<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NATIONAL DATACOMPUTER, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NATIONAL DATACOMPUTER, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
NATIONAL DATACOMPUTER, INC.
900 MIDDLESEX TURNPIKE, BLDG. 5
BILLERICA, MASSACHUSETTS 01821
September 6, 1996
Dear Stockholder:
You are cordially invited to attend the Special Meeting in Lieu of Annual
Meeting of Stockholders (the "Special Meeting") of National Datacomputer, Inc.
(the "Corporation") to be held on Monday, September 30, 1996 at 10:00 a.m. at
the offices of the Corporation, 900 Middlesex Turnpike, Bldg. 5, Billerica,
Massachusetts 01821.
At the Special Meeting, you will be asked to: (i) elect three (3) members
of the Board of Directors; (ii) authorize the Board of Directors to execute, at
their discretion, an amendment to the Corporation's Certificate of Incorporation
to effect a reverse stock split; (iii) approve an amendment to the Corporation's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock; (iv) approve the Corporation's 1995 Stock Option Plan, under which
500,000 shares of Common Stock have been reserved for issuance; (v) ratify the
selection of Price Waterhouse LLP as independent auditors of the Corporation for
the fiscal year ending December 31, 1996; and (vi) consider and act upon any
matters incidental to the foregoing and any other matters which may properly
come before the meeting or any adjournment or adjournments thereof.
Details of the matters to be considered at the Special Meeting are
contained in the Proxy Statement, which we urge you to consider carefully.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return your Proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your Proxy.
Sincerely,
Malcolm M. Bibby
Chairman
<PAGE>
NATIONAL DATACOMPUTER, INC.
900 MIDDLESEX TURNPIKE, BLDG. 5
BILLERICA, MASSACHUSETTS 01821
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Special Meeting in Lieu of Annual Meeting
of Stockholders of NATIONAL DATACOMPUTER, INC., a Delaware corporation (the
"Corporation"), will be held on Monday, September 30, 1996 at 10:00 a.m. at the
offices of the Corporation, 900 Middlesex Turnpike, Bldg. 5, Billerica,
Massachusetts 01821 for the following purposes:
1. To elect three (3) members of the Board of Directors.
2. To authorize the Board of Directors to execute, at their discretion,
an amendment to the Corporation's Certificate of Incorporation to effect a
reverse stock split.
3. To approve an amendment to the Corporation's Certificate of Incorporation
to increase the number of authorized shares of Common Stock.
4. To approve the Corporation's 1995 Stock Option Plan, under which 500,000
shares of Common Stock have been reserved for issuance.
5. To ratify the selection of Price Waterhouse LLP as independent auditors of
the Corporation for the fiscal year ending December 31, 1996.
6. To consider and act upon any matters incidental to the foregoing and any
other matters which may properly come before the meeting or any adjournment
or adjournments thereof.
The Board of Directors has fixed the close of business on September 2,
1996, as the record date for the determination of stockholders entitled to
notice of and vote at the meeting and any adjournment or adjournments thereof.
We hope that all stockholders will be able to attend the meeting in
person. To assure that a quorum is present at the meeting on September 30,
1996, please date, sign and promptly return the enclosed Proxy whether or not
you expect to attend the meeting. A postage-prepaid envelope, addressed to
American Stock Transfer & Trust Co., the Corporation's transfer agent and
registrar, has been enclosed for your convenience. If you attend the meeting,
your Proxy will, at your request, be returned to you and you may vote your
shares in person.
By Order of the Board of Directors
Malcolm M. Bibby
Chairman
Billerica, Massachusetts
September 6, 1996
<PAGE>
NATIONAL DATACOMPUTER, INC.
900 MIDDLESEX TURNPIKE, BLDG. 5
BILLERICA, MASSACHUSETTS 01821
SEPTEMBER 6, 1996
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of NATIONAL
DATACOMPUTER, INC., a Delaware corporation (the "Corporation"), for use at the
Special Meeting in Lieu of Annual Meeting of Stockholders to be held at the
offices of the Corporation, 900 Middlesex Turnpike, Bldg. 5, Billerica,
Massachusetts 01821 at 10:00 a.m. on Monday, September 30, 1996 and at any
adjournment or adjournments thereof.
Stockholders of record at the close of business on September 2, 1996, will
be entitled to vote at the meeting or any adjournment thereof. On that date,
4,952,585 shares of Common Stock, $.02 par value (the "Common Stock"), of the
Corporation were issued and outstanding. Also, the Corporation had 4,200 shares
of Series B Convertible Preferred Stock, $.001 par value (the "Series B Stock"),
issued and outstanding. Each share of Series B Stock is convertible into 667
shares of Common Stock. Each holder of the shares of Series B Stock is entitled
to the number of votes equal to the number of shares of Common Stock into which
such Series B Stock is convertible. The Corporation has no other voting
securities.
Each share of Common Stock entitles the holder to one vote with respect to
all matters submitted to stockholders at the meeting. A quorum for the meeting
is a majority of the shares outstanding. The proposals to be voted upon by the
stockholders of the Corporation require the votes of a majority of the voting
securities present at the meeting for approval. Abstentions and broker non-
votes (which result when a broker holding shares for a beneficial holder in
"street name" has not received timely voting instructions on certain matters
from such beneficial holder and the broker does not have discretionary voting
power on such matters) are counted for purposes of determining the presence or
absence of a quorum at the meeting. Abstentions are counted in tabulation of the
votes cast on proposals presented to stockholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
THE DIRECTORS AND OFFICERS OF THE CORPORATION AS A GROUP OWN APPROXIMATELY
7.87% OF THE OUTSTANDING VOTING SECURITIES OF THE CORPORATION. EACH OF THE
DIRECTORS AND OFFICERS HAS INDICATED HIS INTENT TO VOTE ALL SHARES OF COMMON
STOCK OWNED OR CONTROLLED BY HIM IN FAVOR OF EACH ITEM SET FORTH HEREIN.
Execution of a Proxy will not in any way affect a stockholder's right to
attend the meeting and vote in person. The Proxy may be revoked at any time
before it is exercised by written notice to the Secretary prior to the Special
Meeting or by giving to the Secretary a duly executed Proxy bearing a later date
than the Proxy being revoked at any time before such Proxy is voted, or by
appearing at the Special Meeting and voting in person. The shares represented
by all properly executed Proxies received in time for the meeting will be voted
as specified therein. In the absence of a special choice, shares will be voted
in favor all items set forth herein.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be taken, such shares represented by all Proxies received by the Board
of Directors will be voted with respect thereto in accordance with the judgment
of the person named in the Proxies. The Board of Directors knows of no matter
to be acted upon at the meeting that would give rise to appraisal rights for
dissenting stockholders.
This Proxy Statement and the accompanying Proxy were first mailed to
stockholders on or about September 6, 1996.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Directors of the Corporation are elected annually and hold office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. The number of authorized Directors is three (3).
Shares represented by all proxies received and not so marked as to withhold
authority to vote for any individual Director or for all Directors will be voted
(unless one or more nominees are unable or unwilling to serve) for the election
of the nominees named below. The Board knows of no reason why any such nominee
should be unable or unwilling to serve. However, the Board will select new
nominees in the unlikely event any named nominee declines or is unable to serve
as a Director.
The Board met two times during the fiscal year ended December 31, 1995
("Fiscal 1995"). Messrs. Norman Mackinnon, William R. Smart and John P. Ward
attended both meetings. Dr. Malcolm M. Bibby joined the Board in January 1996
and was elected Chairman in July 1996, succeeding Mr. Mackinnon who resigned
from the Board at that time. The Corporation has no standing audit, nominating
or compensation committees. Messrs. Ward and Smart comprise the Stock Option
Committee.
All nominees are currently Directors of the Corporation and have served
continuously since the date of their election shown below. The following table
sets forth the name of each nominee, the age of each nominee, the positions and
offices currently held by each nominee with the Corporation, and the year each
nominee first became a Director.
<TABLE>
<CAPTION>
Positions and
Director Offices with Director
Nominee Age the Corporation Since
------- ---- --------------- -----
<S> <C> <C> <C>
Malcolm M. Bibby 55 Chairman 1996
and President
William R. Smart 76 Director 1989
John P. Ward 68 Director 1967
</TABLE>
Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires executive officers and Directors and
persons who beneficially own more than ten percent (10%) of the Corporation's
Common Stock to file initial reports of ownership on Form 3 and reports of
changes in ownership on Form 4 with the Securities and Exchange Commission (the
"Commission") and any national securities exchange on which the Corporation's
securities are registered. Executive officers, Directors and greater than ten
percent
2
<PAGE>
(10%) beneficial owners are required by the Commission's regulations to
furnish the Corporation with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Corporation and written representations from the executive officers and
Directors, the Corporation believes that all Section 16(a) filing requirements
applicable to its executive officers, Directors and greater than ten percent
(10%) beneficial owners were satisfied, except for John Kells who filed one (1)
late Form 5.
BACKGROUND
The following is a brief summary of the background of each Director nominee
of the Corporation:
MALCOLM M. BIBBY, PH.D. has served as a Director of the Corporation since
January, 1996 and was elected Chairman of the Board in July 1996. He was
President of LXE Inc. ("LXE"), a diversified wireless data communications
products company, from 1983 to December 1994. During this period LXE's annual
revenues grew from approximately $600,000 to approximately $63,000,000. Prior to
LXE, Dr. Bibby was an Executive Assistant to the President at Ciba Vision Care,
a Vice President of Product Development at Wesley-Jessen, Inc. and a Project
Manager/Group Leader for hardware and software development at Monsanto Co. Dr.
Bibby holds a Bachelor of Science degree and a Ph.D, both in Electrical
Engineering, from the University of Liverpool and a Masters of Business
Administration from the University of Chicago.
WILLIAM R. SMART has served as a Director of the Corporation since December
1989. He spent 32 years with the General Electric Company where his
responsibilities included distribution and marketing management and general
management as a Division Vice President. He spent nine years with Honeywell,
Inc. where he served as Vice President in charge of European operations and
Senior Vice President of Honeywell Information Systems, responsible for
international operations as well as for the corporate staff. Mr. Smart
currently serves as a Senior Vice President of the Cambridge Strategic
Management Group, a privately-held management consulting company. Mr Smart
holds a Bachelor of Science degree in Electrical Engineering from Princeton
University. Mr. Smart is also the non-executive Chairman of 1st Carolina
Corporation ("1st Carolina"). 1st Carolina filed a Chapter 7 bankruptcy
petition in the United States Bankruptcy Court for the District of South
Carolina on August 16, 1994 (Case Number 94-73884).
JOHN P. WARD has served as a Director of the Corporation since its founding
in 1967. Since February 1996 Mr. Ward has served as the Chief Executive Officer
of Midas Vision Systems, Inc., a privately held company specializing in machine
vision systems for automatic optical inspections. From 1990 to 1996 Mr. Ward was
the Chief Executive Officer and a Director of Vanzetti Systems, Inc., a
privately-held company specializing in infrared systems. Mr. Ward was Vice
President of Engineering, co-founder and clerk of the Corporation from its
3
<PAGE>
founding until December 1986. From 1953 to 1968 Mr. Ward was a Design Section
Manager at the Raytheon Company. He holds a Bachelor of Science degree in
Electrical Engineering from the Massachusetts Institute of Technology and a
Masters of Science degree in Electrical Engineering from Northeastern
University.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages and positions held in the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Malcolm M. Bibby 55 President
Gerald S. Eilberg 63 Vice President of Finance and
Administration and Chief Financial Officer
John H. Kells 58 Senior Vice President of Sales and
Marketing
Joseph C. Pinto 50 Vice President of Operations
Marty H. Port 43 Vice President of Customer Services
Gary R. Whear 37 Vice President of Sales
Larry F. Yeager 47 Vice President of Research and
Development
</TABLE>
BACKGROUND
The following is a brief summary of the background of each executive
officer of the Corporation other than Mr. Bibby, whose background is summarized
above.
GERALD S. EILBERG joined the Corporation in September 1988 as Vice
President of Finance and Administration and Chief Financial Officer. From
October 1986 to August 1988, Mr. Eilberg served as a financial consultant to
small private and public companies. Mr. Eilberg is a graduate of the Boston
University School of Management and the Columbia University Graduate School of
Business.
JOHN H. KELLS joined the Corporation in October 1995 as Senior Vice
President of Sales and Marketing after serving as an independent consultant for
several months. Mr. Kells began his career at Honeywell Information Systems
reaching the position of Branch Manager before leaving to become Regional
Director and later Senior Vice President of Sales and Marketing at Nixdorf
Computer Corp. In the late 1980's, he became the Vice President of Sales and
Service for B.G.S. System, Inc. Prior to joining the Corporation, Mr. Kells was
Director of Distribution Operations at Status Computer, Inc. He is a graduate of
New York University with a major in Accounting.
4
<PAGE>
JOSEPH C. PINTO joined the Corporation in March 1984 as Materials Manager,
advanced into the position of Manufacturing Manager in September 1986, was
appointed Vice President of Manufacturing in January 1988, and became the Vice
President of Operations in June 1996. Prior to joining the Corporation, Mr.
Pinto had been Production Control Manager at BLH Electronics, a manufacturer of
process control systems, since January 1979. Mr. Pinto holds a Bachelor of
Science degree in Industrial Technology from Northeastern University and a
Masters of Science degree in Systems Management from Western New England
College.
MARTY H. PORT served as Manager of Applications Software upon joining the
Corporation in May 1994. In November 1995, Mr. Port was appointed to the
position of Vice President of Customer Services. Previous experience includes
being an applications project leader with Wang Laboratories, a senior software
engineer and group manager at Xyvision Inc. and similar positions with Locus
Computing and Dentronics Inc. just prior to coming to the Corporation. Mr. Port
holds an undergraduate degree and a Masters degree in Computer Science from the
State University of New York.
GARY R. WHEAR joined the Corporation in January 1996 as Vice President of
Sales. From 1994 to 1996, he was Director of Worldwide Education with
responsibility for Sales and Marketing and Product Planning. Revenues more than
doubled under his leadership. From 1988 to 1994, Mr. Whear was President and
Co-founder of Application Systems Group, a regional solutions provider and
technical education company. Annual sales grew to almost $10,000,000 from a
start-up during this period. Prior experience includes being a Sales and
General Manager for Businessland, a Sales Manager for Spaulding Corp. and a
Major Accounts Representative for Dictaphone Corp. Mr. Whear earned a Bachelor
of Science degree from Babson College with a major in Marketing and
Communications.
LARRY G. YEAGER has served as Vice President of Research and Development
since joining the Corporation in December 1985. Prior to that, Mr. Yeager was
Vice President of Software Development at the Saddlebrook Corporation, a turnkey
systems company. During eight years at Saddlebrook Corporation, Mr. Yeager
developed various software products, including Pro-Forma Modeling, System M,
Client Controllable software products and numerous financial applications
programs. Prior to joining Saddlebrook, Mr. Yeager worked at the State Street
Bank and Trust Company of Boston, Massachusetts where he held the positions of
Manager of Capital Planning and Manager of Management Sciences. Mr. Yeager holds
a Bachelor of Science degree from Massachusetts Institute of Technology's Sloan
School of Management as well as a Masters degree in Business Administration from
Northeastern University.
None of the Corporation's executive officers or Directors are related to
any other executive officer or Director.
5
<PAGE>
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of September 2, 1996, certain
information concerning stock ownership of the Corporation by (i) each person who
is known by the Corporation to own beneficially 5% or more of the Corporation's
voting securities, (ii) each of the Corporation's Directors, and (iii) all
Directors and officers as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated. For purposes of this table, the Common Stock
and the Series B Stock are treated as one class.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED OF CLASS (2)
----------------------- ------------------ ------------
<S> <C> <C>
Malcolm M. Bibby (3) 143,200 2.87%
William R. Smart 10,000 *
John P. Ward (4) 115,474 2.33%
Gerald S. Eilberg (5) 32,125 *
Larry F. Yeager (6) 53,715 1.1%
RBB Bank AG (7) 2,814,230 36.29%
Burgring 16
8010 Graz, Austria
Firstmark Corporation 474,769 9.59%
One Financial Place
222 Kennedy Memorial Drive
Waterville, Maine 04901
All Directors and officers as a Group 394,074 7.87%
(9 persons) (3)(4)(5)(6)(8)
</TABLE>
----------------------
* Less than 1%
(1) The address for Messrs. Bibby, Smart, Ward, Eilberg and Yeager is c/o
National Datacomputer, Inc., 900 Middlesex Turnpike, Bldg. 5, Billerica,
Massachusetts 01821.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock that an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table. This table reflects the ownership of all shares of Common Stock and
the Series B Stock voting as a single class.
(3) Includes an aggregate of 43,000 shares of Common Stock underlying vested
options to purchase Common Stock.
(4) Includes 40,546 shares held by Mr. Ward's wife for which Mr. Ward disclaims
beneficial ownership.
(5) Includes 60 shares of Common Stock underlying vested options to purchase
Common Stock.
(6) Includes 60 shares of Common Stock underlying vested options to purchase
Common Stock.
(7) Includes an aggregate of 2,801,400 shares of Common Stock issuable upon
conversion of 4,200 shares of Series B Stock.
(8) Includes an aggregate of 13,560 shares of Common Stock underlying vested
options to purchase Common Stock held by three of the Corporation's
officers.
6
<PAGE>
COMPENSATION OF OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth the compensation paid to Mr. Mackinnon,
the Corporation's former Chief Executive Officer and President, during the
fiscal years ended December 31, 1995, December 31, 1994, and December 31, 1993
("Fiscal 1995, 1994 and 1993", respectively) and the other executive officers of
the Corporation who earned total compensation in excess of $100,000 during
Fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------
ANNUAL COMPENSATION AWARDS
--------------------------- ----------------
(A) (B) (C) (D) (G)
- ------------------------------------------ -------- --------- ------ ----------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)(1)
- ------------------------------------------ -------- --------- ------ ----------------
<S> <C> <C> <C> <C>
Norman Mackinnon (2)(3) 1995 $160,185 $0 0
former Chairman of the Board, President 1994 128,829 0 0
and Chief Executive Officer 1993 127,423 0 0
William B. Berens (2) 1995 $106,974 $0 0
former Vice President of Sales 1994 120,245 0 0
1993 120,000 0 0
Gerald S. Eilberg (2) 1995 $102,106 $0 0
Vice President of Finance and 1994 85,612 0 0
Administration and Chief 1993 74,800 0 0
Financial Officer
Larry F. Yeager (2) 1995 $100,522 $0 0
Vice President of Research 1994 97,112 0 0
and Development 1993 89.800 0 0
- ----------------------
</TABLE>
(1) On August 17, 1992, a non-qualified stock option to purchase 20,000 shares
of Common Stock at an exercise price of $1.60 per share was granted to Mr.
Berens. On November 9, 1993 the option granted to Mr. Berens was repriced
by the Board of Directors to an exercise prive of $1.00 per share. See
"Report on Repricing of Options." The option held by Mr. Berens vests
annually over a five-year period commencing one year form its date of
grant. At December 31, 1995, options to purchase 12,000 of the 20,000
shares of Common Stock held by Mr. Berens had vested and 8,000 of the
12,000 shares remained unexercised. The balance of 8,000 shares not vested
have been forfeited due to Mr. Berens leaving the Corporation in October
1995.
(2) On March 1, 1994, the Board of Directors approved the issuance of stock
options to purchase shares of Common Stock at an exercise price of $1.00
per share to all employees of the Corporation who had
7
<PAGE>
vacation pay accrued as of December 31, 1993 ("Vacation Options"). The
Vacation Options were issued to employees of the Corporation at the rate of
one share per $1.00 of accrued vacation pay. Under this arrangement,
Messrs. Mackinnon, Berens, Eilberg and Yeager were issued options to
purchase 33,714, 1,921, 2,229 and 12,088 shares of Common Stock,
respectively. In March 1994, 115,600, 5,921, 32,065 and 53,655 shares of
Common Stock were issued to Messrs. Mackinnon, Berens, Eilberg and Yeager
respectively, in exchange for promissory notes tendered in accordance with
the Corporation's 1994 cashless stock option exercise program. Mr. Berens
returned his shares and the promissory note was voided when he left the
Corporation in October 1995.
(3) On February 4, 1993, warrants to purchase 150,000 additional shares of
Common Stock at an exercise price of $1.60 per share were issued to Mr.
Mackinnon in exchange for $240,000 of additional cash collateralization
provided by him to the Corporation's primary lender. On November 9, 1993,
the Board of Directors cancelled the outstanding warrants previously issued
to Mr. Mackinnon on August 6, 1991 and February 4, 1993, and issued him a
new warrant to purchase 440,000 shares of Common Stock at an exercise price
of $1.00 per share. The exercise price of the warrants issued to Mr.
Mackinnon on November 9, 1993 was adjusted to comport with the repricing of
options by the Board of Directors.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
-------------------- ------------ ------------ ----------------- -----------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
VALUE AT FY-END EXERCISABLE/
SHARES ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE ($) UNEXERCISABLE ($) (1)
- --------------------- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Norman Mackinnon 0 0 60/117,292 30/58,646
William B. Berens 0 0 8,000/0 $ 4,000/0
Gerald S. Eilberg 0 0 60/52,234 $30/26,117
Larry F. Yeager 0 0 60/47,393 $30/23,965
- ---------------------------
</TABLE>
(1) In-the-Money options are those options for which the fair market value of
the underlying shares of Common Stock is greater than the exercise price of
the option. As of December 31, 1995, Messrs. Mackinnon, Berens, Eilberg
and Yeager had exercisable options to purchase 60, 8,000, 60 and 60 shares
of Common Stock at a per share exercise price of $1.00. The fair market
value of the Corporation's Common Stock underlying the options as of
December 31, 1995 was $1.50 (National Quotation Bureau closing bid price on
December 31, 1995).
COMPENSATION OF DIRECTORS
The Corporation's non-employee Directors receive an annual retainer of
$3,000 and $500 for each meeting of the Board of Directors attended in person.
During Fiscal 1995, Mr. Ward received an aggregate of $35,000 for his services
rendered as a Director for the years from 1987
8
<PAGE>
up to and including 1995, and Mr. Smart received an aggregate of $23,000 for his
services rendered as a Director for the years from 1990 up to and including
1995.
REPORT ON REPRICING OF OPTIONS
On November 9, 1993, the Board of Directors approved the repricing of
options, including options held by Messrs. Mackinnon and Berens, that had been
granted previously pursuant to the Corporation's 1986 and 1989 Stock Option
Plans. All outstanding options that carried an exercise price greater than $1.00
per share were repriced at $1.00 per share. With the exception of the decrease
in the per share exercise price, all other terms of the previously granted
options, including original vesting provisions, remained unchanged.
The Board of Directors approved the repricing of options to reflect the
fair market value of the Corporation's Common Stock based on its current trading
activities and to strengthen employee morale by providing an increased incentive
for all employees to continue their efforts. At its meeting on November 9, 1993,
the Board noted that since 1990 the Corporation's employees had struggled
through difficult circumstances, including a period of reduced and/or deferred
pay as well as increased responsibilities that resulted from a general reduction
in staff. Due to these financial sacrifices and intense efforts by the
Corporation's employees, the Board announced at its meeting that the condition
of the Corporation had been transformed from significant losses to
profitability. The Board believes that its repricing of options has accelerated
the Corporation in its efforts to achieve its ultimate goal of regaining and
building value for its stockholders.
9
<PAGE>
PROPOSAL NO. 2
PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO EXECUTE,
AT THEIR DISCRETION, AN AMENDMENT TO THE CORPORATION'S CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
GENERAL
On August 15, 1996, the Board of Directors adopted a resolution proposing
that the Corporation seek authorization from its shareholders to execute, at the
Board's discretion, an amendment to the Certificate of Incorporation of the
Corporation (the "Certificate") to effect a reverse stock split in the ratio of
approximately 1:2 of the presently issued and outstanding shares of the
Corporation's Common Stock (the "Reverse Split"). The Board may, at its
discretion, reduce or increase the ratio of the Reverse Split depending upon the
extent of the split necessary to accomplish the purpose of the Reverse Split, as
described below. If this proposal is approved by the requisite vote of the
Corporation's stockholders and the Board decides to execute the Reverse Split,
upon the filing of an amendment to the Certificate with the Delaware Secretary
of State (the "Amendment"), the Reverse Split will be deemed effective, and each
certificate representing shares of Common Stock outstanding immediately prior to
the Reverse Split (the "Old Shares") will be deemed automatically, without any
action on the part of the stockholders, to represent the number of shares of
Common Stock that remains after giving effect to the Reverse Split (the "New
Shares"); provided, however, that no fractional New Shares will be issued as a
result of the Reverse Split. In lieu thereof, each stockholder whose Old Shares
are not evenly divisible by the denominator of the Reverse Split will receive
one additional New Share for the fractional New Share that such stockholder
would otherwise be entitled to receive as a result of the Reverse Split. After
the Reverse Split becomes effective, stockholders will be asked to surrender
certificates representing Old Shares in accordance with the procedures set forth
in a letter of transmittal to be sent by the Corporation. Upon such surrender, a
certificate representing the New Shares will be issued and forwarded to the
stockholders. However, each certificate representing Old Shares will continue to
be valid and represent New Shares equal to the number of Old Shares divided by
the denominator for the Reverse Split (plus one additional New Share where such
Old Shares are not evenly divisible by such denominator).
The number of shares of Common Stock authorized by the Certificate will be
reduced proportionately as a result of the proposed Reverse Split, from
10,000,000 to approximately 5,000,000. The number of shares of Common Stock
into which each share of Series B Stock is convertible will also be reduced from
667 to approximately 334. The Common Stock issued pursuant to the Reverse Split
will be fully paid and nonassessable. Except as described above, the voting and
other rights that presently characterize the Common Stock will not be altered by
the Reverse Split.
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<PAGE>
PURPOSES OF THE PROPOSED REVERSE SPLIT
The Board of Directors believes the Reverse Split is desirable for several
reasons, but the primary one is to qualify for listing on the NASDAQ SmallCap
Market System ("NASDAQ"). Currently, the Corporation's shares of Common Stock
are traded on the National Association of Securities Dealers ("NASD") Electronic
Bulletin Board, more commonly referred to as the "pink sheets." The Corporation
has applied for listing on NASDAQ and believes it currently meets every
requirement except for the minimum stock price requirement of $3.00 per share.
It may be necessary to reverse split the Common Stock to increase the price per
share above the minimum stock price and to thereby better enable the Corporation
to qualify for listing on NASDAQ.
The Reverse Split should also enhance the acceptability and marketability
of the Common Stock by the financial community and investing public. A variety
of brokerage house policies and practices tends to discourage dealing with lower
priced stocks. These policies and practices pertain, in part, to the payment of
brokers' commissions and to time-consuming procedures that function to make the
handling of lower priced stocks economically unattractive to brokers. In
addition, the structure of trading commissions also tends to have an adverse
impact upon holders of lower priced stock because the brokerage commission on a
sale of lower priced stock generally represents a higher percentage of the sales
price than the commission on a relatively higher priced issue. The Board of
Directors believes that the proposed Reverse Split should result in a price
level for the Common Stock that will reduce, to some extent, the effect on the
Common Stock of the above-referenced policies and practices of brokerage firms
and diminish the adverse impact of trading commissions on the market for the
Common Stock. (Any reduction in brokerage commissions resulting from a Reverse
Split may be offset, however, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling "odd lots" created by
the Reverse Split.) The expected increased price level may also encourage
interest and trading in the Common Stock and possibly promote greater liquidity
for the Corporation's stockholders.
However, no assurance can be given that any or all of these effects will
occur; including, without limitation, that the market price per New Share of
Common Stock after the Reverse Split will be equal to the factor of the Reverse
Split, or approximately two times the market price per Old Share of Common Stock
before the Reverse Split, or that such price will either exceed or remain in
excess of the current market price. Further, no assurance can be given that the
market for the Common Stock will be improved. Stockholders should note that the
Board of Directors cannot predict what effect the Reverse Split will have on the
market price of the Common Stock.
CHANGES AFFECTING CAPITAL STOCK
Assuming a Reverse Split of 1:2, the par value of the Common Stock will be
increased from $.02 to $.04 per share following the Reverse Split, and the
number of shares of Common Stock authorized and outstanding will be reduced from
10,000,000 to 5,000,000 and from 4,952,585 to 2,476,293 respectively. Also, the
number of shares of Common Stock into which each share of Preferred
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<PAGE>
Stock is convertible will be reduced from 667 to 334.
The Common Stock is currently registered under Section 12(b) of the
Exchange Act, and, as a result, the Corporation is subject to the periodic
reporting and other requirements of the Exchange Act. The Reverse Split will not
affect the registration of the Common Stock under the Exchange Act.
IMPLEMENTATION OF REVERSE SPLIT
The Reverse Split will be effected by filing the Amendment to the
Certificate with the Delaware Secretary of State. Assuming approval of the
Reverse Split by the requisite vote of the stockholders and the decision by the
Board to execute the Reverse Split, the Amendment to the Certificate will
thereafter be filed with the Delaware Secretary of State as promptly as
practicable and the Reverse Split will become effective on the date of such
filing (the "Reverse Split Effective Date"). Without any further action on the
part of the Corporation or the stockholders, after the Reverse Split Effective
Date, the certificates representing Old Shares will be deemed to represent New
Shares equal to the number of Old Shares divided by the denominator for the
Reverse Split (plus one additional New Share where such Old Shares are not
evenly divisible by such denominator).
As soon as practicable after the Reverse Split Effective Date, the
Corporation will send a letter of transmittal to each holder of record of Old
Shares of Common Stock outstanding on the Reverse Split Effective Date. The
letter of transmittal will contain instructions for the surrender of
certificate(s) representing such Old Shares to American Stock Transfer & Trust
Company, the Corporation's exchange agent (the "Exchange Agent"). Upon proper
completion and execution of the letter of transmittal and return thereof to the
Exchange Agent, together with the certificate(s) representing Old Shares, a
stockholder will be entitled to receive a certificate representing the number of
New Shares of Common Stock into which his Old Shares have been reclassified and
changed as a result of the Reverse Split.
Stockholders should not submit any certificates until requested to do so.
No new certificate will be issued to a stockholder until he has surrendered his
outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the Exchange Agent.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The Corporation has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Split. The Corporation believes, however, that
because the Reverse Split is not part of a plan to periodically increase a
stockholder's proportionate interest in the assets or earnings and profits of
the Corporation, the Reverse Split will have the following federal income tax
effects:
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<PAGE>
1. A stockholder will not recognize gain or loss on the exchange. In the
aggregate, the stockholder's basis in the New Shares will equal his basis
in the Old Shares.
2. A stockholder's holding period for the New Shares will be the same as the
holding period of the Old Shares exchanged therefor.
3. The Reverse Split will constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, and
the Corporation will not recognize any gain or loss as a result of the
Reverse Split.
MISCELLANEOUS
The Board of Directors may abandon the proposed Reverse Split at any time
prior to the Reverse Split Effective Date if for any reason the Board of
Directors deems it advisable to abandon the proposal. The Board of Directors
may consider abandoning the proposed Reverse Split if the Corporation's NASDAQ
listing application has already been approved or it determines, in its sole
discretion, that the Reverse Split is not in the best interests of the
Corporation at this time. The Board of Directors may make any and all changes
to the Amendment to the Certificate that it deems necessary to file the
Amendment to the Certificate with the Delaware Secretary of State and give
effect to the Reverse Split.
RECOMMENDATION AND VOTE
The Board of Directors believes that the proposed reverse stock split is
advisable and in the best interests of the Corporation. Accordingly, the Board
of Directors recommends a vote FOR the approval of Proposal No. 2.
PROPOSAL NO. 3
PROPOSAL TO APPROVE AN AMENDMENT TO THE CORPORATION'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL
On July 25, 1996, the Board of Directors adopted a resolution proposing
that the Certificate be amended to increase the total number of shares of Common
Stock that the Corporation is authorized to issue, without regard to the Reverse
Split, from 10,000,000 shares to 20,000,000 shares, $.02 par value per share. If
the Reverse Split is implemented, the increase in authorized shares would be
from the authorized shares resulting from the Reverse Split, or approximately
5,000,000, to an amount that is approximately twice the amount of such resulting
shares, or approximately 10,000,000.
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<PAGE>
PURPOSES
During 1996, the Corporation completed two Series B Stock financings (the
"Series B Financings"). The net proceeds of the Series B Financings have been,
and will continue to be, used by the Corporation for general working capital
purposes.
As a result of the Series B Financings, the number of shares of Common
Stock outstanding and reserved for issuance upon conversion of the Series B
Stock and upon the exercise of all of the Corporation's outstanding options and
warrants will be close to total amount currently authorized. In addition to the
4,200 shares of Series B Stock, which are convertible into an aggregate of
2,801,400 shares of Common Stock, 4,952,585 shares of Common Stock were issued
and outstanding, and options and warrants to purchase an aggregate of 1,845,774
shares of Common Stock were issued as of September 1, 1996. The primary purpose
of this proposal is to prevent a potential shortfall in the number of authorized
shares of Common Stock. If this proposal is approved, the Corporation will have
a sufficient number of authorized and unissued shares to fulfill its potential
obligations under the outstanding Series B Stock, options, and warrants plus an
additional 10,400,241 authorized and unissued shares prior to giving effect to
the Reverse Split (or approximately 5,200,120 after giving effect to the Reverse
Split).
The Board of Directors believes that it is prudent to have additional
shares of Common Stock available for general corporate purposes, including
acquisitions, equity financings, grants of stock options and recapitalizations,
which will be able to be done expediently if such increase is approved by the
stockholders at this meeting. As a stockholder vote is required to increase the
number of authorized shares of Common Stock and, given the time and expense
normally required to complete a proxy solicitation, such an increase is unlikely
to be completed expediently in the future. The Board of Directors will determine
whether, when and on what terms the issuance of shares of Common Stock may be
warranted in connection with any of the foregoing purposes.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock will give the Corporation greater flexibility
by allowing shares of Common Stock to be issued by the Board of Directors
without the delay and expense of a special meeting of stockholders. For example,
the Board of Directors may deem it appropriate to make a private or public
offering of the Corporation's Common Stock, or the Common Stock may be issued to
finance possible future acquisitions, or for distribution to the Corporation's
stockholders in the event of a stock dividend or stock split, or for
distribution pursuant to employee benefit plans. At this time, however, the
Board of Directors has not proposed any plans for any such offerings
acquisitions, dividends or distributions.
MISCELLANEOUS
Stockholders of the Corporation do not now have preemptive rights to subscribe
for or purchase additional shares of Common Stock, and the stockholders will
have no preemptive
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<PAGE>
rights to subscribe for or purchase any of the authorized shares of Common Stock
that will be available for issuance as a result of the increase in the number of
authorized shares of Common Stock.
If the proposed amendment is adopted, the authority of the Board of
Directors to issue the authorized but unissued shares of Common Stock might have
the effect of discouraging an attempt by another person or entity to effect a
takeover or otherwise gain control of the Corporation since the issuance of
additional shares of Common Stock would dilute the voting power of the Common
Stock then outstanding.
IMPLEMENTATION
If the proposed amendment is adopted by the stockholders, it will become
effective upon the filing and recording of a Certificate of Amendment as
required by the General Corporation Law of Delaware.
RECOMMENDATION AND VOTE
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is advisable and in the best interests of the
Corporation. Accordingly, the Board of Directors recommends a vote FOR the
approval of Proposal No. 3.
PROPOSAL NO. 4
PROPOSAL TO APPROVE THE CORPORATION'S 1995 STOCK
OPTION PLAN, UNDER WHICH 500,000 SHARES OF COMMON
STOCK HAVE BEEN RESERVED FOR ISSUANCE
On October 6, 1995, the Board of Directors proposed and approved a 1995
Stock Option Plan (the "Plan"), under which 500,000 shares of Common Stock, were
reserved for issuance. As of September 1, 1996, the Stock Option Committee of
the Board of Directors has granted 345,000 options under the Plan and the Board
believed that these options were granted in order to retain and motivate the
management of the Corporation.
THE PLAN
Options under the Plan may be either "incentive stock options" ("ISOs")
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options. Incentive stock options may be
granted only to employees of the Corporation, while non-qualified options may be
issued to non-employee Directors, employees, consultants and any other non-
employee of the Corporation.
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<PAGE>
The Plan is administered by the Corporation's Stock Option Committee of the
Board of Directors. Options may be granted to Directors who are not members of
the Stock Option Committee.
The per share exercise price of the Common Stock subject to ISOs granted
pursuant to the Plan may not be less than the fair market value of the Common
Stock on the date the option is granted. Pursuant to the Plan, non-qualified
options may be granted by the Board of Directors, except that the Corporation
may not grant non-qualified options at an exercise price of less than the lesser
of (i) the book value per share of the Common Stock as of the end of the fiscal
year immediately preceding the date of such grant, or (ii) 50% of the fair
market value per share of Common Stock on the date of such grant. The Plan
provides that the aggregate fair market value (determined as of the date the
option is granted) of the Common Stock that first becomes exercisable by any
employee in any one calendar year pursuant to the exercise of ISOs may not
exceed $100,000. No person who owns, directly or indirectly, at the time of the
granting of an ISO to him or her, more than 10% of the total combined voting
power of all classes of stock of the Corporation (a "10% Stockholder") shall be
eligible to receive any ISOs under the Plan unless the option price is at least
110% of the fair market value of the Common Stock subject to the option,
determined on the date of the grant.
No ISO may be transferred by an optionee other than by will or the laws of
descent and distribution, and during the lifetime of an optionee, the option
will be exercisable only by him or her. If an optionee who receives and ISO (an
"ISO Optionee") ceases to be employed by the Corporation, other than by reason
of death or disability, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate after the passage of 60 days
from the date of termination of employment, but in no event later than on their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into non-qualified options at the
written request of the optionee and in the discretion of the Board of Directors.
If an ISO Optionee ceases to be employed by the Corporation by reason of death
or disability, his or her ISO may be exercised, to the extent of the number of
shares which could have been exercised by the ISO Optionee on the date of his or
her death or disability, by the optionee, the optionee's estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws of
descent and distribution, at any time prior to the ISO's specified expiration
date.
Options under the Plan must be granted within ten years from the effective
date of the Plan. The ISOs granted under the Plan cannot be exercised more than
ten years from the date of grant except that ISOs issued to a 10% stockholder
are limited to a term of no more than five years.
All options granted under the Plan provide for the payment of the exercise
price in cash or by delivery to the Corporation of shares of Common Stock
already owned by the optionee having a fair market value equal to the exercise
price of the options being exercised, or by a combination of such methods of
payment. Therefore, an optionee may be able to tender shares
16
<PAGE>
of Common Stock to purchase additional shares of Common Stock and may
theoretically exercise all of his stock options with no additional investment
other than his or her original shares.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed with the Corporation become available once again for
issuance.
FEDERAL INCOME TAX CONSEQUENCES
Under the Plan, no tax obligation will arise for the optionee or the
Corporation upon the granting of ISOs, or non-qualified stock options whose
exercise price is equal to or greater than fair market value. Upon exercise of
a non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the excess, if any, of the fair market value, on the date of
exercise, of the stock acquired over the exercise price of the option.
Thereupon, the Corporation will be entitled to a tax deduction (as a
compensation expense) in an amount equal to the ordinary income recognized by
the optionee. Any additional gain or loss realized by an optionee on
disposition of the stock generally will be capital gain or loss to the optionee
and will not result in any additional tax deduction to the Corporation. The
taxable event arising from exercise of non-qualified stock options by officers
of the Corporation subject to Section 16(b) of the Exchange Act occurs on the
later of the date on which the option is exercised or the date six months after
the date the option was granted unless the optionee elects, within thirty (30)
days of the date of exercise, to recognize ordinary income as of the date of
exercise. The income recognized at the end of any deferred period will include
any appreciation in the value of the stock during that period and the capital
gain holding period will not begin to run until the completion of such period.
Upon the exercise of an ISO, an optionee recognizes no immediate taxable
income. The tax cost is deferred until the optionee ultimately sells the shares
of stock. If the optionee does not dispose of the option shares within two
years from the date the option was granted and within one year after the
exercise of the option, and the option is exercised no later than three months
after the termination of the optionee's employment, the gain on the sale will be
treated as long term capital gain. Subject to the limitations in the Plan,
certain of these holding periods and employment requirements are liberalized in
the event of the optionee's death or disability while employed by the
Corporation. The Corporation is not entitled to any tax deduction, except that,
if the stock is not held for the full term of the holding period outlined above,
the gain on the sale of such stock, which will be the lesser of (i) the fair
market value of the stock on the date of exercise minus the option price, or
(ii) the amount realized on disposition minus the option price, will be taxed to
the optionee as ordinary income and the Corporation will be entitled to a
deduction in the same amount. Any additional gain or loss realized by an
optionee upon disposition of the stock prior to the expiration of the full term
of the holding period outlined above, generally will be capital gain or loss to
the optionee and will not result in any additional tax deduction to the
Corporation. The "spread" upon exercise of an ISO constitutes a tax preference
item within the computation of the "alternative minimum tax" under the Code.
The
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<PAGE>
tax benefits which might otherwise accrue to an optionee may be affected by
the imposition of the alternative minimum tax if applicable to the optionee's
individual circumstances.
OPTION GRANTS UNDER THE PLAN
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, all current executive officers as a
group, all current non-executive Directors as a group, and all current employees
as a group, and the number of shares of Common Stock underlying options that
have been granted pursuant to the Plan.
NUMBER OF SECURITIES
NAME AND POSITIONS UNDERLYING OPTIONS
------------------ ------------------
<TABLE>
<CAPTION>
<S> <C>
Norman Mackinnon........................... 0
Former Chairman of the Board, President
and Chief Executive Officer
William B. Berens.......................... 0
Former Vice President of Sales
All current executive officers
as a group............................... 345,000
All non-executive Directors
as a group............................... 0
All employees (except executive officers)
as a group............................... 0
</TABLE>
All of the options granted pursuant to the Plan, as set forth above, are
exercisable at per share prices that range from $1.00 to $1.25 with various
vesting schedules.
EFFECT OF STOCKHOLDER APPROVAL
Pursuant to the terms of the Plan, all provisions relating to ISOs are
subject to the approval of the Corporation's stockholders within 12 months of
the date on which the plan was adopted by the Board of Directors. If the Plan is
not approved by the stockholders at the Special Meeting, all provisions relating
to ISOs will be void. However, all provisions of the Plan, exclusive of those
that relate to ISOs, will remain in full force and effect and the ISOs granted
to executive officers and Directors of the Corporation will automatically
convert into non-qualified options, retroactive to their date of issuance.
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<PAGE>
RECOMMENDATION AND VOTE
The Board of Directors believes that the approval of the Plan is advisable
and in the best interests of the Corporation. Accordingly, the Board of
Directors recommends a vote FOR the approval of Proposal No. 4.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Price Waterhouse LLP,
independent public accountants, to serve as auditors for the fiscal year ending
December 31, 1996. Unless otherwise specified in the proxy, the persons named
in the accompanying form of proxy intend to exercise such proxy to ratify such
selection.
VOTING AT MEETING
The Board of Directors has fixed September 2, 1996, as the record date for
the determination of stockholders entitled to vote at this meeting. At the close
of business on that date, 4,952,585 shares of Common Stock and 4,200 shares of
Series B Stock were outstanding and entitled to vote.
SOLICITATION OF PROXIES
The cost of solicitation of Proxies will be borne by the Corporation. In
addition to the solicitation of Proxies by mail, officers and employees of the
Corporation may solicit in person or by telephone. The Corporation may
reimburse brokers or persons holding stock in their names, or in the names of
their nominees, for their expense in sending Proxies and Proxy material to
beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all Proxies received
by the Corporation will be effective, notwithstanding any transfer of the shares
to which such Proxies relate, unless prior to the meeting the Corporation
receives a written notice of revocation signed by the person who, as of the
record date, was the registered holder of such shares. The Notice of Revocation
must indicate the certificate number or numbers of the shares to which such
revocation relates and the aggregate number of shares represented by such
certificate(s).
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<PAGE>
ANNUAL REPORT
THE CORPORATION IS PROVIDING TO EACH STOCKHOLDER, WITHOUT CHARGE, A COPY OF
THE CORPORATION'S ANNUAL REPORT, INCLUDING THE FINANCIAL STATEMENTS FOR THE
CORPORATION'S MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1995.
MISCELLANEOUS
The management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting,
it is the intention of the person named in the accompanying Proxy to vote, or
otherwise act, in accordance with his judgment on such matters.
By Order of the Board of Directors
MALCOLM M. BIBBY
Chairman
September 6, 1996
THE MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND YOU ARE URGED TO COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN IF THEY HAVE SENT IN THEIR PROXIES.
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<PAGE>
NATIONAL DATACOMPUTER, INC.
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL
MEETING TO BE HELD ON SEPTEMBER 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Malcolm M. Bibby with full power of
substitution to vote for and on behalf of the undersigned at the Special Meeting
in Lieu of Annual Meeting of Stockholders of NATIONAL DATACOMPUTER, INC., to be
held at the offices of the Company, 900 Middlesex Turnpike, Bldg. 5, Billerica,
Massachusetts 01821, on Monday, September 30, 1996 at 10:00 a.m., and at any
adjournment or adjournments thereof, upon and with respect to all shares of the
Common Stock of the Company upon and with respect to which the undersigned would
be entitled to vote and act if personally present. The undersigned hereby
directs the said Malcolm M. Bibby to vote in accordance with his judgment on any
matters which may properly come before the meeting, all as indicated in the
Notice of the meeting, receipt of which is hereby acknowledged, and to act on
the following matters set forth in such Notice as specified by the undersigned:
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3, 4, AND 5.
(1) Proposal to elect three (3) members of the Board of Directors of the
Company.
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE STRIKE
SUCH NOMINEE'S NAME FROM THE LIST BELOW.
[_] FOR ALL nominees listed below (except as marked to the contrary
below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below.
Nominees: Malcolm M. Bibby, William R. Smart, John P. Ward.
(2) Proposal to authorize the Board of Directors to execute, at their
discretion, an amendment to the Company's Certificate of Incorporation
to effect a reverse stock split.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) Proposal to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock.
[_] FOR [_] AGAINST [_] ABSTAIN
(4) Proposal to approve the Company's 1995 Stock Option Plan, under which
500,000 shares of Common Stock have been reserved for issuance.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
(5) Proposal to ratify the selection of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1996.
[_] FOR [_] AGAINST [_] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4, AND 5.
(6) In his discretion to transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR AND IN FAVOR OF THE
ITEMS SET FORTH ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
__ __ Dated:
| | -------------------------------------
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
-------------------------------------
Printed Name
| | -------------------------------------
__ __ Address
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If the person named on the stock certificate has died, please submit
evidence of your authority. If a corporation, please sign in full corporate
name by an authorized officer and indicate the signer's office. If a
partnership, sign in the partnership name by authorized person.
