Datawatch Corporation (NASDAQ:DWCH) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Amended and Restated 2018 Compensation Plan

On July 13, 2018, the Board of Directors (the “Board”) of Datawatch Corporation (the “Corporation”) amended and restated in its entirety the fiscal 2018 Corporate Officers Compensation Plan (as amended and restated, the “Amended 2018 Compensation Plan”). The 2018 Corporate Officers Compensation Plan (the “Prior 2018 Compensation Plan”) was previously disclosed in the Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on December 6, 2017 (the “Prior 8-K”).

Base salaries, performance-based cash bonuses for the first fiscal quarter and second fiscal quarter of the Corporation’s 2018 fiscal year and existing performance-based cash bonuses for Mr. Tacelli have not been amended in the Amended 2018 Compensation Plan compared to the Prior 2018 Compensation Plan disclosed in the Prior 8-K. The Amended 2018 Compensation Plan provides for amended performance-based cash bonuses for the third fiscal quarter, the fourth fiscal quarter and fiscal year as a whole of the Corporation based on fiscal 2018 performance of the Corporation and Angoss Software Corporation (“Angoss”), the Corporation’s wholly owned Canadian subsidiary which the Corporation acquired on January 30, 2018.

Base Salary, First Quarter Bonuses and Second Quarter Bonuses

The following table sets forth the base salary of the executive officers of the Corporation, eligibility of the executive officers of the Corporation for the first fiscal quarter and second fiscal quarter performance-based cash bonuses, and the performance-based cash bonus eligibility amount for Mr. Tacelli under the Amended 2018 Compensation Plan:

First and Second Quarter Bonus Eligibility and Calculation

For executives other than Mr. Tacelli, first fiscal quarter and second fiscal quarter cash bonuses are payable based on: (A) whether the Corporation achieved earnings before interest, taxes, severance, depreciation and amortization in excess of a certain threshold for such fiscal quarter (each such threshold amount as approved by the Board is referred to herein as the “Quarterly EBITDA Threshold”) and (B) only if the Quarterly EBITDA Threshold was met, the extent to which the Corporation achieved its revenue targets for the applicable fiscal quarter (each such quarterly revenue target as approved by the Board is referred to herein as the “Quarterly Revenue Target”, and each such quarterly bonus, a “Quarterly Bonus”). Each Quarterly Bonus is payable only if Datawatch’s earnings before interest, taxes, severance, depreciation and amortization met or exceeded the applicable Quarterly EBITDA Threshold.

Each Quarterly Bonus is eligible for payout if the Corporation: (A) achieved the applicable Quarterly EBITDA Threshold and (B) achieved at least 90% of the applicable Quarterly Revenue Target. Assuming the applicable Quarterly EBITDA Threshold was met, Quarterly Bonus eligibility at performance representing 90% of the Quarterly Revenue Target is 80% of the Quarterly Bonus amount, with bonus eligibility scaling up at a 2 to 1 rate as performance improves above 90% to 50% of the applicable Quarterly Revenue Target. Quarterly EBITDA achievement above 50% of each Quarterly Revenue Target will not result in additional payments above 50% of the applicable Quarterly Bonus amount.

Tacelli Bonus Eligibility

Except for the Tacelli Additional Cash Bonus Amount discussed below, Mr. Tacelli’s cash bonus is commission-based, tied to monthly bookings of the Corporation and will be paid out monthly in arrears.

Third Quarter Bonuses, Fourth Quarter Bonuses, Annual Bonuses and Additional Bonuses

The following table sets forth the eligibility of the executive officers of the Corporation for third fiscal quarter, fourth fiscal quarter, annual and additional performance-based cash bonuses under the Amended 2018 Compensation Plan:

Third and Fourth Quarter Bonus Eligibility and Calculation

For executives other than Mr. Tacelli, the third fiscal quarter bonuses and the fourth fiscal quarter bonuses are only payable if the Corporation and Angoss achieve certain minimum levels of earnings before interest, taxes, severance, depreciation and amortization for such quarter on a consolidated basis (such amount as approved by the Board is referred to herein as the “Combined Quarterly EBITDA Threshold”). If the applicable Combined Quarterly EBITDA Threshold is met, (1) a quarterly target bonus amount (the “Datawatch Quarterly Target Bonus”) is payable based on the extent to which the Corporation achieves its revenue target for the applicable fiscal quarter (each such quarterly revenue target of the Corporation as approved by the Board is referred to herein as the “Datawatch Quarterly Revenue Target”) and (2) an additional quarterly target bonus amount (the “Angoss Quarterly Target Bonus”) is payable based on the extent to which Angoss achieves its revenue target for the applicable fiscal quarter (each such quarterly revenue target of Angoss as approved by the Board is referred to herein as the “Angoss Quarterly Revenue Target”).

Assuming the applicable Combined Quarterly EBITDA Threshold is met, the Datawatch Quarterly Target Bonus is eligible for payout if the Corporation achieves at least 90% of the applicable Datawatch Quarterly Revenue Target. Assuming the applicable Combined Quarterly EBITDA Threshold is met, the Datawatch Quarterly Target Bonus at performance representing 90% of the Datawatch Quarterly Revenue Target is 80% of the Datawatch Quarterly Target Bonus, with bonus eligibility scaling up at a 2 to 1 rate as performance improves above 90% to 50% of the applicable Datawatch Quarterly Revenue Target. Quarterly revenue achievement above 50% of each Datawatch Quarterly Revenue Target will not result in additional payments above 50% of the applicable Datawatch Quarterly Target Bonus.

Assuming the applicable Combined Quarterly EBITDA Threshold is met, the Angoss Quarterly Target Bonus is eligible for payout if Angoss achieves at least 90% of the applicable Angoss Quarterly Revenue Target. Assuming the applicable Combined Quarterly EBITDA Threshold is met, the Angoss Quarterly Target Bonus at performance representing 90% of the Angoss Quarterly Revenue Target is 80% of the Angoss Quarterly Target Bonus, with bonus eligibility scaling up at a 2 to 1 rate as performance improves above 90% to 50% of the applicable Angoss Quarterly Revenue Target. Quarterly revenue achievement above 50% of each Angoss Quarterly Revenue Target will not result in additional payments above 50% of the applicable Angoss Quarterly Target Bonus.

Annual Bonus Eligibility and Calculation

Each executive, other than Mr. Tacelli, is eligible for up to two (2) annual performance-based cash bonuses, each payable after the end of the Corporation’s fiscal 2018 year, which are in addition to any quarterly bonuses or additional bonuses payable to the executives. If the Corporation and Angoss achieve earnings before interest, taxes, severance, depreciation and amortization in excess of a threshold for the Corporation’s fiscal year 2018 and, with respect to Angoss, for the six month period ending September 30, 2018, on a consolidated basis (as such combined EBITDA threshold is determined by the Board, the “Combined EBITDA Threshold”), (1) an annual target bonus amount is payable based on the extent to which the Corporation (excluding Angoss) achieves its revenue target for the fiscal year (the “Datawatch Annual Target Bonus”) and (2) an annual target bonus amount is payable based on the extent to which Angoss achieves its revenue target for the six month period ending September 30, 2018 (the “Angoss Annual Target Bonus”).

If the Combined EBITDA Threshold is met, performance over 50% of the revenue target of the Corporation for fiscal year 2018 (as such revenue target of the Corporation is determined by the Board, the “Datawatch Annual Revenue Target”) will result in eligibility for the Datawatch Annual Target Bonus calculated: (i) at a 2 to 1 rate as performance improves above 50% to 105% of the Datawatch Annual Revenue Target and (ii) at a 4 to 1 rate as performance improves above 105% of the Datawatch Annual Revenue Target. There is no cap on the amount of annual cash bonus potentially payable as a result of the Corporation’s performance relative to the Datawatch Annual Revenue Target. For example, assuming the Combined EBITDA Threshold is met, (y) performance at 105% of the Datawatch Annual Revenue Target will result in eligibility for an annual cash bonus amount equal to 10% of the applicable Datawatch Annual Target Bonus and (z) performance at 125% of the Datawatch Annual Revenue Target will result in eligibility for an annual cash bonus amount equal to 90% of the applicable Datawatch Annual Target Bonus.

If the Combined EBITDA Threshold is met, performance over 50% of the revenue target of Angoss for the six month period ending September 30, 2018 (as such revenue target of Angoss is determined by the Board, the “Angoss Annual Revenue Target”) will result in eligibility for the Angoss Annual Target Bonus calculated: (i) at a 2 to 1 rate as performance improves above 50% to 105% of the Angoss Annual Revenue Target and (ii) at a 4 to 1 rate as performance improves above 105% of the Angoss Annual Revenue Target. There is no cap on the amount of annual cash bonus potentially payable as a result of Angoss’s performance relative to the Angoss Annual Revenue Target. For example, assuming the Combined EBITDA Threshold is met, (y) performance at 105% of the Angoss Annual Revenue Target will result in eligibility for an annual cash bonus amount equal to 10% of the applicable Angoss Annual Target Bonus and (z) performance at 125% of the Angoss Annual Revenue Target will result in eligibility for an annual cash bonus amount equal to 90% of the applicable Angoss Annual Target Bonus.

Integration Cash Bonus Amount

In addition to any other cash bonus amounts payable as described above, for executives other than Mr. Tacelli, each executive will be eligible for an additional one-time integration cash bonus (“Integration Cash Bonus Amount”) if: (i) the Corporation (excluding Angoss) achieves performance at or above 105% the Datawatch Annual Revenue Target and (ii) Angoss achieves performance at or above 105% the Angoss Annual Revenue Target.

Tacelli Additional Cash Bonus Amount

Mr. Tacelli is eligible for additional cash bonuses up to an aggregate additional cash bonus amount of $50,000 (the “Tacelli Additional Cash Bonus Amount”), which additional cash bonuses are commission-based, tied to monthly bookings of Angoss and will be paid out monthly in arrears.

The Board retains the discretion at any time to change the above cash bonus criteria (including bonus amounts, Quarterly EBITDA Thresholds, Quarterly Revenue Targets, the Tacelli Additional Cash Bonus Amount, Integration Cash Bonus Amount, Combined Quarterly EBITDA Thresholds, Datawatch Quarterly Target Bonus, Angoss Quarterly Target Bonus, Datawatch Quarterly Revenue Targets, Angoss Quarterly Revenue Targets, Angoss Bookings Target, Combined EBITDA Threshold, Datawatch Annual Revenue Target and Angoss Annual Revenue Target), including based on individual performance or in the event any operating changes (including acquisitions) are approved during the fiscal year that materially impact the Corporation’s fiscal 2018 financial plan.

Equity Awards

On July 13, 2018, the Corporation granted to Ken Tacelli an award of restricted stock units for 10,000 shares of the Corporation’s common stock (“RSUs”) under the Corporation’s Third Amended and Restated Equity Compensation and Incentive Plan (the “2011 Plan”) which will vest as follows: (i) one-third of such RSUs will vest upon the Corporation, including Angoss, achieving its annual booking target for the twelve month period ending September 30, 2018 (the “2018 Booking Target”) and (ii) if the Corporation achieves its 2018 Booking Target, the remaining two-thirds of such RSUs will vest in equal installments on the first and second anniversaries of May 1, 2019, provided that Mr. Tacelli remains employed by the Corporation on these dates.

Time-based and performance-based RSUs previously granted by the Board to the executive officers of the Corporation as described in the Prior 8-K have not been amended by the Amended 2018 Compensation Plan.

About Datawatch Corporation (NASDAQ:DWCH)

Datawatch Corporation is engaged in the design, development, marketing, distribution and support of business computer software primarily for the self-service data preparation and visual data discovery markets. The Company also provides services, including implementation and support of its software products, as well as training on their use and administration. The Company’s product family includes Datawatch Monarch, Datawatch Panopticon and Datawatch Report Mining Server (RMS). The Company offers its enterprise products through perpetual licenses and subscription pricing models. The Company also offers educational services for customers and partners implementing and learning about the platform, maintenance and support, and professional services to provide in-depth technical assistance for software implementations. The Company offers an array of live and virtual classroom instruction, including private onsite classes.