, an e-integration services firm, since August 1999. From
April 1991 until August 1999, Mr. Messman served as chairman and chief executive
officer of Union Pacific Resources Group, Inc., an energy company. Mr. Messman
is a director of Cambridge Technology Partners (Massachusetts), Inc., Metallurg,
Inc., Novell, Inc., Tandy Corporation, and Safeguard Scientifics, Inc.
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ARTHUR R. SPECTOR Director since 1994
Age 60
Mr. Spector is a managing director of the general partner and of the management
company of Safeguard International Fund, L. P., an international private equity
fund. From January 1997 to March 1998, Mr. Spector served as a managing director
of TL Ventures LLC, a venture capital management company organized to manage
day-to-day operations of TL Ventures III L. P. and TL Ventures III Offshore L.
P. From January 1995 to December 1996, Mr. Spector served as director of
acquisitions for Safeguard. From July 1992 to May 1995, Mr. Spector was vice
chairman and secretary of Casino & Credit Services, Inc. Mr. Spector is chairman
of the board of directors of Neoware Systems, Inc. and a director of DocuCorp
International, Inc. and Metallurg, Inc.
The following individual currently is a director whose term will expire this
year, but will not stand for election at the annual meeting:
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MAX D. HOPPER Director since 1995
Age 65
Mr. Hopper has served as Chairman of the Board of USDATA from April 1998 through
February 2001. He has served as principal and chief executive officer of Max D.
Hopper Associates, Inc., an information systems consulting firm, since 1995.
Prior to that time, Mr. Hopper served as a senior vice president, information
systems of American Airlines, Inc. Mr. Hopper served as chairman of The SABRE
Group, the airline reservation system unit of American Airlines, from April 1994
to January 1995. Mr. Hopper currently serves as a director of the Gartner Group,
Inc., Payless Cashways, Inc., Metrocall, Inc., Exodus Communications, Inc.,
United Stationers, Inc., and Accrue Software, Inc.
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BOARD OF DIRECTORS -- ADDITIONAL INFORMATION
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BOARD MEETINGS: The board of directors held nine meetings in 2000. Each director
attended at least 75% of the total number of meetings of the board and
committees of which he was a member during the period in which he served as a
director.
ANNUAL AND MEETING ATTENDANCE FEES: Directors who are not executive officers of
Safeguard, SCP or our employees are reimbursed for travel expenses incurred in
connection with attending board meetings or other company business but do not
receive compensation for serving as directors.
BOARD COMPENSATION: In early 2000, we reviewed board of director compensation
practices for public companies of similar size and in similar industries. In
February 2000, management recommended and the board approved a stock equity
compensation program as described below.
STOCK OPTIONS: Directors who are not executive officers of Safeguard or SCP, or
any of their respective wholly owned subsidiaries, or are not employees of us or
any of our subsidiaries receive:
o options to purchase 20,000 shares of our common stock upon initial election
to the board, vesting 25% each year starting on the first anniversary of
the grant date, and
o annual service grants of 5,000 shares of our common stock, fully vested as
of the grant date.
Directors' options have an eight-year term. The exercise price is equal to the
closing price of a share of our common stock on the grant date.
Prior to the adoption of the stock equity compensation program described above,
directors received an initial stock option grant of 15,000 shares. Upon adoption
of the current plan in February 2000, Mr. Messman and Mr. Spector each received
an option for 5,000 shares at an exercise price of $15.6875 per share vesting
25% each year starting on the first anniversary of the grant date. Annual
service grants of 5,000 were made in May 2000 to Mr. Messman and Mr. Spector at
an exercise price of $6.6875 per share. Annual service grants of 3,000 shares
were made in 1999 to Mr. Messman and Mr. Spector at an exercise price of $3.50
per share.
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BOARD COMMITTEE MEMBERSHIP ROSTER
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AUDIT COMPENSATION EXECUTIVE
MEETINGS HELD IN 2000 2 3 0
Winston J. Churchill X**
Christopher J. Davis
James W. Dixon X
Max D. Hopper X X*
Robert A. Merry X
Jack L. Messman
Arthur R. Spector X* X X
* Chairperson
** Mr. Churchill was elected to the compensation committee, and to serve at
its chairperson, as of February 2001.
AUDIT: The audit committee, pursuant to the written charter adopted by the board
of directors and attached as Appendix B, recommends our independent accountants,
discusses the scope and results of our audit with the independent accountants,
reviews
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with management and the independent accountants our interim and year-end
operating results, considers the adequacy of our internal accounting controls
and audit procedures, and reviews the non-audit services to be performed by the
independent accountants.
COMPENSATION: The compensation committee reviews and recommends compensation
arrangements for senior management, including salaries, cash incentives and
option grants and administers our equity compensation plan.
EXECUTIVE: The executive committee approves transactions that do not exceed one
million dollars in the aggregate, except where the approval of the board of
directors is required by law.
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PROPOSAL TO ISSUE ADDITIONAL SHARES OF SERIES C-1 PREFERRED
STOCK AND WARRANTS TO PURCHASE SHARES OF SERIES C-2
PREFERRED STOCK
ITEM 2 ON THE PROXY CARD
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PROPOSAL
The board of directors recommends that the stockholders approve the following
resolution:
RESOLVED, that the proposal of the board of directors to authorize the
issuance of additional shares of Series C-1 Preferred Stock and warrants to
purchase shares of Series C-2 Preferred Stock in accordance with the terms
of the Series C Preferred Stock Purchase Agreement, is hereby approved and
adopted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO ISSUE
ADDITIONAL SHARES OF SERIES C-1 PREFERRED STOCK AND WARRANTS TO PURCHASE SHARES
OF SERIES C-2 PREFERRED STOCK. Approval of this proposal requires a majority of
the votes cast at a meeting at which a quorum representing a majority of all
outstanding voting stock is present, either in person or by proxy, and voting on
the proposal. For the purposes of determining a majority of the votes cast,
shares of our Series C Preferred Stock will not be counted. The board of
directors believes that Safeguard, Technology Leaders I L.P., Technology Leaders
II L.P. and SCP intend to vote their shares in favor of the proposal. Safeguard,
through an affiliate, participates in the management of Technology Leaders I
L.P. and Technology Leaders II L.P. In this event, the proposal will be assured
passage based on the voting power of these entities. In the event the proposal
is not approved, the proposed issuance described in this proxy statement is
expected to not occur.
BACKGROUND
On March 30, 2001, we entered into a Series C Preferred Stock Purchase
Agreement, and related agreements, with SCP. Pursuant to the purchase agreement,
we issued and sold to SCP 37,500 shares of our Series C-1 Preferred Stock and a
warrant to purchase up to 75,000 shares of Series C-2 Preferred Stock of the
Company for an aggregate purchase price of $1,500,000. In addition, SCP
committed to purchase an additional 37,500 shares of the Series C-1 Preferred
Stock at a purchase price of $40.00 per share at our option, upon our meeting of
certain funding conditions and upon approval of the issuance by our
stockholders.
Pursuant to a Waiver of Anti-Dilution Rights for Series A Preferred Stock and
Series B Preferred Stock, holders of our Series A Preferred Stock and Series B
Preferred Stock agreed to waive any adjustment in the conversion price of the
shares of Series A Preferred Stock and Series B Preferred Stock that otherwise
would have been resulted from the consummation of the transactions contemplated
by the purchase agreement.
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As part of this transaction, we entered into a Warrant Agreement with Safeguard
2000 Capital, L.P. and SCP, both of which are holders of warrants to purchase
shares of preferred stock of eMake Corporation. Pursuant to exchange agreements
that we had previously entered into with these parties, the shares of eMake
Corporation preferred stock received upon exercise of the warrants could be
exchanged for shares of our Series B Preferred Stock. However, under the terms
of the new Warrant Agreement, both Safeguard 2000 Capital, L.P. and SCP have
agreed not to exercise their rights to acquire our Series B Preferred Stock.
TERMS OF THE SERIES C PREFERRED STOCK
Holders of the Series C Preferred Stock are entitled to significant rights,
preferences and privileges. These rights, preferences and privileges are
summarized below. A more detailed description of the rights, preferences and
privileges of the Series C Preferred Stock are set forth in the Certificate of
Designation for Series C-1 Preferred Stock and Series C-2 Preferred Stock,
attached as Appendix A.
Amount. We have authorized a total of 125,000 shares of Series C-1 Preferred and
125,000 shares of Series C-2 Preferred. Up to 75,000 shares of Series C-1
Preferred and up to 75,000 shares of Series C-2 Preferred could be issued in
connection with the purchase agreement.
Rank. The Series C Preferred Stock ranks senior to all other classes and series
of our capital stock with respect to dividend rights, rights on liquidation,
dissolution and winding up.
Dividends. The holders of the Series C Preferred Stock are entitled to receive
cumulative dividends at the rate of $4.00 per share per annum, whether or not
earned or declared. We may not declare or pay dividends or distributions on any
of our securities which are junior to the Series C Preferred Stock so long as
any accrued dividends on the Series C Preferred Stock remain unpaid.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of USDATA, the holders of the Series C-1 Preferred
Stock and Series C-2 Preferred Stock will be entitled to receive, out of our
assets or surplus funds, an amount equal to $80.00 and $120.00 per share,
respectively, plus accrued and unpaid dividends and interest. If the assets and
funds are insufficient to permit the payment to the holders of the Series C-1
Preferred Stock and Series C-2 Preferred Stock, all of our assets and funds
legally available for distribution will be distributed ratably among the holders
of the Series C Preferred Stock in proportion to the aggregate amount each
holder is entitled to receive.
After distributions to junior securities, holders of the Series C Preferred
Stock, together with the holders of the Company's common stock, Series A
Preferred Stock, Series B Preferred Stock and all other series of our preferred
stock that rank on a parity with the Series A Preferred Stock and Series B
Preferred Stock, will then be entitled to receive, our remaining assets and
funds legally available for distribution in proportion to the shares of common
stock held by them or which they have the right to acquire upon conversion of
preferred stock.
Voting Rights. The holders of the Series C Preferred Stock have voting rights
and powers equal to the voting rights and powers of our common stock based on
the number of whole shares of our common stock into which the shares of Series C
Preferred Stock could be converted. In addition, the vote of at least fifty
percent of the then outstanding Series C Preferred Stock, voting as a separate
class, is required for us to:
o alter, amend or modify the rights, preferences or privileges of the Series
C Preferred Stock;
o increase the authorized number of shares of Series C Preferred Stock or
issue any additional shares of Series C Preferred Stock;
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o authorize or issue, or obligate ourselves to issue equity securities senior
to or on parity with the Series C Preferred Stock as to dividend rights,
liquidation preferences or redemption rights;
o redeem, purchase or otherwise acquire certain of our securities, except for
those repurchased as the original purchase price from employees, officers,
directors or other persons performing services for us;
o reorganize, merge or consolidate;
o sell, lease, convey or otherwise dispose of all or substantially all of our
assets; or
o liquidate, dissolve or wind up.
Conversion. Each share of Series C Preferred Stock is convertible, at the option
of the holder thereof, into the number of shares of our common stock determined
by dividing $40.00 plus all accrued but unpaid dividends and interest thereon by
the conversion price, which is initially $0.40. The conversion price will be
adjusted if we issue additional shares of our common stock for a price per share
less than the conversion price in effect on the date of the issuance of the
additional shares of common stock. The conversion price will be reduced
concurrently with that issuance to a price equal to the price per share paid for
the additional shares of common stock. The conversion price will not be adjusted
upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock. Additionally, the conversion price will not be
adjusted upon issuance of shares of our common stock to outside directors,
officers, employees and consultants pursuant to our 1994 Equity Compensation
Plan, Employee Stock Purchase Plan or other employee stock plans, subject to
certain qualifications.
Board Representation. The holders of the Series C Preferred Stock, voting as a
separate class by majority vote, are entitled to vote to elect one member to the
board of directors.
WARRANT
The warrant issued under the purchase agreement entitles the holder to purchase
up to 75,000 shares of the Series C-2 Preferred Stock at a purchase price per
share of $40.00. The right to purchase the shares of Series C-2 Preferred Stock
under the warrant are exercisable on any business day on or before March 30,
2011, with the exception of 50,500 of the shares under the warrant which may not
be exercisable until the earlier of stockholder approval of the transactions
under the warrant or May 31, 2001. The number of shares of Series C-2 Preferred
Stock and the purchase price per share of Series C-2 Preferred Stock are subject
to adjustment from time to time, subject to certain exceptions, in the case of:
o our merger or consolidation;
o a sale or transfer of our properties and assets as, or substantially as, an
entirety;
o a reclassification or exchange of securities subject to the warrant;
o stock splits, stock dividends, reverse stock splits; or
o dividends in our stock or other securities or our property other than cash.
The warrant may be exercised in cash or by electing to receive a "net" number of
shares of Series C-2 Preferred Stock without making a cash payment determined by
a formula based on the amount the fair market value of a share of Series C-2
Preferred Stock exceeds the exercise price per share of Series C-2 Preferred
Stock. In addition, in the event of our liquidation, dissolution or winding up,
the holder may elect to receive an amount payable to holders of Series C
Preferred Stock with respect to the number of shares of Series C-2 Preferred
Stock covered by the holder's election less the exercise price of the shares of
Series C-2 Preferred Stock covered by the election. If the holder does not
exercise the warrant before the expiration date, the warrant will be deemed to
have been exercised in full, and the holder will be entitled to the "net" number
of shares of Series C-2 Preferred Stock for which the warrant was exercisable
immediately prior to expiration.
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REGISTRATION RIGHTS
In connection with the purchase agreement, we entered in a Second Amended and
Restated Investors' Rights Agreement. Pursuant to this Investors' Rights
Agreement, we have agreed to prepare and file a "shelf" registration statement
with the Securities and Exchange Commission and keep it continuously effective
for a specified period upon the request of the certain holders of securities as
set forth in the agreement. Additionally, under certain circumstances upon the
request of the certain holders of securities as set forth in the agreement, we
agreed to include their securities in a securities registration that we
undertake.
USE OF PROCEEDS
We agreed to use the proceeds from the issuance and sale of the Series C-1
Preferred Stock, the warrant and the Series C-2 Preferred Stock for general
corporate purposes.
PURPOSE
We are subject to a variety of corporate governance standards that are imposed
by The Nasdaq Stock Market because our common stock is listed on the Nasdaq
National Market. Specifically, certain rules of The Nasdaq Stock Market require,
among other things, that we obtain stockholder approval prior to the sale or
issuance of shares of capital stock that may result in a change of control.
In the event that The Nasdaq Stock Market determines that a change of control
may result from the full issuance of 75,000 shares of Series C-1 Preferred Stock
and the full issuance of 75,000 shares of Series C-2 Preferred Stock upon the
exercise of the warrants to purchase shares of Series C-2 Preferred Stock, we
are submitting this proposal to the stockholders to approve the issuance of the
portion of shares of Series C-1 Preferred Stock and warrants to purchase shares
of Series C-2 Preferred Stock that may result in a deemed change of control.
--------------------------------------------------------------------------------
PROPOSAL TO AMEND OUR CERTIFICATE OF INCORPORATION TO AMEND
THE TERMS OF THE EXISTING SERIES A PREFERRED STOCK AND SERIES
B PREFERRED STOCK
ITEM 3 ON THE PROXY CARD
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PROPOSAL
The board of directors recommends that the stockholders approve the following
resolution:
RESOLVED, that the proposal of the board of directors to approve the
amendment of the certificate of incorporation to amend the terms of the
Series A Preferred Stock and Series B Preferred Stock of USDATA Corporation
is hereby approved and adopted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND
THE CERTIFICATE OF INCORPORATION TO AMEND THE TERMS OF THE SERIES A PREFERRED
STOCK AND SERIES B PREFERRED STOCK. Approval of this proposal requires a
majority of the votes cast at a meeting at which a quorum representing a
majority of all outstanding voting stock is present, either in person or by
proxy, and voting on the proposal. In addition, approval of the proposal
requires the vote of the holders of a majority of the outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
voting as a separate class, and the vote of the Series A Preferred Stock, voting
as a separate class. The board of directors believes that Safeguard, Technology
Leaders I L.P., Technology Leaders II L.P. and SCP intend to vote their shares
in favor of the proposal. Safeguard, through an affiliate, participates in the
management of
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Technology Leaders I L.P. and Technology Leaders II L.P. In this event, the
proposal will be assured passage based on the voting power of these entities. In
the event the proposal is not approved, the proposed amendment described in this
proxy statement is expected to not occur.
BACKGROUND
Currently, our certificate of incorporation provides that the holders of our
Series A Preferred Stock and Series B Preferred Stock shall rank on a parity
with one another with respect to dividend rights, rights on liquidation,
dissolution and winding up and redemption rights.
PURPOSE
In a separate transaction involving the holders of the Series A Preferred Stock
and Series B Preferred Stock, we agreed to amend the terms of the Series A
Preferred Stock and Series B Preferred Stock so that the holders of the Series B
Preferred rank senior to the holders of the Series A Preferred Stock with
respect to dividend rights, rights on liquidation, dissolution and winding up.
The language of this proposed amendment is contained in the sections entitled
"Rank" and "Liquidation Preferences" of the attached Appendix A.
In deciding to amend the terms of the Series A Preferred Stock and Series B
Preferred Stock, the board of directors considered many factors, including the
terms of the amendment described in this proposal. In addition, the board of
directors considered the impact of the changes on the existing rights and
privileges of the holders of the Series A Preferred Stock and Series B Preferred
Stock and the affirmative consent of those holders to the amendment described in
this proposal. Based on these factors, the board of directors believes that it
is in our best interests to amend the terms of the Series A Preferred Stock and
Series B Preferred Stock.
Except as otherwise provided the rights and privileges of the Series A Preferred
Stock and Series B Preferred Stock will remain unchanged.
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STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND GREATER THAN 5% STOCKHOLDERS
AS OF APRIL 12, 2001
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The following table sets forth the beneficial ownership of our common stock by
each person known to us to beneficially own 5% or more of our common stock, each
of our directors and nominees, each of our executive officers and each of our
directors and executive officers as a group. The calculation of the percentage
of our common stock beneficially owned as of April 12, 2001 is based on
14,075,055 shares of common stock issued and outstanding as of that date, plus
9,378,052 shares of common stock that may be received by the holders of the
Series A Preferred Stock and Series B Preferred Stock (both of which include
accrued dividends) and Series C Preferred Stock (which excludes accrued
dividends) upon conversion to common stock and for which the holders of those
shares are entitled to vote with the holders of common stock as a single class
on all matters submitted to our stockholders.
SHARES BENEFICIALLY PERCENT OF VOTING
NAME OWNED CLASS
---- ------------------- -----------------
Safeguard Scientifics, Inc. 8,439,250(1) 36.0%
800 The Safeguard building
435 Devon Park Drive
Wayne, PA 19087
SCP Private Equity Partners II, L.P. 13,454,707(2) 43.5%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Technology Leaders I L. P. 1,623,856(3) 6.9%
800 The Safeguard building
435 Devon Park Drive
Wayne, PA 19087
Technology Leaders II L. P. 1,621,356(4) 6.9%
800 The Safeguard building
435 Devon Park Drive
Wayne, PA 19087
Winston J. Churchill 0 *
Christopher J. Davis 0 *
Timothy G. Davis 44,750(5) *
James W. Dixon 38,450(6) *
Robert L. Drury 2,515 *
Max D. Hopper 49,000(7) *
Robert A. Merry 387,500(8) 1.6%
Jack L. Messman 91,225(9) *
Edward R. Nugent 63,755(10) *
Arthur R. Spector 22,595(11) *
Kerry Walbridge 3,000 *
Executive officers and directors as a group (11 persons) 702,790(12) 2.9%
* Less than 1% of outstanding shares of common stock
Each individual has the sole power to vote and to dispose of the shares (other
than shares held jointly with spouse) except as follows:
(1) Includes shares held by Safeguard Scientifics (Delaware), Inc., a
wholly-owned subsidiary of Safeguard Scientifics, Inc. All of the shares
beneficially owned by Safeguard have been
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pledged by Safeguard as collateral under its line of credit. Also
includes 1,218,638 shares that may be acquired upon conversion of 50,000
shares of Series A Preferred Stock (100% of that class) and 2,204,707
shares that may be acquired upon conversion of 132,500 shares of Series B
Preferred Stock (50% of that class). Does not include shares beneficially
owned by each of Technology Leaders I and Technology Leaders II, venture
capital partnerships in which Safeguard has a beneficial interest.
Safeguard disclaims beneficial ownership of the shares beneficially owned
by each of Technology Leaders I and Technology Leaders II.
(2) Includes 2,204,707 shares that may be acquired upon conversion of 132,500
shares of Series B Preferred Stock (50% of that class) and 3,750,000
shares that may be acquired upon conversion of 37,500 shares of Series
C-1 Preferred Stock (100% of that class). Also includes (a) 2,450,000
shares that may be acquired upon conversion of 24,500 shares of Series
C-2 Preferred Stock pursuant to currently exercisable warrants to
purchase 24,500 shares of Series C-2 Preferred Stock and (b) 5,050,000
shares that may be acquired upon conversion of 50,500 shares of Series
C-2 Preferred Stock pursuant to warrants to purchase 50,500 shares of
Series C-2 Preferred Stock, pending approval of such issuance by the
stockholders.
(3) Consists of Technology Leaders L.P. and Technology Leaders Offshore C.V.
Technology Leaders Management L.P., the sole general partner of
Technology Leaders L.P. and the co-general partner of Technology Leaders
Offshore C.V., exercises, through its executive committee, sole
investment and voting power with respect to the shares owned by such
entities. Of the 1,623,856 shares owned by Technology Leaders I, 758,083
shares are owned by Technology Leaders L. P. and 865,773 shares are owned
by Technology Leaders Offshore C.V. Technology Leaders L. P., Technology
Leaders Offshore C.V., Technology Leaders Management L. P., Technology
Leaders II L. P., Technology Leaders II Offshore C.V. and Technology
Leaders II Management L. P. are members of a group for purposes of
Sections 13(d) and 13(g) of the Securities Exchange Act of 1934.
Technology Leaders I disclaims beneficial ownership of the shares
beneficially owned by Technology Leaders II.
(4) Consists of Technology Leaders II L.P. and Technology Leaders II Offshore
C.V. Technology Leaders II Management L.P., the sole general partner of
Technology Leaders II L.P. and the co-general partner of Technology
Leaders II Offshore C.V., exercises, through its executive committee,
sole investment and voting power with respect to the shares owned by such
entities. Of the 1,621,356 shares owned by Technology Leaders II, 903,492
shares are owned by Technology Leaders II L. P. and 717,864 shares are
owned by Technology Leaders II Offshore C.V. Technology Leaders L.P.,
Technology Leaders Offshore C.V., Technology Leaders Management L.P.,
Technology Leaders II L.P., Technology Leaders II Offshore C.V. and
Technology Leaders II Management L.P. are members of a group for purposes
of Sections 13(d) and 13(g) of the Securities Exchange Act of 1934.
Technology Leaders II disclaims beneficial ownership of the shares
beneficially owned by Technology Leaders I.
(5) Includes options to purchase 43,750 shares of common stock that are
exercisable within 60 days.
(6) Includes options to purchase 22,000 shares of common stock that are
exercisable within 60 days.
(7) Includes options to purchase 49,000 shares of common stock that are
exercisable within 60 days.
(8) Includes options to purchase 387,500 shares of common stock that are
exercisable within 60 days.
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(9) Includes options to purchase 22,000 shares of common stock that are
exercisable within 60 days. Also includes 6,620 shares held in trust for
Mr. Messman's daughter and 6,620 shares held in trust for Mr. Messman's
son. Mr. Messman disclaims beneficial ownership of the securities held in
trust for his children.
(10) Includes options to purchase 60,250 shares of common stock that are
exercisable within 60 days.
(11) Includes options to purchase 22,000 shares of common stock that are
exercisable within 60 days.
(12) Includes options to purchase 606,500 shares of common stock that are
exercisable within 60 days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require that we disclose
late filings of reports of stock ownership by our directors and executive
officers. To the best of our knowledge, the only late filing during 2000 was a
Form 3 by James W. Dixon.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All decisions regarding the compensation of the executive officers were made by
the compensation committee of the board of directors, which is comprised
entirely of non-employee members of the board of directors. Although Mr. Merry
made recommendations to the committee with regard to the compensation of the
other executive officers he did not participate in the committee's deliberations
with respect to his own compensation.
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STOCK PERFORMANCE GRAPH
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The following graph compares the cumulative total return on our common stock for
the period from December 29, 1995, through December 29, 2000, with the
cumulative total return on the Nasdaq Index and the peer group index for the
same period.
[PERFORMANCE GRAPH]
December 29, 2000
Peer Group $267
Nasdaq $238
USDATA $ 4
1. The peer group consists of SIC Code 737--computer programming and data
processing services.
2. We have historically reinvested earnings in the growth of our business and
have not paid cash dividends on our common stock.
3. Assumes an investment of $100 on December 29, 1995.
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REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
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COMPENSATION PHILOSOPHY
Our mission is to succeed in a highly competitive business and achieve maximum
returns for our stockholders by providing manufacturing and process control
knowledge through software products and services.
Our philosophy is to align the compensation of senior management and other
employees with that mission and the long-term interests of our stockholders.
This philosophy also helps us to:
o attract and retain outstanding executives,
o promote among our executives the economic benefits of stock ownership, and
o motivate and reward executives who, by their hard work, loyalty and
exceptional service, make contributions of special importance to the
success of our business.
COMPENSATION STRUCTURE
The compensation of our executives consists of:
o base salary,
o annual cash incentives, and
o stock options.
BASE PAY
Base pay is established initially on the basis of a combination of subjective
factors, including experience and achievements of the individual and the level
of responsibility assumed at USDATA. Salary increases for 2000 were based on:
o level of achievement of financial and strategic objectives,
o levels of individual responsibility and performance, and
o general levels of inflation.
Based on the guidelines discussed above, the 2000 base salary for Mr. Merry, Mr.
Drury, Mr. Nugent, Mr. Davis and Mr. Walbridge was $285,000, $160,000, $150,000,
$130,000 and $275,000, respectively.
ANNUAL CASH INCENTIVES
Annual cash incentives are intended to create an incentive for executives who
significantly contribute to and influence our strategic plans and are
responsible for our performance. Our primary objectives are to:
o focus executives' attention on profitability and asset management,
o encourage teamwork, and
o tie executives' pay to corporate performance goals consistent with
long-term goals of our stockholders.
Incentives are awarded based on achievement of annual financial and strategic
goals approved by the compensation committee at the beginning of the year, which
goals may include target ranges of:
o pretax earnings,
o earnings per share,
o return on equity,
o cash management, or
o some other objective measurement consistent with long-term goals of our
stockholders.
The committee approves a target range for specific and/or strategic goals and a
range of potential incentive amounts for each executive, stated as a percentage
of base salary, and based upon the executive's ability to impact our
performance. Incentives are awarded at year-end based on the level achievement
of the goals compared to the target ranges established.
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Based on these criteria, neither Mr. Merry nor any other executive was eligible
for a cash incentive for 2000 based on achievement of specific financial
performance objectives.
STOCK OPTIONS
Stock options are intended to align the interests of executives and key
employees with the long-term interests of our stockholders and other investors
and to encourage executives and key employees to remain in our employ. Grants
are not made in every year, but are awarded subjectively based on the following
factors including:
o individual's level of responsibility,
o amount and term of options already held by the individual, and
o individual's achievement of financial and strategic objectives, which may
include in addition to the goals described above:
- developing strategic alliances,
- identifying and expanding markets,
- developing new products,
- expanding existing market share and penetration,
- expanding operating capabilities, and
- improving net operating margins and return on equity.
In 2000, the committee granted stock options to purchase 20,000 shares at
$15.6875 a share vesting 25% per year beginning with the first anniversary date
from date of grant to Mr. Drury and Mr. Nugent.
Submitted by the compensation committee:
Winston J. Churchill, Chairman
Max D. Hopper
Arthur R. Spector
In February 2001, Messrs. Winston J. Churchill and Arthur R. Spector were
elected to the compensation committee replacing Jack L. Messman. Mr. Stephen J.
Andriole resigned from the board in the 4th quarter of 2000.
IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code provides that publicly held companies may not deduct in any taxable
year compensation in excess of $1,000,000 paid to any of the individuals named
in the Summary Compensation Table that is not "performance-based." To qualify as
"performance-based" compensation, the compensation committee's discretion to
grant incentive awards must be strictly limited. The compensation committee
believes that the benefit of retaining the ability to exercise discretion under
USDATA's incentive compensation plans outweighs the limited risk of loss of tax
deductions under section 162(m). Therefore, the compensation committee does not
currently plan to qualify its incentive compensation plans under section 162(m).
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EXECUTIVE COMPENSATION & OTHER ARRANGEMENTS
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ---------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS/SARS (#) ($)(2)
------------------------ -------- --------- --------- ------------ --------------- ------------
Robert A. Merry, 2000 $282,000 -- -- -- $ 2,625
President and Chief 1999 $260,000 $173,978 -- 50,000 $ 2,500
Executive Officer 1998 $225,000 $ 78,837 -- 450,000 $ 2,500
Robert L. Drury 2000 $153,000 -- -- 20,000 $ 2,625
Vice President, Chief 1999 $155,000 $ 65,651 -- -- $ 2,500
Financial Officer and 1998 $150,000 $ 31,535 -- 100,000 $ 2,250
Secretary(3)
Edward R. Nugent, 2000 $149,000 -- -- 20,000 $ 2,625
Vice-President Global 1999 $144,000 $165,374 -- 70,000 $ 2,500
Distribution 1998 $ 85,000 $ 75,179 -- 27,000 $ 2,500
Timothy G. Davis, 2000 $129,000 -- -- -- $ 2,625
Vice-President Marketing 1999 $120,000 $ 85,424 -- 35,000 $ 2,500
and Product Development 1998 $105,000 $ 26,279 -- 12,000 $ 2,500
Kerry Walbridge, eMake 2000 $167,000 -- -- -- --
Corporation Chief -- -- -- -- --
Executive Officer(3) -- -- -- -- --
NOTES TO ANNUAL COMPENSATION TABLE:
(1) For 2000, personal benefits did not exceed $50,000 or 10% of the total
annual salary and bonus for any executive.
(2) For 2000, all other compensation includes USDATA's contributions to the
401(k) Matched Savings Plan.
(3) Mr. Drury and Mr. Walbridge were not employed with us as of April 12, 2001.
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OPTION GRANTS IN LAST FISCAL YEAR
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POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
--------------------------------------------------------- -----------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#)(2) FISCAL YEAR ($/SH)(3) DATE ($) ($)
---- ------------ ----------- --------- ---------- -- --
Robert L. Drury 20,000 5.2% $15.6875 2/24/2008 149,802 358,801
Edward R. Nugent 20,000 5.2% $15.6875 2/24/2008 149,802 358,801
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END STOCK OPTION VALUES
--------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ON VALUE
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
Robert L. Drury -- -- 75,000 -- $ 0 $ 0
Robert A. Merry -- -- 375,000 125,000 $ 0 $ 0
Edward R. Nugent 3,000 33,563 31,000 86,000 $ 0 $ 0
Timothy G. Davis -- -- 32,000 37,250 $ 0 $ 0
(1) Value is based on the difference between the option exercise price and the
fair market value per share of our common stock. The fair market value of
our common stock on December 29, 2000 was $0.563 per share.
EMPLOYMENT CONTRACTS; SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Merry is an "at will" employee. We have an arrangement with Mr. Merry
providing that if he is terminated, other than for gross negligence, that he
will be entitled to payment of his salary and certain benefits for a period of
one year. In addition, if Mr. Merry's employment is terminated within nine
months after any one investor, excluding Safeguard Scientifics, Inc., SCP
Private Equity Partners II, L.P. and the Technology Leaders funds, accumulates
30% or more of our common stock, all of his respective stock options will
immediately vest. Mr. Merry's options will also immediately vest upon a change
of control.
Messrs. Drury and Walbridge were "at will" employees. We had an arrangement with
both Messrs. Drury and Walbridge providing that if either employee is
terminated, other than for gross negligence, that he would be entitled to
payment of his salary and certain benefits for a period of one year. Messrs.
Drury and Walbridge
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both were terminated in the 4th quarter of 2000 and received one time severance
payments of $127,125 and $215,250, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT AND OTHERS
We pay Safeguard an administrative support services fee of $30,000 monthly. The
administrative support services include consultation regarding our general
management, investor relations, financial management, certain legal services,
insurance programs administration, audit administration, tax research and
planning, but does not cover extraordinary services or services that are
contracted out. The agreement is subject to termination by us or Safeguard upon
notice 90 days' prior to the end of any fiscal year. The agreement was
terminated as of March 31, 2000. During 2000, we paid $90,000 to Safeguard under
this arrangement.
On November 8, 1994, Safeguard and certain other investors acquired 6,198,808
shares of common stock from USDATA's then majority stockholders for an aggregate
purchase price of approximately $18 million. We granted Safeguard a warrant to
purchase 698,238 shares of common stock. The exercise price of the shares
subject to each warrant is $3.02 per share. In June 2000, Safeguard exercised
its warrant to purchase 698,238 shares of our common stock for $2,108,679 in
cash.
On August 6, 1999, Safeguard Scientifics (Delaware), Inc., a wholly-owned
subsidiary of Safeguard, acquired 50,000 shares of Series A Convertible
Preferred Stock from USDATA for an aggregate purchase price of $5.0 million.
Each share of Series A Convertible Preferred Stock may be converted into the
number of shares of common stock determined by dividing the purchase price of
such share of $100.00 plus any accrued but unpaid dividends by the conversion
price of $4.65.
At various times throughout 2000, a subsidiary of Safeguard provided $10.75
million in financings to us or eMake in exchange for four demand notes ranging
from $1.5 million to $5.0 million. Each demand note was due the earlier of one
year from the date of the note or 60 days following the date of demand for
payment. The notes had an interest rate based on a specified bank prime rate
plus one percent.
On August 14, 2000, SCP Private Equity Partners II, L. P. provided $6.0 million
in financing to eMake in exchange for a demand note due the earlier of one year
from the date of the note or 60 days following the date of demand for payment.
The note had an interest rate based on a specified bank prime rate plus one
percent. Concurrently, we repaid the $2.5 million demand note dated July 28,
2000 to Safeguard plus accrued interest of $13,000 with proceeds from this
demand note payable.
On September 12, 2000, SCP and Safeguard Capital 2000, L.P., a wholly-owned
subsidiary of Safeguard, purchased through a private placement 5,300,000 shares
each, for a total of 10,600,000 shares, of eMake Corporation Series A-1
Convertible Preferred Stock and Series A-2 Convertible Preferred Stock and
warrants to purchase up to an additional 5,300,000 shares each of eMake
Corporation Series A-1 and Series A-2 preferred stock, respectively. The
aggregate purchase price of $26,500,000 was comprised of $6,936,754 in cash and
cancellation of $19,250,000 of the notes described above and the related accrued
interest of $313,000.
In January 2001, SCP and Safeguard each elected to exercise their right to
convert their eMake Series A preferred stock into shares of our Series B
Preferred Stock.
On March 30, 2001, we received an equity contribution of $1.5 million from SCP
through the issuance of 37,500 shares of Series C-1 Preferred Stock and a
warrant to purchase up to 75,000 shares of Series C-2 Preferred Stock. In
addition, SCP has committed to purchase an additional 37,500 shares of Series
C-1 Preferred at the purchase price of $40 per share or $1.5 million. We may
exercise our right to sell
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these shares on or before the expiration of nine months after March 30, 2001,
but not before May 30, 2001. In addition, we must be in compliance with
specified monthly targets as defined in the Stock Purchase Agreement and we must
have received stockholder approval for the issuance.
The Series C Preferred Stock is convertible into our common stock at a
conversion rate of 100 shares of common stock for each share of Series C
Preferred Stock. Cumulative dividends are payable at $4.00 per share per annum
in the form of additional shares of Series C Preferred. As an additional
condition to this financing, SCP and Safeguard agreed to not exercise their
right to exchange shares of Series A-1 and Series A-2, respectively, Preferred
Stock of eMake that they may receive upon the exercise of warrants issued by
eMake Corporation.
Pursuant to our certificate of incorporation, the holders of the Series C
Preferred Stock are entitled to elect one director to our board of directors by
the vote of a majority of the holders of the Series C Preferred. Currently, SCP
holds all of the outstanding Series C Preferred Stock. As a result, at its
discretion SCP may elect one additional director to our board of directors.
In addition, pursuant to the Second Amended and Restated Investors' Rights
Agreement, SCP (as long as it owns at least 5% of our common stock on an
as-converted basis) is entitled to propose one director for election to our
board of directors. SCP has proposed that Winston J. Churchill be its director
nominee, to stand for election under Proposal 1.
INDEPENDENT PUBLIC ACCOUNTANTS
On November 11, 1999, we dismissed PricewaterhouseCoopers LLP as our independent
accountants and engaged KPMG LLP as our independent accountants. We have
retained KPMG LLP for the years ended December 31, 2000 and 2001. Our Audit
Committee participated in and approved the decision to change independent
accountants. The reports of PricewaterhouseCoopers LLP on the financial
statements for the years ended December 31, 1998 and 1997 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle.
In connection with its audits for the 1998 and 1997 fiscal years and through
November 11, 1999, we have had no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
PricewaterhouseCoopers LLP furnished us with a letter addressed to the
Securities and Exchange Commission stating that it agreed with the above
statements. A copy of the letter, dated November 15, 1999, is filed as Exhibit
16 to our Current Report on Form 8-K, filed with the Securities and Exchange
Commission on November 16, 1999.
A representative of KPMG LLP is expected to be present at the annual meeting and
will have an opportunity at the meeting to make a statement if he or she desires
to do so, and will be available to respond to appropriate questions.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of two outside directors and operates under a
charter adopted by the Board of Directors according to the rules and regulations
of the Securities and Exchange Commission and the Nasdaq National Market. The
Audit Committee charter is attached as Appendix B. The Audit Committee members
are Mr. Dixon and Mr. Spector, and Mr. Spector is Chairperson of the Audit
Committee. The Board of Directors believes that both of these directors are
independent as defined by the Nasdaq National Market.
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The following is the report of the Audit Committee with respect to our audited
financial statements for the fiscal year ended December 31, 2000, which include
our consolidated balance sheets as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
2000, and the notes thereto.
The information contained in this report shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall the information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that the company specifically incorporates it by
reference in such filing.
Review With Management
The Audit Committee has reviewed and discussed our audited financial statements
with management.
Review and Discussions With Independent Accountants
The Audit Committee held two meetings in conjunction with the full board during
our fiscal year ended December 31, 2000. The Audit Committee has discussed with
KPMG LLP, our independent accountants, the matters required to be discussed by
SAS 61 (Codification of Statements on Accounting Standards) that includes, among
other items, matters related to the conduct of the audit of our financial
statements.
The Audit Committee has also received written disclosures and the letter from
KPMG LLP required by Independent Standards Board Standard No. 1 (that relates to
the accountant's independence from us and our related entities) and has
discussed with KPMG LLP their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that our audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2000.
SUBMITTED BY THE AUDIT COMMITTEE OF USDATA CORPORATION
Arthur R. Spector, Chairperson
James W. Dixon
The fees we incurred from our principal auditor for the fiscal year ended
December 31, 2000 is comprised of the following: $96,000 for the annual audit,
$22,000 for quarterly reviews, $8,000 for review of the federal income tax
return, $10,000 for the audit of our 401(k) Plan and $11,000 for other
consulting services.
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Appendix A
CERTIFICATE OF DESIGNATION
FOR
SERIES C-1 PREFERRED STOCK AND SERIES C-2 PREFERRED STOCK
USDATA Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the Delaware General Corporation Law (the
"DGCL"), does hereby certify that pursuant to the authority conferred upon the
Board of Directors by Article IV of its Certificate of Incorporation and the
provisions of Section 151 of the DGCL, the Board of Directors adopted a
resolution setting forth the designations, preferences, qualifications,
privileges, limitations, conversion rights and other rights of two series of its
Preferred Stock consisting of 250,000 shares which resolution is as follows:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by Article IV of the Certificate of Incorporation of the Corporation
and the provisions of Section 151 of the DGCL, the Board of Directors, hereby
approves, authorizes and establishes the following two series of Preferred
Stock, par value $0.01 per share: (1) "Series C-1 Preferred Stock" to consist of
125,000 shares and (2) "Series C-2 Preferred Stock" to consist of 125,000
shares. As used herein, the term "Series C Preferred Stock" refers to both the
Series C-1 Preferred Stock and the Series C-2 Preferred Stock. Each share of
Series C Preferred Stock shall have the following preferences, qualifications,
privileges, limitations, conversion rights and other rights:
1. Rank. The Series C Preferred Stock shall, with respect to dividend
rights, rights on liquidation, dissolution and winding up, rank senior to all
other classes and series of stock of the Corporation, now or hereafter
authorized, issued or outstanding (collectively, "Junior Securities"),
including, without limitation, the Corporation's Common Stock, par value $0.01
per share ("Common Stock"), the Corporation's Series A Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"), the Corporation's Series
B Preferred Stock, par value $0.01 per share (the "Series B Preferred Stock")
and all other series of the Corporation's Preferred Stock. The Corporation's
Certificate of Designation for Series A Preferred Stock and Series B Preferred
Stock (the "Series A and B Designation") is hereby amended to provide that the
Series B Preferred Stock shall, with respect to dividend rights, rights on
liquidation, dissolution and winding up, rank senior to the Series A Preferred
Stock. No dividends or other distributions (including payments pursuant to
liquidation, redemption or repurchase) shall be made with respect to the Series
A Preferred Stock until such time as the holders of the Series B Preferred Stock
shall have received from the Corporation, by way of dividends or other
distributions (including payments pursuant to liquidation, redemption or
repurchase), an amount equal to the Liquidation Amount (as such term is defined
in Section 3 of the Series A and B Designation). Except as otherwise provided
herein, each share of Series A Preferred Stock and Series B Preferred Stock
shall have the rights, qualifications, privileges, limitations, conversion
rights and other rights as set forth in the Series A and B Designation.
2. Dividends.
a. The holders of the Series C Preferred Stock shall be entitled to
receive cumulative dividends at the rate of $4.00 per share per annum (as
adjusted for any stock dividends, combinations, splits or similar events)
whether or not earned or declared. Such dividends shall be payable in additional
shares of Series C Preferred Stock (valued at $40.00 per share, as adjusted for
any stock dividends, combinations, splits or similar events),
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(i) when, as and if declared by the Board of Directors of the Corporation or
(ii) upon conversion of all of the Series C Preferred Stock to Common Stock
pursuant to Section 6 below.
b. No dividends or distributions of any sort (other than a dividend
payable solely in the Common Stock of the Corporation) shall be declared or paid
by the Corporation on any Junior Securities of the Corporation so long as any
accrued dividends on the Series C Preferred Stock remain unpaid.
c. So long as shares of Series C Preferred Stock are outstanding,
the Corporation shall not declare or pay any distribution on any shares of its
Junior Securities except as otherwise provided in this Section 2.c. In the event
that the Corporation shall declare a dividend or distribution payable in
securities of other persons, evidences of indebtedness issued by the Corporation
or other persons, or options or rights to purchase any such securities or
evidences of indebtedness or other assets (including cash), to the holders of
the Common Stock of the Corporation, then the holders of the Series C Preferred
Stock shall be entitled to a proportionate share of any such dividend or
distribution as though the holders of the Series C Preferred Stock were the
holders of the number of shares of Common Stock of the Corporation into which
their respective shares of Series C Preferred Stock are convertible as of the
record date fixed for the determination of the holders of the Common Stock of
the Corporation entitled to receive such dividend or distribution.
d. All numbers relating to calculation of cumulative dividends or
the payment of dividends on the Series C Preferred Stock in kind shall be
subject to equitable adjustment in the event of any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series C Preferred
Stock.
3. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, (i) the holders of the Series
C-1 Preferred Stock shall be entitled prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Junior Securities of the Corporation, by reason of their
ownership thereof, an amount equal to $80.00 (as adjusted for any stock
dividends, combinations, splits or similar events) plus all accrued but unpaid
dividends and interest thereon (the "Series C-1 Liquidation Amount") for each
share of Series C-1 Preferred Stock then held by them; and (ii) the holders of
the Series C-2 Preferred Stock shall be entitled prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Junior Securities of the Corporation, by reason of their
ownership thereof, an amount equal to $120.00 (as adjusted for any stock
dividends, combinations, splits or similar events) plus all accrued but unpaid
dividends and interest thereon (the "Series C-2 Liquidation Amount") for each
share of Series C-2 Preferred Stock then held by them. The "Series C-1
Liquidation Amount" and the "Series C-2 Liquidation Amount" are hereinafter
individually and collectively referred to as the "Liquidation Amount". If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the full amounts required, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series C Preferred Stock in proportion to the
aggregate amount each such holder is otherwise entitled to receive. The holders
of Series C Preferred Stock shall have the right to convert such shares into
Common Stock, in accordance with Section 6 hereof, at any time prior to or in
connection with any liquidation, dissolution or winding up of the Corporation.
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b. After payment to the holders of the Series C Preferred Stock of
the amounts set forth in Section 3.a. above, the entire remaining assets and
funds of the Corporation legally available for distribution, if any, to the
Corporation's stockholders shall be distributed among the holders of the Series
B Preferred Stock to the extent of the respective liquidation values of the
Series B Preferred Stock. After payment to the holders of the Series B Preferred
Stock of the amounts set forth herein, the entire remaining assets and funds of
the Corporation legally available for distribution, if any, to the Corporation's
stockholders shall be distributed among the holders of the Series A Preferred
Stock to the extent of the respective liquidation values of the Series A
Preferred Stock. After payment to the holders of the Series A Preferred Stock of
the amounts set forth herein, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, to the Corporation's
stockholders shall be distributed among the holders of the Junior Securities
other than Series B Preferred Stock, Series A Preferred Stock and Common Stock
to the extent of the respective liquidation values of such Junior Securities.
After payment to the holders of any Junior Securities other than Series B
Preferred Stock, Series A Preferred Stock and Common Stock of the respective
liquidation values of such Junior Securities, the entire remaining assets and
funds of the Corporation legally available for distribution, if any, to the
Corporation's stockholders shall be distributed among the holders of the Common
Stock, the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and all other series of the Corporation's Preferred Stock whose
terms specifically provide that such series will rank on a parity with the
Series A Preferred Stock and the Series B Preferred Stock (the "Parity
Securities"), in proportion to the shares of Common Stock then held by them and
the shares of Common Stock which they then have the right to acquire upon
conversion of the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and other Parity Securities then held by them;
provided, however, that, in connection with any such distribution, the holders
of the Series A Preferred Stock and the Series B Preferred Stock shall be
entitled to receive a maximum $500.00 (as adjusted for any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event), including amounts received by the holders of the Series A
Preferred Stock and the Series B Preferred Stock in connection with a
liquidation of the Corporation and any other amounts distributed to the holders
of the Series A Preferred Stock and the Series B Preferred Stock pursuant to
this Section 3.b., for each outstanding share of Series A Preferred Stock and
Series B Preferred Stock held by them.
c. For purposes of this Section 3, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued or paid, or caused to be issued or paid, by the
acquiring entity or its subsidiary (other than a mere reincorporation
transaction) or (ii) a sale, lease or conveyance of all or substantially all of
the assets of the Corporation (upon such written direction, each event described
in (i) and (ii), a "Corporate Transaction"), shall be treated as a liquidation,
dissolution or winding up of the Corporation and shall entitle the holders of
the Series C Preferred Stock to receive at the closing of such Corporate
Transaction in cash, securities or other property (valued as provided in Section
3.d. below) the amounts specified in Sections 3.a. and 3.b. above. The
provisions of this Section 3 shall not apply to any reorganization, merger or
consolidation involving (1) only a change in the state of incorporation of the
Corporation, (2) a merger of the Corporation with or into a wholly-owned
subsidiary of the Corporation that is incorporated in the United States of
America, or (3) an acquisition by merger, reorganization or consolidation of
another corporation (a) in which the Corporation is substantively the surviving
corporation, the Corporation continues to operate thereafter as a going concern
and the Corporation is not the target in such acquisition, and (b) that (i) is
approved by the Board of Directors of the Corporation, (ii) does not result in
the holders of the Corporation's Common Stock and Preferred Stock immediately
prior thereto holding less than 50% of the outstanding voting securities of the
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surviving corporation immediately thereafter and (iii) does not involve a
recapitalization of the Series C Preferred Stock.
d. Whenever the distribution provided for in this Section 3 shall
be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors. The Liquidation Amount
shall in all events be paid in cash; provided, however, that if the Liquidation
Amount is otherwise payable in connection with a consolidation or merger of the
Corporation, or sale of substantially all of the capital stock of the
Corporation, then each holder of the Series C Preferred Stock shall receive
payments with respect to such shares in the same form of consideration as is
payable with respect to the Common Stock. In the event of any business
combination or acquisition involving the Corporation which is intended to be
treated as a "pooling of interests" for accounting purposes under Accounting
Principles Board Opinion No. 16, the acquisition consideration (including any
shares of capital stock or other securities to be delivered or exchanged by the
acquiring corporation) shall be reallocated among the holders of Series C
Preferred Stock in an appropriate manner to give economic effect to the
essential intent and purposes of Sections 3.a, 3.b. and 3.c.
4. Redemption.
None of the Series C Preferred Stock shall be redeemable.
5. Voting Rights. Each holder of shares of Series C Preferred Stock
shall (a) be entitled to the number of votes equal to the number of whole shares
of Common Stock into which such shares of Series C Preferred Stock could be
converted, (b) have voting rights and powers equal to the voting rights and
powers of such Common Stock (except as otherwise expressly provided herein or as
required by law, voting together with the Common Stock as a single class), and
(c) be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation and the DGCL. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares into which shares of Series C Preferred Stock held
by each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward). Except as otherwise expressly provided
herein or in the Certificate of Incorporation, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common
Stock shall vote together (or render written consents in lieu of a vote) as a
single class on all matters submitted to the stockholders of the Corporation.
6. Conversion. The holders of the Series C Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Series C Preferred Stock shall
be convertible, at the option of the holder thereof, at any time at the office
of the Corporation or any transfer agent for such stock, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
$40.00 plus all accrued but unpaid dividends and interest thereon by the
conversion price applicable to such share (the "Conversion Price"), determined
as hereinafter provided, in effect on the date the certificate is surrendered
for conversion. The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series C Preferred Stock initially
shall be $0.40 per share of Common Stock. Such initial Conversion Price shall be
adjusted as hereinafter provided.
b. Mechanics of Conversion. Before any holder of Series C Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation
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or of any transfer agent for such stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same and shall
state therein the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series C Preferred Stock a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series C Preferred Stock to
be converted and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
c. Adjustments to Conversion Price for Certain Diluting Issues.
(i) Special Definitions. For purposes of this Section 6.c., the
following definitions apply:
(1) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities (defined below), other than rights, options or warrants relating to
Employee Stock (defined below).
(2) "Measurement Date" shall mean March 30, 2001.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock or Series C Preferred Stock) or
other securities convertible into or exchangeable for Common Stock (other than
Options).
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 6.c.(iii), deemed to be
issued) by the Corporation after the applicable Measurement Date, other than
shares of Common Stock issued (or deemed issued):
(A) upon conversion of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock;
(B) to outside directors, officers, employees and
consultants pursuant to the Corporation's 1994 Equity Compensation Plan or
Employee Stock Purchase Plan or other employee stock plan (the "Employee
Stock"), provided that (i) the issuance of such shares is or has been approved
by a majority of the members of the Board of Directors or any duly constituted
committee thereof and (ii) the number of shares of Employee Stock does not
exceed an aggregate of 2,700,000 shares (as adjusted for any stock dividends,
combinations, splits or similar events) regardless of whether issued by the
Corporation prior to the date hereof;
(C) as a dividend or distribution on Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock; or
(D) for which adjustment of the Conversion Price is made
pursuant to Section 6.d.
(ii) No Adjustment of Conversion Price. Any provision herein to
the contrary notwithstanding, no adjustment in the Conversion Price shall be
made in respect of the issuance of Additional Shares of Common Stock unless the
consideration per
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share (determined pursuant to Section 6.c.(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue.
In computing each adjusted Conversion Price, the result shall be rounded to five
decimal places, and such adjustment shall be made separately in each instance,
and in the event the adjustment therefrom results in a change of the Conversion
Price of less than $0.01, no adjustment to the then Conversion Price shall be
made, but the amount of said adjustment calculated thereby shall be carried
forward to successive occasions until such adjustments in the aggregate equal or
exceed $0.01.
(iii) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the applicable
Measurement Date shall issue any Options or Convertible Securities or shall fix
a record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities, except, in both
cases, where Common Stock to be issued upon conversion or exercise of such
securities would not constitute Additional Shares of Common Stock, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
further that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(1) no further adjustments in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
Series C Preferred Stock); and
(3) no readjustment pursuant to clause (1) or (2) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (a) Conversion Price on the original adjustment date, or
(b) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock.
(1) In the event that, at any time after the applicable
Measurement Date, the Corporation shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 6.c.(iii)) without consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, the Conversion Price shall
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be reduced, concurrently with such issue, to a price equal to the price per
share paid for such Additional Shares of Common Stock. The provisions of this
paragraph may be waived in any instance (without the necessity of convening any
meeting of stockholders of the Corporation) upon the written approval of the
holders of a majority of the outstanding shares of Series C Preferred Stock.
(v) Determination of Consideration. For purposes of this Section
6.c., the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received in exchange for the Additional Shares of Common Stock,
computed as provided in clauses (A) and (B) above, as determined in good faith
by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 6.c.(iii), relating to Options
and Convertible Securities shall be determined by dividing:
(D) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(E) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against the dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
d. Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the applicable Measurement Date shall
effect a (i) subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock dividend, stock split,
reclassification or otherwise), or (ii) combination or consolidation of the
outstanding shares of Common Stock into a lesser number of shares of Common
Stock (by reclassification or otherwise), then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate. In the
event that the Corporation shall declare or pay, without
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33
consideration, any dividend on the Common Stock payable in Common Stock or in
any right to acquire Common Stock for no consideration, then the Corporation
shall be deemed to have subdivided the outstanding shares of Common Stock by an
amount of shares equal to the maximum number of shares issuable through such
dividend and/or upon exercise of such rights to acquire Common Stock.
e. Adjustments to Conversion Price for Reclassification and
Reorganization. If the Common Stock issuable upon conversion of the Series C
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than as provided for in Section 6.d. above
or in connection with a Corporate Transaction), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Series C Preferred
Stock shall be convertible into, in lieu of the number of shares of Common Stock
which the holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon conversion of the Series C Preferred Stock immediately before that change.
f. No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or the Certificate of Incorporation of any of its
subsidiaries through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but shall at all times in
good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series C Preferred Stock
against impairment.
g. Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series C Preferred Stock a certificate executed by the Corporation's
President or Chief Financial Officer setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series C Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of the Series C Preferred
Stock.
h. Notices of Record Date. In the event that the Corporation shall
propose at any time to effect any reclassification or recapitalization, to merge
or consolidate with or into any other entity, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up, then, in
connection with each such event, the Corporation shall send to the holders of
Series C Preferred Stock: (1) at least 20 days prior written notice of the date
on which a record shall be taken for such event and specifying the date on which
such event shall occur; and (2) at least 20 days prior written notice of the
record date for determining rights to vote, if any, in respect of such event.
i. Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series C Preferred Stock pursuant
hereto; provided, however, that
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the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
j. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to this Certificate of
Incorporation.
k. Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series C Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series C Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
l. Notices. Any notice required by the provisions of this Section 6
to be given to the holders of shares of Series C Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
7. Series C Restrictions and Limitations. So long as any shares of
Series C Preferred Stock remain outstanding, in addition to any other vote
required by the Delaware General Corporation Law, the vote or written consent or
written agreement of the holders of at least fifty percent of the then
outstanding shares of the Series C Preferred Stock, voting as a separate class,
shall be required in order to:
(i) alter, amend or modify the rights, preferences or privileges
of the Series C Preferred Stock;
(ii) increase the authorized number of shares of the Series C
Preferred Stock or issue any additional shares of Series C Preferred Stock other
than shares issued in payment of dividends on the outstanding shares of Series C
Preferred Stock pursuant to Section 2.a above;
(iii) authorize or issue, or obligate itself to issue, any other
equity security (including any security convertible into or exercisable for any
equity security) senior to or on a parity with the Series C Preferred Stock as
to dividend rights, liquidation preferences or redemption rights;
(iv) redeem, purchase or otherwise acquire any Parity Securities
or Junior Securities (or pay into a sinking fund for such purpose); provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock at
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the original purchase price from employees, officers, directors or other persons
performing services for this Corporation;
(v) reorganize, merge or consolidate the Corporation with or
into any corporation if such reorganization, merger or consolidation would
result in the stockholders of the Corporation immediately prior to such
reorganization, merger or consolidation holding less than a majority of the
voting power of the stock of the surviving corporation immediately after such
reorganization, merger or consolidation;
(vi) sell, lease, convey or otherwise dispose of, or encumber,
all or substantially all the Corporation's assets in a single transaction or
series of
related transactions; or
(vii) liquidate, dissolve or wind-up the Company.
a. Board of Directors. The holders of the Series C Preferred Stock,
voting as a separate class (acting by majority vote), shall be entitled to vote
to elect one member to the Board of Directors of the Corporation. The right to
elect a member of the Board of Directors of the holders of the Series C
Preferred Stock contained in this Section may be exercised at a special meeting
of the holders of Series C Preferred Stock, called as provided hereinafter, at
any annual or special meeting of the stockholders of the Corporation, or by
written consent of the holders of the Series C Preferred Stock in lieu of a
meeting. The director to be elected by the holders of the Series C Preferred
Stock shall serve for a term extending from the date of election and
qualification until the time of the next succeeding annual meeting of
stockholders and until his or her successor has been duly elected and qualified.
Any director elected pursuant to this Section shall not be subject to removal
unless such removal is approved by a majority vote of the holders of the Series
C Preferred Stock. If at any time a directorship to be filled by the holders of
the Series C Preferred Stock shall be vacant, the Chief Executive Officer of the
Corporation shall, upon the written request of the holders of record of shares
representing at least fifty percent of the voting power of the shares of Series
C Preferred Stock, call a special meeting of the holders of Series C Preferred
Stock for the purpose of electing a director to fill such vacancy. Such meeting
shall be held at the earliest practicable date at such place as is specified in
or determined in accordance with the Bylaws of the Corporation. If such meeting
is not so called within ten days after delivery of said written request, then
the holders of record of shares representing at least twenty-five percent of the
voting power of the shares of Series C Preferred Stock may designate in writing
one of such holders to call such meeting at the expense of the Corporation. Such
meeting may be called by such designated person upon the notice required for
annual meetings of stockholders and shall be held at such place as specified or
determined above. At any meeting held for the purpose of electing directors at
which the holders of Series C Preferred Stock shall have the right to elect such
directors as aforesaid, the presence in person or by proxy of the holders owning
shares having at least a majority of the votes of Series C Preferred Stock shall
be required to constitute a quorum of such Series C Preferred Stock. Any holder
of record of shares of Series C Preferred Stock shall have access to the stock
books of the Corporation for the purpose of calling a meeting of stockholders
pursuant to this Section
8. No Reissuance. No share or shares of Series C Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
restored to the status of undesignated Preferred Stock.
* * *
[Signature page follows.]
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IN WITNESS WHEREOF, this Certificate of Designation for Series C-1
Preferred Stock and Series C-2 Preferred Stock has been signed by the Chief
Executive Officer of the Corporation this 30th day of March, 2001.
----------------------------------------
Robert A. Merry, Chief Executive Officer
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APPENDIX B
USDATA CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
GENERAL
The role of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of USDATA Corporation (the "Corporation") is to assist
the Board of Directors in fulfilling its oversight responsibilities by:
o Serving as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
o Reviewing and appraising the audit efforts of the Corporation's
independent accountants.
o Providing an open avenue of communication among the independent
accountants, financial and senior management and the Board of
Directors.
COMPOSITION
The Committee shall consist of three or more directors as determined
by the Board. No later than June 14, 2001, each member of the Committee shall be
an independent director and 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 Committee. In determining whether any director is
independent, the Board shall take into consideration the requirements of the
principal exchange or system on which the Corporation's common stock is traded.
Directors who are affiliates of the Company, or officers or employees of the
Company or of its subsidiaries, will not be considered independent.
All members of the Committee must be able to read and understand
fundamental financial statements, including a balance sheet, income statement
and cash flow statement, or become able to do so within a reasonable period of
time after his or her appointment to the Committee, and at least one member of
the Committee is to have past employment experience in finance or accounting,
requisite professional certification in accounting or any other comparable
experience or background which results in that member's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The members of the Committee are to be elected by the Board and shall
serve until their successors are duly elected and qualified. Unless a Chair is
elected by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
MEETINGS
The Committee shall hold regular meetings as may be necessary and
special meetings as may be called by the Chair of the Committee. As part of its
job to foster open communication, the Committee should meet at least annually
with management and the independent accountants in separate executive sessions
to discuss any matters that the Committee or either of these groups believe
should be discussed privately. In addition, the Committee or its Chair should
meet with the independent accountants and management quarterly to review the
Corporation's financial statements.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Corporation's independent accountants are to be ultimately
accountable to the Board and the Committee, and the Committee and the Board
shall have the ultimate authority and responsibility to select, evaluate and,
where appropriate, replace the independent accountants (or nominate the outside
auditor to be proposed for shareholder approval in any proxy statement).
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Documents/Reports Review
o Review and assess the adequacy of this Charter at least annually,
and otherwise as conditions dictate.
o Review the Corporation's annual financial statements and any
reports or other financial information submitted to the
Securities and Exchange Commission or the public, including any
certification, report, opinion, or review rendered by the
independent accountants.
o Review with financial management and the independent accountants
the Corporation's filings with the Securities and Exchange
Commission on Form 10-Q prior to their filing or prior to the
release of earnings. The Chair of the Committee may represent the
entire Committee for purposes of this review.
Independent Accountants
o Recommend to the Board the selection of the independent
accountants, considering independence and effectiveness, and
approve the fees and other compensation to be paid to the
independent accountants.
o On an annual basis, obtain from the independent accountants, and
review and discuss with the independent accountants, a formal
written statement delineating all relationships the independent
accountants have with the Corporation, consistent with
Independence Standards Board Standard 1, and actively engage in a
dialogue with the independent accountants with respect to any
disclosed relationships or services that may impact the
objectivity and independence of the independent accountants.
o Recommend to the Board any appropriate action to oversee the
independence of the independent accountants.
o Review the performance of the independent accountants and approve
any proposed discharge of the independent accountants when
circumstances warrant.
o Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness
and accuracy of the Corporation's financial statements.
Financial Reporting Processes
o In consultation with the independent accountants, review the
integrity of the Corporation's financial reporting processes,
both internal and external.
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o Consider the independent accountant's judgment about the quality
and appropriateness of the Corporation's accounting principles as
applied in its financial reporting.
o Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants or management.
o Establish regular and separate reporting to the Committee by each
of management and the independent accountants regarding any
significant judgment made in management's preparation of the
financial statements and the view of each as to appropriateness
of such judgment.
o Following completion of the annual audit, review separately with
each of management and the independent accountants any
significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or access
to required information.
o Review any significant disagreement among management and the
independent accountants in connection with the preparation of the
financial statements.
o Review with the independent accountants and management the extent
to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been implemented.
Ethical and Legal Compliance
o Establish, review and update periodically a Code of Conduct and
ensure that management has established a system to enforce this
Code.
o Review with the Corporation's legal counsel any matter that could
have a significant impact on the Corporation's financial
statements.
o Perform any other activities consistent with this Charter, the
Corporation's bylaws and governing law, as the Committee or the
Board deems necessary or appropriate.
Adopted by Resolution of the Board of Directors
effective as of September 22, 2000.
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PROXY
USDATA CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE SIGN AND DATE THIS PROXY, AND INDICATE HOW YOU WISH TO VOTE, ON THE BACK
OF THIS CARD. PLEASE RETURN THIS CARD PROMPTLY IN THE ENCLOSED ENVELOPE. YOUR
VOTE IS IMPORTANT.
When you sign and return this proxy card, you
o appoint Robert A. Merry (or any substitutes he may appoint), as proxies to
vote your shares, as you have instructed, at the annual meeting on May 29,
2001, and at any adjournments of that meeting,
o authorize the proxies to vote, in their discretion, upon any other
business properly presented at the meeting, and
o revoke any previous proxies you may have signed.
If you do not indicate how you wish to vote, the proxies will vote FOR all
nominees to the Board of Directors, FOR the proposal to issue additional shares
of Series C-1 Preferred Stock and warrants to purchase shares of Series C-2
Preferred Stock, FOR the amendment to our certificate of incorporation to amend
the terms of the existing Series A Preferred Stock and Series B Preferred Stock,
and as they may determine, in their discretion, with regard to any other matter
properly presented at the meeting.
--------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
Please mark
The Board of Directors recommends a vote FOR proposals 1, 2 and 3. your votes as
indicated in [X]
this example
1. ELECTION OF DIRECTORS 2. PROPOSAL TO ISSUE ADDITIONAL SHARES OF FOR AGAINST ABSTAIN
FOR all nominees WITHHOLD SERIES C-1 PREFERRED STOCK AND WARRANTS
listed below AUTHORITY TO PURCHASE SHARES OF SERIES C-2 [ ] [ ] [ ]
(except as marked to vote for all nominees PREFERRED STOCK
to the contrary) listed below
3. PROPOSAL TO APPROVE AN AMENDMENT TO [ ] [ ]
OUR CERTIFICATE OF INCORPORATION TO
AMEND THE TERMS OF THE EXISTING SERIES A [ ] [ ] [ ]
Nominees: PREFERRED STOCK AND SERIES B PREFERRED
STOCK
Winston J. Churchill Robert A. Merry
Christopher J. Davis Jack L. Messman
James W. Dixon Arthur R. Spector
To withhold authority to vote for any individual nominee
while voting for the remainder, strike a line through
the nominee's name in the list.
SIGNATURE SIGNATURE DATE , 2001
-------------------- ------------------ ----------
YOU MUST SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD. If shares are
jointly owned, you must both sign. Include your full title if you are signing as
an attorney, executor, administrator, trustee or guardian, or on behalf of a
corporation or partnership.
--------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
[USDATA LOGO]
Your Proxy vote is important, regardless of the number
of shares you own.
Whether or not you plan to attend the meeting in person, please
complete, date and sign the above Proxy card and return it
without delay in the enclosed envelope.