<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to .
---------- ----------
Commission file number 0-25936
USDATA Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2405152
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2435 N. Central Expressway, Richardson, TX 75080
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(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (972) 680-9700
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes [X] No [ ]
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 3, 2000
Number of Shares
Class Outstanding
Common Stock, Par Value $.01 Per Share 13,264,145 shares
<PAGE> 2
USDATA CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
PART I. FINANCIAL INFORMATION
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 2000 and December 31,
1999 3
Condensed Consolidated Statements of
Operations and Comprehensive Income (Loss)
for the Three Months Ended
March 31, 2000 and 1999 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,128 $ 2,962
Accounts receivable, net of allowance for doubtful
accounts of $430 and $453, respectively 3,234 6,626
Other current assets 1,094 727
---------- ----------
Total current assets 6,456 10,315
---------- ----------
Property and equipment, net 3,448 2,162
Computer software development costs, net 8,462 6,645
Software held for resale, net 1,014 1,079
Cost in excess of fair value of tangible net assets purchased, net 4,483 4,742
Intangible and other assets 2,020 1,924
---------- ----------
Total assets $ 25,883 $ 26,867
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,220 $ 1,746
Deferred revenue 2,484 2,170
Accrued compensation and benefits 1,294 2,226
Convertible shareholder note payable 5,000 -
Short-term and current portion of long-term debt 67 62
Other accrued liabilities 1,488 1,021
---------- ----------
Total current liabilities 12,553 7,225
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Long-term debt, less current portion 368 388
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Total liabilities 12,921 7,613
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Commitments and contingencies
Redeemable Convertible Preferred Stock, Series A, $.01 par value,
with a redemption and liquidation value of $106 per share and $103
per share in 2000 and 1999, respectively; 100,000 shares authorized;
50,000 shares issued and outstanding 5,275 5,167
Stockholders' equity:
Preferred stock, $.01 par value, 2,200,000 shares authorized;
none issued - -
Common stock, $.01 par value, 22,000,000 shares
authorized; 15,625,951 issued in 2000 and 1999 156 156
Additional paid-in capital 22,207 21,952
Deferred compensation (990) (1,278)
Retained earnings(accumulated deficit) (4,649) 2,523
Treasury stock at cost, 2,368,241 shares in 2000
and 2,452,316 shares in 1999 (8,136) (8,434)
Accumulated other comprehensive loss (901) (832)
---------- ----------
Total stockholders' equity 7,687 14,087
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Total liabilities and stockholders' equity $ 25,883 $ 26,867
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
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<S> <C> <C>
Revenues:
Product license $ 3,017 $ 5,515
Services 1,049 763
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Total revenues 4,066 6,278
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Operating expenses:
Selling and product materials 7,050 3,855
Product development 1,524 610
General and administrative 1,882 1,382
Non-cash stock compensation 288 -
Amortization of intangible assets 360 -
---------- ----------
Total operating expenses 11,104 5,847
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Income (loss) from operations (7,038) 431
Other income (expense), net (26) 20
---------- ----------
Income (loss) before income taxes (7,064) 451
Income tax provision - (50)
---------- ----------
Net income (loss) (7,064) 401
Dividends on preferred stock (108) -
---------- ----------
Net income (loss) applicable to common stockholders $ (7,172) $ 401
========== ==========
Other comprehensive income (loss):
Foreign currency translation adjustment (69) 24
---------- ----------
Comprehensive income (loss) $ (7,241) $ 425
========== ==========
Net income (loss) per common share:
Basic and diluted $ (0.56) $ 0.04
========== ==========
Weighted average shares outstanding:
Basic 12,789 11,261
Diluted 12,789 11,327
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,064) $ 401
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 689 272
Non-cash stock compensation 288 -
Changes in assets and liabilities:
Accounts receivable, net 3,392 13
Other assets, net (619) (173)
Accounts payable and other accrued liabilities 941 (587)
Accrued compensation and benefits (932) (348)
Deferred revenue 314 310
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Net cash used in operating activities (2,991) (112)
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Cash flows from investing activities:
Capital expenditures (1,495) (96)
Capitalized software development costs (1,817) (230)
---------- ----------
Net cash used in investing activities (3,312) (326)
---------- ----------
Cash flows from financing activities:
Proceeds from stock option exercises 553 -
Proceeds from convertible shareholder note payable 5,000 -
Payments on long-term debt (15) -
---------- ----------
Net cash provided by financing activities 5,538 -
---------- ----------
Translation adjustments and effect of exchange rate changes on cash (69) 24
---------- ----------
Net decrease in cash and cash equivalents (834) (414)
Cash and cash equivalents, beginning of period 2,962 1,980
---------- ----------
Cash and cash equivalents, end of period $ 2,128 $ 1,566
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
USDATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of USDATA
Corporation and its subsidiaries (the "Company") for the three-month periods
ended March 31, 2000 and 1999 have been prepared in accordance with generally
accepted accounting principles. Significant accounting policies followed by the
Company were disclosed in the notes to the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. In the opinion of the Company's management, the accompanying
consolidated financial statements contain the adjustments, consisting of normal
recurring accruals, necessary to present fairly the consolidated financial
position of the Company at March 31, 2000 and the consolidated results of its
operations and comprehensive income (loss), and cash flows for the periods
ended March 31, 2000 and 1999. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
2. CONVERTIBLE SHAREHOLDER NOTES PAYABLE
On February 8, 2000 and March 24, 2000, the Company entered into two
convertible promissory note agreements with a subsidiary of Safeguard
Scientifics, Inc. ("Safeguard"), the Company's primary stockholder, for $2.5
million each, totaling $5.0 million in borrowings. The promissory notes bear
interest at a rate of 12% per annum and are due in full on February 8, 2001 and
March 24, 2001, respectively. The outstanding principal balances of these notes
are convertible at any time into shares of common stock of a wholly-owned
subsidiary of the Company at an initial conversion price of $4.00 per share. The
conversion price is equal to the estimated fair value of the subsidiary's common
stock at the dates of the issuance of the promissory notes. If the notes payable
are paid in full at maturity, interest will be forgiven.
3. INCOME (LOSS) PER SHARE
Net income (loss) per share of common stock is presented in accordance
with the provisions of SFAS No. 128, Earnings Per Share. Under SFAS No. 128,
basic income (loss) per share excludes dilution for potentially dilutive
securities and is computed by dividing income or loss available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted income (loss) per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Potentially dilutive securities are
excluded from the computation of diluted income (loss) per share when their
inclusion would be antidilutive. Options and warrants to acquire a total of
2,459,000 shares have been excluded from the computation of diluted loss per
share for the three months ended March 31, 2000, as their inclusion would be
antidilutive.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
(in thousands, except per share data) ----------- ------------
<S> <C> <C>
Net income (loss) applicable to
common stockholders $ (7,172) $ 401
=========== ==========
Weighted average common shares outstanding 12,789 11,261
Effect of dilutive securities:
Common stock options and warrants - 66
---------- ----------
Weighted average common shares and common
share equivalents (if dilutive) outstanding 12,789 11,327
========== ==========
Net income (loss) per common share:
Basic and diluted $ (0.56) $ 0.04
========== ==========
</TABLE>
6
<PAGE> 7
USDATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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4. SEGMENT INFORMATION
The Company defines operating segments based on two distinct product
divisions - the USDATA Products Division, which includes its FactoryLink and
Xfactory product lines, and the eMake Division, which develops and distributes
internet applications that deliver integrated production solutions and real-time
visibility across the supply chain and includes the Company's Smart Shop unit.
The Company uses revenues and income (loss) from operations, which consists of
revenues less operating expenses, to measure segment operations.
The following summarizes information related to the Company's segments.
All significant intersegment activity has been eliminated. Assets are the owned
or allocated assets used by each operating segment
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
(in thousands) 2000 1999
---------- ----------
<S> <C> <C>
Revenues:
USDATA Division $ 3,545 $ 6,278
eMake Division 521 -
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$ 4,066 $ 6,278
========== ==========
Income (loss) from operations:
USDATA Division $ (2,375) $ 431
eMake Division (4,663) -
---------- ----------
(7,038) 431
Other income (expense), net (26) 20
---------- ----------
Income (loss) before income taxes $ (7,064) $ 451
========== ==========
Depreciation and amortization:
USDATA Division $ 276 $ 272
eMake Division 413 -
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$ 689 $ 272
========== ==========
Total assets:
USDATA Division $ 17,203 $ 16,201
eMake Division 8,680 -
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$ 25,883 $ 16,201
========== ==========
</TABLE>
5. SUBSEQUENT EVENT
On April 26, 2000, Safeguard provided $5.0 million in financing to the
Company 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 bears
interest at a specified bank prime rate plus one percent.
7
<PAGE> 8
USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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OVERVIEW
USDATA Corporation (the "Company") is a global supplier of real-time
component-based production software and Internet-based production applications,
eBusiness and supply chain portals. These products and services are designed to
help customers manage their business in real time, reduce operating costs,
shorten cycle times, and improve quality in their manufacturing operations. Now
in its 25th year, the Company has a strong global presence with more than 45,000
installs located in more than 60 countries throughout the world, 19 offices
worldwide and a global network of distribution and support partners.
The Company conducts its operations in two operating divisions, the
USDATA Products Division and the eMake Division. Each division has its own
sales, marketing, customer support and service, product development and selected
general management and administrative functions. Certain general and
administrative functions (such as corporate management, accounting, human
resources and information technology) provide services to both divisions with
the costs of these shared services allocated between the two divisions.
USDATA Products Division
The USDATA Products Division ("USDATA") is a global supplier of
component-based production software that is designed to help customers reduce
operating costs, shorten cycle times and improve product quality in their
manufacturing operations. USDATA's software enables manufacturers to access more
accurate and timely information - whether they are on the plant floor, in the
office, or around the globe. USDATA's solutions span a wide range of
manufacturing processes, from monitoring equipment to tracking product flow, and
are designed to integrate seamlessly with customers' existing manufacturing and
business software. This combination of product breadth and ease of integration
is intended to provide a total plant solution that defines new levels of
manufacturing performance and gives customers a distinct competitive advantage.
Revenues have been generated primarily from licenses of USDATA's
FactoryLink and Xfactory software and secondarily from technical support and
service agreements, training classes and product related services. The support
and service agreements are generally one-year, renewable contracts entitling a
customer to certain software upgrades and technical support. Support and service
revenue represented approximately 15% and 10% of revenues during the three
months ended March 31, 2000 and 1999, respectively.
Included in the FactoryLink family of products are versions 6.5 and
6.6, real-time information Windows NT and Windows 98/95 platforms, supporting
powerful client access environments and technologies and providing Year 2000
("Y2K") readiness. In addition, USDATA offers FactoryLink WebClient, which
provides the ability to view and control any FactoryLink server running
Microsoft Windows NT using a simple web browser.
Xfactory is a manufacturing execution software ("MES") product that
incorporates Microsoft's newest technologies and is built on Microsoft's
Distributed Internet Applications ("DNA") architecture. Xfactory enables
manufacturing plants to more easily and quickly automate their production
processes and is the first visual object modeling MES. The Xfactory software
product enables customers to develop versatile and flexible MES applications for
production management, product tracking, product scheduling and genealogy
tracking for manufacturing and production processes.
8
<PAGE> 9
USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
In December 1999, USDATA released Xfactory version 1.4, which gives
manufacturers of all sizes the ability to track and improve production processes
"on the fly." Version 1.4 is intended to deliver unparalleled performance and
reliability for even the most demanding large-scale production processes.
USDATA focuses its sales efforts through selected distributors capable
of providing the level of support and expertise required in the real-time
manufacturing and process control application market. The division currently has
seven channel support locations in the United States and six internationally to
support its sales efforts through its network of distributors.
eMake Division
The eMake Division ("eMake") was created to reinvent the way
manufacturers do business, by providing Internet-based, real-time production
applications, eBusiness and supply chain portals. eMake's services enables
customers to more efficiently manage their business in real time, using Internet
technologies to tap into a community of ideas, information and applications
uniquely tailored to fit the needs of the discrete make-to-order manufacturer.
eMake was formed in July 1999 by combining the Company's recently acquired Smart
Shop Software with a team of USDATA personnel with expertise in real time
production and Internet technologies. eMake's services are uniquely designed for
make-to-order manufacturers responding to changing orders, demanding customers,
shorter production cycles and increasing technology needs. eMake's services are
intended to provide a cost-effective, easy-to-implement business and production
solution with secure, real-time visibility through the Internet to customers,
suppliers and partners.
In mid-April 2000, eMake launched the first components of a suite of
Internet applications that include integrated product solutions and real-time
visibility across the supply chain. eMake's strategy is to leverage its
extensive manufacturing knowledge through Internet applications to help
companies maximize their back office production and create the eMake portal for
front office visibility into the production operations of the supply chain. The
Company anticipates that eMake initially will focus on horizontal make-to-order
solutions for smaller manufacturers
eMake focuses its sales efforts through the Internet, a direct sales
force, and telemarketing.
RESULTS OF OPERATIONS
The following table presents selected financial information relating to
the financial condition and results of operations of the Company and should be
read in conjunction with the consolidated financial statements and notes
included herein. The table sets forth, for the periods indicated, the Company's
statement of operations as a percentage of revenues.
9
<PAGE> 10
USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues:
Product license 74.2% 87.8%
Services 25.8% 12.2%
---------- ----------
Total revenues 100.0% 100.0%
---------- ----------
Operating expenses:
Selling and product materials 173.4% 61.4%
Product development 37.5% 9.7%
General and administrative 46.3% 22.0%
Non-cash compensation 7.1% -
Amortization of intangible assets 8.8% -
---------- ----------
Total operating expenses 273.1% 93.1%
---------- ----------
Income (loss) from operations (173.1)% 6.9%
Other income (expense), net (0.6)% 0.3%
---------- ----------
Income (loss) before income taxes (173.7)% 7.2%
Income tax provision - (0.8)%
---------- ----------
Net income (loss) (173.7)% 6.4%
Dividends on preferred stock (2.7)% -
---------- ----------
Net income (loss) applicable to common stockholders (176.4)% 6.4%
========== ==========
</TABLE>
Total revenues for the quarter ended March 31, 2000, were $4.1 million,
a decrease of $2.2 million or 35% compared to the same period in 1999. The
decrease was primarily a result of $2.5 million in lower software licensing
revenues, partially offset by increases in support services and training
revenues. The decrease in software licensing revenues was primarily due to a
delay in the release of FactoryLink 7.0. In addition, the Company believes that
a temporary industry-wide decline in new projects was experienced as businesses
expected unforeseen Year 2000 related problems at the start of the year. While
the Company anticipates an improvement in USDATA revenues going forward, these
market dynamics could affect buying decisions for another two or three quarters,
making revenues and operating results more difficult to forecast.
Selling and product materials expenses increased $3.2 million from $3.9
million for the quarter ended March 31, 1999 to $7.1 million for the same period
in 2000. The increase was a result of eMake's selling and product materials
expenses of $3.5 million, offset by a decrease in USDATA's selling and product
materials expenses of $.3 million, due to decreases in marketing and software
support expenses. Selling and product materials expenses as a percentage of
revenues increased to 173.4% for the quarter ended March 31, 2000 from 61.4% for
the same period in 1999 primarily resulting from the increase in selling
expenses from eMake in addition to the decrease in revenues.
Product development expenses (net of capitalized software development
costs), which consisted primarily of labor costs, increased $.9 million from $.6
million for the quarter ended March 31, 1999 to $1.5 million for the same period
in 2000. Compared to the first quarter 1999, the Company increased its
engineering development activities related to the FactoryLink and Xfactory
product lines. The Company capitalized $1.8 million and $.2 million of
development costs in the quarters ended March 31, 2000 and March 31, 1999,
respectively, primarily related to the next major version of the FactoryLink
product line and development efforts related to eMake.
10
<PAGE> 11
USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
General and administrative expenses increased $.5 million from $1.4
million for the quarter ended March 31, 1999 to $1.9 million for the same period
in 2000. The increase is primarily due to Smart Shop's general and
administrative expenses of $.3 million, which are included in the eMake
Division. General and administrative expenses as a percentage of revenues
increased to 46.3% for the quarter ended March 31, 2000 from 22.0% for the same
period in 1999, primarily due to the decrease in revenues in the first quarter
of 2000 combined with the fixed cost nature of a majority of general and
administrative costs.
In connection with the acquisition of Smart Shop, the Company recorded
$.6 million in charges for the quarter ended March 31, 2000 related to non-cash
compensation and amortization of acquired intangible assets.
The Company experienced a loss from operations of $7.0 million for the
quarter ended March 31, 2000 compared to income from operations of $.4 million
for the same period in 1999. The decrease in income from operations was
primarily the result of a decrease in revenues of $2.2 million, acquisition
related charges of $.6 million and eMake related costs associated with
developing technology, building the infrastructure, start-up and Smart Shop
operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used $3.0 million of cash for the
quarter ended March 31, 2000 compared to $.1 million for the same period in
1999, primarily due to a loss from operations in the first quarter of 2000,
partially offset by improved collections on accounts receivable in 2000. Cash
used in investing activities was $3.3 million for the quarter ended March 31,
2000 resulting from capital expenditures of $1.5 million and software
development costs of $1.8 million. The capital expenditures were primarily
attributable to $1.1 million in costs for computer equipment and software
development related to the internet applications for eMake and $.4 million in
computers and equipment for USDATA.
On February 8, 2000 and March 24, 2000, the Company entered into two
convertible promissory note agreements with a subsidiary of Safeguard
Scientifics, Inc. ("Safeguard"), the Company's primary stockholder, for $2.5
million each, totaling $5.0 million in borrowings. The promissory notes bear
interest at a rate of 12% per annum and are due in full on February 8, 2001 and
March 24, 2001, respectively. The outstanding principal balances of these notes
are convertible at any time into shares of common stock of a wholly-owned
subsidiary of the Company at an initial conversion price of $4.00 per share. The
conversion price is equal to the estimated fair value of the subsidiary's common
stock at dates of the issuance of the promissory notes. If the notes payable are
paid in full at maturity, interest will be forgiven.
On April 26, 2000, Safeguard provided an additional $5.0 million in
financing to the Company 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 bears interest at a specified bank prime rate plus one
percent.
The development and launch of the Company's new eMake Division has
significantly increased its operating expenses and cash requirements. To date,
the Company has been able to satisfy these incremental cash requirements through
the aforementioned convertible promissory and demand notes with Safeguard. In
order for the Company to continue its promotion and launch of eMake, additional
cash investments will be required. The Company is in the process of seeking
additional public or private debt or equity financing to fund these future
growth opportunities as well as potential acquisitions. No assurance can be
given, however, that such debt or equity financing will be available to the
Company on terms and conditions acceptable to the Company, if at all.
11
<PAGE> 12
USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
YEAR 2000
The Company has not encountered any material problems in its critical
systems or products subsequent to December 31, 1999 related to the Year 2000
("Y2K") issue and has not encountered any material problems with its third party
vendors and suppliers. The Company will continue to monitor new issues or
concerns relative to Y2K.
Although the Company to date has not experienced any significant
problems associated with Y2K, the Company cannot be certain that unexpected Y2K
compliance problems of its products, computer systems or the systems of its
vendors, customers and service providers, will not occur. Any such problems
could have a material adverse affect on the Company's business, financial
condition or operating results.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board released
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended by SFAS No. 137, which is effective for
fiscal years beginning after June 15, 2000. Earlier application for certain
provisions of this standard is permitted. SFAS 133 establishes accounting and
reporting standards for derivative instruments. The Statement requires that an
entity recognize all derivatives as either assets or liabilities in the
financial statements and measure those instruments at fair value, and it defines
the accounting for changes in the fair value of the derivatives depending on the
intended use of the derivative. SFAS 133 is not expected to have a material
impact on the Company's consolidated results of operations, financial position
or cash flows.
In December 1999, the SEC staff issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
summarizes certain of the staff's views in applying General Accepted Accounting
Principles to revenue recognition and accounting for deferred costs in the
financial statements. Based on our current revenue recognition policies, SAB 101
is not expected to materially impact our financial position, results of
operations or cash flows.
FORWARD LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 regarding revenues,
margins, operating expenses, earnings, growth rates and certain business trends
that are subject to risks and uncertainties that could cause actual results to
differ materially from the results described herein. Specifically, the ability
to grow product and service revenues may not continue and the Company may not be
successful in developing new products, product enhancements or services on a
timely basis or in a manner that satisfies customers needs or achieves market
acceptance. Other factors that could cause actual results to differ materially
are: competitive pricing and supply, market acceptance and success for service
offerings similar to eMake, short-term interest rate fluctuations, general
economic conditions, employee turnover, possible future litigation, the impact
of Y2K and the related uncertainties may have on future revenue and earnings as
well as the risks and uncertainties set forth from time to time in the Company's
other public reports and filings and public statements. Recipients of this
document are cautioned to consider these risks and uncertainties and to not
place undue reliance on these forward-looking statements. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by these
cautionary statements.
12
<PAGE> 13
USDATA CORPORATION AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk associated with changes in interest
rates relates to its variable rate bank note payable of $261,000. Interest rate
risk is estimated as the potential impact on the Company's results of operations
or financial position due to a hypothetical change of 50 basis points in quoted
market prices. This hypothetical change would not have a material effect on the
Company's results of operations and financial position.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (filed as part of this report).
Number Description
------ -----------
10.12 Convertible Promissory Note dated February 8, 2000
10.13 Convertible Promissory Note dated March 24, 2000
10.14 Demand Note dated April 26, 2000
27 Financial Data Schedule
(EDGAR Version only)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during
the quarter ended March 31, 2000.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
USDATA CORPORATION
Date: May 15, 2000 /s/ Robert A. Merry
-----------------------------------------------
Robert A. Merry
President, Chief Executive Officer
and Director
Date: May 15, 2000 /s/ Robert L. Drury
-----------------------------------------------
Robert L. Drury
Vice President Finance,
Chief Financial Officer Treasurer and Secretary
(Principal Financial and Accounting Officer)
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.12 Convertible Promissory Note dated February 8, 2000
10.13 Convertible Promissory Note dated March 24, 2000
10.14 Demand Note dated April 26, 2000
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.12
THIS PROMISSORY NOTE AND THE SHARES, IF ANY, ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, OR DISPOSED OF EXCEPT PURSUANT TO
REGISTRATION UNDER SUCH ACTS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE PROMISSORY NOTE
$2,500,000 February 8, 2000
FOR VALUE RECEIVED, eMake Corporation, a Delaware Company (the
"Company"), hereby promises to pay to the order of Safeguard 2000 Capital, L.P.
(together with its successors and assigns hereunder the "Holder") the principal
amount of $2,500,000 at the time and in the manner provided for herein.
The Company hereby agrees as follows for the benefit of the Holder:
1. Payment. The outstanding principal balance of this Note shall be
due and payable in full on February 8, 2001 (the "Maturity Date") or upon the
earlier acceleration thereof pursuant hereto. No interest shall accrue on the
outstanding principal balance of this Note if the principal balance of this
Note is paid in full at the Maturity Date or immediately upon the earlier
acceleration thereof pursuant hereto. Any principal not paid when due, either
at the Maturity Date or upon any earlier acceleration, shall bear interest at
the rate of 12% per annum until paid. Payments hereunder shall be made by wire
transfer or check in immediately available United States funds sent to the
Holder at the address furnished to the Company for that purpose. The principal
amount of this Note may not be prepaid in whole or in part prior to the
Maturity Date, except with the prior written consent of the Holder.
2. Transfers. This Note shall be registered on the books of the Company
or its agent as to principal and interest. Any transfer of this Note may be
effected only by surrender of this Note to the Company and reissuance of a new
note to the transferee.
3. Default. The happening of any one or more of the following specified
events shall constitute an Event of Default hereunder:
(a) failure to pay any amount as herein set forth within ten
(10) days after such amount becomes due in accordance herewith;
<PAGE> 2
(b) default in the performance by the Company of any other
obligation to the Holder, which default is not cured within thirty (30)
days after written notice of such default from the holder;
(c) insolvency (however evidenced) of the Company or the
commission by the Company of any act of insolvency;
(d) the making by the Company of a general assignment for the
benefit of creditors;
(e) the filing of any petition or the commencement of any
proceeding by the Company or any endorser or guarantor of this Note for
any relief under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions;
(f) the filing of any petition or the commencement of any
proceeding against the Company or any endorser or guarantor of this
Note for any relief under any bankruptcy or insolvency laws, or any
laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions, which proceeding is not
dismissed within sixty (60) days;
(g) suspension of the transaction of the usual business of the
Company; or
(h) the past or future making of a false representation or
warranty by the Company in connection with this Note.
Upon the occurrence of an Event of Default described in clause (e) or
(f) above, all amounts owed by the Company to the Holder hereunder shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, or any other notice or declaration of any
kind, all of which are hereby expressly waived by the Company. During the
continuation of any other Event of Default, the Holder, at any time and from
time to time, may declare any or all of the amounts owing by the Company to the
Holder hereunder immediately due and payable, all without notice, demand,
presentment, notice of demand or of dishonor and nonpayment, or any notice or
declaration of any kind, all of which are hereby expressly waived by the
Company.
4. Conversion. The Holder shall have the right to convert the
outstanding principal balance of this Note as follows:
(a) At the option of the Holder, at any time at the office of
the Company, the outstanding principal balance of this Note shall be
convertible into such number of fully paid and nonassessable shares of
Class B Common Stock of the Company (the "Class B Common Stock") as is
determined by dividing the outstanding principal of this Note by the
conversion price then applicable (the "Conversion Price"), determined
as hereinafter provided, in effect on the date this Note is surrendered
for conversion. The Conversion
2
<PAGE> 3
Price at which shares of Class B Common Stock shall be deliverable upon
conversion of this Note initially shall be $4.00 per share of Class B
Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.
(b) Before the Holder shall be entitled to convert this Note
into shares of Class B Common Stock, the holder shall surrender this
Note, duly endorsed, at the office of the Company and shall give
written notice to the Company at such office that the Holder elects to
convert the same and shall state therein the name or names in which the
Holder wishes the certificate or certificates for shares of Class B
Common Stock to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to the Holder, a
certificate or certificates for the number of shares of Class B Common
Stock to which the 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 this Note for conversion,
and the person or persons entitled to receive the shares of Class B
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Class B
Common Stock on such date.
(c)
(i) Special Definitions. For purposes of this Section
4.c., the following definitions apply:
"Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock of the Company
or Convertible Securities (defined below) other than any such right, option, or
warrants covered by Section 4.c.4(B) below.
"Original Issue Date" shall mean the date this Note
was first issued.
"Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities convertible
into or exchangeable for Common Stock.
"Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.c.(iii), deemed to be
issued) by the Company after the Original Issue Date, other than shares of
Common Stock issued (or deemed issued):
(A) to outside directors, officers,
employees and consultants of the Company and/or USDATA Corporation, a Delaware
corporation ("USDATA") pursuant to the Company's 2000 Equity Compensation 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
3
<PAGE> 4
committee thereof and (ii) the number of shares of Employee Stock does not
exceed an aggregate of 5,650,000 shares (as adjusted for any stock dividends,
combinations, splits or similar events) regardless of whether issued by the
Company prior to the date hereof;
(B) for which adjustment of the Conversion
Price is made pursuant to Section 4.d.
(C) pursuant to the transactions
contemplated in that certain Securities Purchase Agreement by and between the
Company, USDATA and the Holder (the "Purchase Agreement").
(ii) 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 share (determined pursuant to Section 4.c.(v) hereof) for an Additional
Share of Common Stock issued or deemed to be issued by the Company 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) In the event the Company at any time or from
time to time after the Original Issue 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, 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 Company, 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
4
<PAGE> 5
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(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) the 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) In the event the Company, at any time after the
Original Issue Date, shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
4.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 be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying the Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of Common
Stock so issued would purchase at the Conversion Price in effect immediately
prior to such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued. For the purpose of
the above calculation, the number of shares of Common Stock outstanding
immediately prior to such issue shall be calculated on a fully diluted basis, as
if all Convertible Securities had been fully converted into shares of Common
Stock and any outstanding Options or other Convertible Securities had been fully
exercised (and the resulting securities fully converted into shares of Common
Stock, if so convertible) as of such date.
(v) For purposes of this Section 4.c., the
consideration received by the Company for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(1) Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company;
(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
Company for consideration which covers both, be the proportion of such
consideration so received in exchange
5
<PAGE> 6
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) The consideration per share received by the
Company for Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.c.(iii), relating to Options and Convertible Securities
shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Company 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 Company 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
(B) 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) In the event that the Company at any time or from time to
time after the Original Issue 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 Company shall declare or pay,
without consideration, any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock for no
consideration, then the Company 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) If the Common Stock issuable upon conversion of this Note
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
4.d. above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted so that this Note 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 this Note immediately before that change.
6
<PAGE> 7
(f) The Company shall not, by amendment of its Certificate of
Incorporation, 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 Company, but shall at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking
of all such action as may be necessary or appropriate in order to
protect the conversion rights of the Holder against impairment.
(g) Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section 4, the Company at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Holder
a certificate executed by the Company'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 Company shall, upon the written request at any time of the Holder,
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 Class B Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of this Note.
(h) In the event that the Company 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 Company shall send to
the Holders: (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) The Company shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of
Class B Common Stock on conversion of this Note pursuant hereto;
provided, however, that the Company shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(j) Following the execution of the Purchase Agreement, the
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Class B Common Stock, solely for the
purpose of effecting the conversion of the shares of this Note, such
number of its shares of Class B Common Stock as shall from time to time
be sufficient to effect the conversion of the entire outstanding
principal balance of this Note; and if at any time the number of
authorized but unissued shares of Class B Common Stock shall not be
sufficient to effect the conversion of the entire outstanding principal
balance of this Note, the Company shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Class B
7
<PAGE> 8
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
the Company's Certificate of Incorporation.
(k) No fractional share shall be issued upon the conversion of
this Note. If the conversion would result in the issuance of a fraction
of a share of Class B Common Stock, the Company 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).
5. Expenses of Collection. The Company agrees to pay the Holder's
reasonable costs in collecting and enforcing this Note, including reasonable
attorney's fees.
6. Waiver by Holder. No waiver of any obligation of the Company under
this Note shall be effective unless it is in a writing signed by the Holder. A
waiver by the holder of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
7. Notice. Any notice required or permitted under this Note shall be
in writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at:
eMake Corporation
2435 North Central Expressway
Richardson, Texas 75080
Attention: Chief Financial Officer
if to the Holder, at the most recent address provided to the Company by
the Holder for such purpose; or, in each case, to the most recent address,
specified by written notice, given to the sender pursuant to this paragraph.
8. Waiver by Company. The Company hereby expressly waives presentment,
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the Holder hereof with respect to the time of payment
or any other provision hereof.
9. Severability. In the event any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively
8
<PAGE> 9
operate to invalidate this Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Note and the remaining provisions of this Note shall remain operative and
in full force and effect and in no way shall be affected, prejudiced, or
disturbed thereby.
10. Savings Clause. Should any interest or other charges paid hereunder
result in the computation or earning of interest in excess of the maximum rate
or amount of interest permitted by applicable law, such excess interest and
charges shall be and hereby are waived by the Holder, and the amount of such
excess interest and charges shall be automatically credited against, and be
deemed to have been payments in reduction of, the principal then due hereunder,
and any portion of such excess which exceeds the principal then due hereunder
shall be paid by the Holder to the Company.
11. Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
[SIGNATURE FOLLOWS ON NEXT PAGE]
9
<PAGE> 10
EXECUTED effective as of February 8, 2000
eMake CORPORATION
By: /s/ ROBERT L. DRURY
------------------------------------
Robert L. Drury
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.13
THIS PROMISSORY NOTE AND THE SHARES, IF ANY, ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, OR DISPOSED OF EXCEPT PURSUANT TO
REGISTRATION UNDER SUCH ACTS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE PROMISSORY NOTE
$2,500,000 March 24, 2000
FOR VALUE RECEIVED, eMake Corporation, a Delaware Company (the
"Company"), hereby promises to pay to the order of Safeguard 2000 Capital, L.P.
(together with its successors and assigns hereunder the "Holder") the principal
amount of $2,500,000 at the time and in the manner provided for herein.
The Company hereby agrees as follows for the benefit of the Holder:
1. Payment. The outstanding principal balance of this Note shall be due
and payable in full on March 24, 2001 (the "Maturity Date") or upon the earlier
acceleration thereof pursuant hereto. No interest shall accrue on the
outstanding principal balance of this Note if the principal balance of this Note
is paid in full at the Maturity Date or immediately upon the earlier
acceleration thereof pursuant hereto. Any principal not paid when due, either at
the Maturity Date or upon any earlier acceleration, shall bear interest at the
rate of 12% per annum until paid. Payments hereunder shall be made by wire
transfer or check in immediately available United States funds sent to the
Holder at the address furnished to the Company for that purpose. The principal
amount of this Note may not be prepaid in whole or in part prior to the Maturity
Date, except with the prior written consent of the Holder.
2. Transfers. This Note shall be registered on the books of the Company
or its agent as to principal and interest. Any transfer of this Note may be
effected only by surrender of this Note to the Company and reissuance of a new
note to the transferee.
3. Default. The happening of any one or more of the following specified
events shall constitute an Event of Default hereunder:
(a) failure to pay any amount as herein set forth within ten
(10) days after such amount becomes due in accordance herewith;
<PAGE> 2
(b) default in the performance by the Company of any other
obligation to the Holder, which default is not cured within thirty (30)
days after written notice of such default from the holder;
(c) insolvency (however evidenced) of the Company or the
commission by the Company of any act of insolvency;
(d) the making by the Company of a general assignment for the
benefit of creditors;
(e) the filing of any petition or the commencement of any
proceeding by the Company or any endorser or guarantor of this Note for
any relief under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions;
(f) the filing of any petition or the commencement of any
proceeding against the Company or any endorser or guarantor of this
Note for any relief under any bankruptcy or insolvency laws, or any
laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions, which proceeding is not
dismissed within sixty (60) days;
(g) suspension of the transaction of the usual business of the
Company; or
(h) the past or future making of a false representation or
warranty by the Company in connection with this Note.
Upon the occurrence of an Event of Default described in clause (e) or
(f) above, all amounts owed by the Company to the Holder hereunder shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, or any other notice or declaration of any
kind, all of which are hereby expressly waived by the Company. During the
continuation of any other Event of Default, the Holder, at any time and from
time to time, may declare any or all of the amounts owing by the Company to the
Holder hereunder immediately due and payable, all without notice, demand,
presentment, notice of demand or of dishonor and nonpayment, or any notice or
declaration of any kind, all of which are hereby expressly waived by the
Company.
4. Conversion. The Holder shall have the right to convert the
outstanding principal balance of this Note as follows:
(a) At the option of the Holder, at any time at the office of
the Company, the outstanding principal balance of this Note shall be
convertible into such number of fully paid and nonassessable shares of
Class B Common Stock of the Company (the "Class B Common Stock") as is
determined by dividing the outstanding principal of this Note by the
conversion price then applicable (the "Conversion Price"), determined
as hereinafter provided, in effect on the date this Note is surrendered
for conversion. The Conversion
2
<PAGE> 3
Price at which shares of Class B Common Stock shall be deliverable upon
conversion of this Note initially shall be $4.00 per share of Class B
Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.
(b) Before the Holder shall be entitled to convert this Note
into shares of Class B Common Stock, the holder shall surrender this
Note, duly endorsed, at the office of the Company and shall give
written notice to the Company at such office that the Holder elects to
convert the same and shall state therein the name or names in which the
Holder wishes the certificate or certificates for shares of Class B
Common Stock to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to the Holder, a
certificate or certificates for the number of shares of Class B Common
Stock to which the 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 this Note for conversion,
and the person or persons entitled to receive the shares of Class B
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Class B
Common Stock on such date.
(c)
(i) Special Definitions. For purposes of this Section
4.c., the following definitions apply:
"Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock of the Company
or Convertible Securities (defined below) other than any such right, option, or
warrants covered by Section 4.c.4(B) below.
"Original Issue Date" shall mean the date this Note
was first issued.
"Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities convertible
into or exchangeable for Common Stock.
"Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.c.(iii), deemed to be
issued) by the Company after the Original Issue Date, other than shares of
Common Stock issued (or deemed issued):
(A) to outside directors, officers,
employees and consultants of the Company and/or USDATA Corporation ("USDATA"), a
Delaware corporation, pursuant to the Company's 2000 Equity Compensation 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
3
<PAGE> 4
committee thereof and (ii) the number of shares of Employee Stock does not
exceed an aggregate of 5,650,000 shares (as adjusted for any stock dividends,
combinations, splits or similar events) regardless of whether issued by the
Company prior to the date hereof;
(B) for which adjustment of the Conversion
Price is made pursuant to Section 4.d;
(C) pursuant to the transactions
contemplated in that certain Securities Purchase Agreement by and between the
Company, USDATA and the Holder (the "Purchase Agreement").
(ii) 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 share (determined pursuant to Section 4.c.(v) hereof) for an Additional
Share of Common Stock issued or deemed to be issued by the Company 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) In the event the Company at any time or from
time to time after the Original Issue 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, 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 Company, 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
4
<PAGE> 5
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(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) the 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) In the event the Company, at any time after the
Original Issue Date, shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
4.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 be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying the Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of Common
Stock so issued would purchase at the Conversion Price in effect immediately
prior to such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued. For the purpose of
the above calculation, the number of shares of Common Stock outstanding
immediately prior to such issue shall be calculated on a fully diluted basis, as
if all Convertible Securities had been fully converted into shares of Common
Stock and any outstanding Options or other Convertible Securities had been fully
exercised (and the resulting securities fully converted into shares of Common
Stock, if so convertible) as of such date.
(v) For purposes of this Section 4.c., the
consideration received by the Company for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(1) Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company;
(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
Company for consideration which covers both, be the proportion of such
consideration so received in exchange
5
<PAGE> 6
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) The consideration per share received by the
Company for Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.c.(iii), relating to Options and Convertible Securities
shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Company 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 Company 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
(B) 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) In the event that the Company at any time or from time to
time after the Original Issue 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 Company shall declare or pay,
without consideration, any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock for no
consideration, then the Company 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) If the Common Stock issuable upon conversion of this Note
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
4.d. above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted so that this Note 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 this Note immediately before that change.
6
<PAGE> 7
(f) The Company shall not, by amendment of its Certificate of
Incorporation, 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 Company, but shall at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking
of all such action as may be necessary or appropriate in order to
protect the conversion rights of the Holder against impairment.
(g) Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section 4, the Company at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Holder
a certificate executed by the Company'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 Company shall, upon the written request at any time of the Holder,
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 Class B Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of this Note.
(h) In the event that the Company 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 Company shall send to
the Holders: (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) The Company shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of
Class B Common Stock on conversion of this Note pursuant hereto;
provided, however, that the Company shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(j) Following the execution of the Purchase Agreement, the
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Class B Common Stock, solely for the
purpose of effecting the conversion of the shares of this Note, such
number of its shares of Class B Common Stock as shall from time to time
be sufficient to effect the conversion of the entire outstanding
principal balance of this Note; and if at any time the number of
authorized but unissued shares of Class B Common Stock shall not be
sufficient to effect the conversion of the entire outstanding principal
balance of this Note, the Company shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Class B
7
<PAGE> 8
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
the Company's Certificate of Incorporation.
(k) No fractional share shall be issued upon the conversion of
this Note. If the conversion would result in the issuance of a fraction
of a share of Class B Common Stock, the Company 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).
5. Expenses of Collection. The Company agrees to pay the Holder's
reasonable costs in collecting and enforcing this Note, including reasonable
attorney's fees.
6. Waiver by Holder. No waiver of any obligation of the Company under
this Note shall be effective unless it is in a writing signed by the Holder. A
waiver by the holder of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
7. Notice. Any notice required or permitted under this Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at:
eMake Corporation
2435 North Central Expressway
Richardson, Texas 75080
Attention: Chief Financial Officer
if to the Holder, at the most recent address provided to the Company by
the Holder for such purpose; or, in each case, to the most recent address,
specified by written notice, given to the sender pursuant to this paragraph.
8. Waiver by Company. The Company hereby expressly waives presentment,
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof; and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the Holder hereof with respect to the time of payment
or any other provision hereof.
9. Severability. In the event any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively
8
<PAGE> 9
operate to invalidate this Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Note and the remaining provisions of this Note shall remain operative and
in full force and effect and in no way shall be affected, prejudiced, or
disturbed thereby.
10. Savings Clause. Should any interest or other charges paid hereunder
result in the computation or earning of interest in excess of the maximum rate
or amount of interest permitted by applicable law, such excess interest and
charges shall be and hereby are waived by the Holder, and the amount of such
excess interest and charges shall be automatically credited against, and be
deemed to have been payments in reduction of, the principal then due hereunder,
and any portion of such excess which exceeds the principal then due hereunder
shall be paid by the Holder to the Company.
11. Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
[SIGNATURE FOLLOWS ON NEXT PAGE]
9
<PAGE> 10
EXECUTED effective as of March 24, 2000
eMake CORPORATION
By: /s/ Robert L. Drury
------------------------------------
Robert L. Drury
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.14
DEMAND NOTE
USDATA CORPORATION
$5,000,000 APRIL 26, 2000
In consideration of the loan (hereinafter referred to as a "Loan")
Safeguard Delaware, Inc., a Delaware corporation (the "Lender"), has made to
USDATA Corporation, a Delaware corporation (the "Borrower"), and for value
received, the Borrower hereby promises to pay to the order of the Lender or its
assigns, at the Lender's office located at 103 Springer Building, 3411
Silverside Road, Wilmington, DE 19810, or at such other place in the
continental United States as the Lender may designate in writing, in lawful
money of the United States, and in immediately available funds, the principal
sum of FIVE MILLION DOLLARS ($5,000,000).
The unpaid principal balance of the Note shall be paid on the date which
is 60 days after the date of demand for payment by the Lender, or the date which
is one year from the date hereof, whichever first occurs.
The Borrower hereby further promises to pay to the order of the Lender or
its assigns interest on the outstanding principal amount from the date hereof,
at an annual rate equal to the announced prime rate of the PNC Bank, N.A. (the
"Prime Rate") plus one percent (1%). Such interest rate shall be changed when
and as the Prime Rate changes. In addition, the Borrower shall pay on demand
interest on any overdue payment of principal and interest (to the extent
legally enforceable) at the fluctuating Prime Rate plus three percent (3%).
Interest shall be payable when the unpaid principal balance of the Note is
paid.
All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Accrued and unpaid interest shall be due
and payable upon maturity of this Note. After maturity or in the event of
default, interest shall continue to accrue on the Note at the rate set forth
above and shall be payable on demand of the Lender.
The outstanding principal amount of this Note may be prepaid by the
Borrower upon notice to the Lender in whole at any time or in part from time to
time without any prepayment penalty or premium; provided, that upon such payment
any interest due to the date of such prepayment on such prepaid amount shall
also be paid.
Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any
stated interest rate herein exceeds the maximum allowable rate, then the
interest rate shall be reduced to the maximum allowable rate, and any excess
payment of interest made by the Borrower at any time shall be applied to the
unpaid balance of any outstanding principal of this Note.
<PAGE> 2
An event of default hereunder shall consist of:
(i) a default in the payment by the Borrower to the Lender of principal
or interest under this Note as and when the same shall become due and payable;
or
(ii) an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money, beyond any applicable notice
and/or grace period; or
(iii) institution of any proceeding by or against the Borrower under any
present or future bankruptcy or insolvency statute or similar law and, if
involuntary, if the same are not stayed or dismissed within sixty (60) days, or
the Borrower's assignment for the benefit of creditors or the appointment of a
receiver, trustee, conservator or other judicial representative for the
Borrower or the Borrower's property or the Borrower's being adjudicated a
bankrupt or insolvent; or
(iv) the admission in writing by Borrower of its inability to pay its
debts as they become due.
Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), the
entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.
Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $100,000 ("Summary
Proceeding"), arising out of or relating to this Note, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Supreme Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts
are vested with sole and exclusive jurisdiction by statute and (vii)
understands and agrees that it shall not seek a jury trial or punitive damages
in any Summary Proceeding based upon or arising out of or otherwise related to
this Note and waives any and all rights to any such jury trial or to seek
punitive damages.
<PAGE> 3
In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $100,000 (a "Proceeding"), arising out of or relating to this Note or the
breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.
If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Note and the
substantive law of the State of Delaware. The arbitration shall be conducted at
the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court
of competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written
notice to the other party of its intent to do so.
Neither party shall be precluded hereby from securing equitable remedies
in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protects its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.
The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof must be made before, at or after maturity by agreement by the
Lender. Upon default hereunder the Lender shall have the right to offset the
amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of any event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all
costs and expenses, including, without limitation, attorney's fees and legal
expenses, that may be incurred by the Lender in connection with the enforcement
of this Note.
Notices required to be given hereunder shall be deemed validly given (i)
three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the
sender, by Federal Express Next Day Delivery or other guaranteed delivery
service, (iii) when sent by facsimile transmission, or (iv) when delivered by
hand:
If to the Lender: Safeguard Delaware, Inc.
800 The Safeguard Building
435 Devon Park Drive
<PAGE> 4
Wayne, PA 19087
Attn: Chief Financial Officer
If to the Borrower: USDATA Corporation
2435 North Central Expressway
Richardson, TX 75080-2722
Attn: Chief Financial Officer
or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.
Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Note shall be binding upon
the Lender unless in writing and signed by it. Any provision hereof found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect
the validity, legality or enforceability of the remainder hereof. This Note
shall apply to and bind the successors of the Borrower and shall inure to the
benefit of the Lender, its successors and assigns.
The Note shall be governed by and interpreted in accordance with the
laws of the State of Delaware.
IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Demand Note as of
the date first written above.
USDATA CORPORATION
By: /s/ ROBERT L. DRURY
----------------------------------------
Robert L. Drury, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S MARCH 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,128
<SECURITIES> 0
<RECEIVABLES> 3,664
<ALLOWANCES> 430
<INVENTORY> 249
<CURRENT-ASSETS> 6,456
<PP&E> 9,746
<DEPRECIATION> 6,298
<TOTAL-ASSETS> 25,883
<CURRENT-LIABILITIES> 12,553
<BONDS> 368
0
0
<COMMON> 156
<OTHER-SE> 7,531
<TOTAL-LIABILITY-AND-EQUITY> 25,883
<SALES> 4,066
<TOTAL-REVENUES> 4,066
<CGS> 0
<TOTAL-COSTS> 11,104
<OTHER-EXPENSES> 26
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,064)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,172)
<EPS-BASIC> (56.00)
<EPS-DILUTED> (56.00)
</TABLE>
