<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NATIONAL DATACOMPUTER, INC.
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(4)(1) 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> 2
NATIONAL DATACOMPUTER, INC.
900 MIDDLESEX TURNPIKE, BLDG. 5
BILLERICA, MASSACHUSETTS 01821
December 19, 1997
Dear Stockholder:
You are cordially invited to attend the Special Meeting in Lieu of Annual
Meeting of Stockholders of National Datacomputer, Inc. (the "Corporation") to be
held on Friday, January 9, 1998 at 10:00 a.m. at the offices of the Corporation,
900 Middlesex Turnpike, Bldg. 5, Billerica, Massachusetts 01821.
At the Meeting, you will be asked to: (i) elect three (3) members of the
Board of Directors; (ii) approve the Corporation's 1997 Stock Option Plan, under
which 200,000 shares of Common Stock have been reserved for issuance; (iii)
ratify the selection of Price Waterhouse LLP as independent auditors of the
Corporation for the fiscal year ending December 31, 1997; and (iv) 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 Meeting are contained in the
Proxy Statement, which we urge you to consider carefully.
Whether or not you plan to attend the 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 Meeting, you may vote
in person if you wish, even if you have previously returned your Proxy.
Sincerely,
/s/ Malcolm M. Bibby
--------------------
Malcolm M. Bibby
Chairman
<PAGE> 3
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 Friday, January 9, 1998 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 approve the Corporation's 1997 Stock Option Plan, under which
200,000 shares of Common Stock have been reserved for issuance.
3. To ratify the selection of Price Waterhouse LLP as independent auditors
of the Corporation for the fiscal year ending December 31, 1997.
4. 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 December 18, 1997
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 January 9, 1998, 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 Company, 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
/s/ Malcolm M. Bibby
----------------------------------
Malcolm M. Bibby
Chairman
Billerica, Massachusetts
December 19, 1997
<PAGE> 4
NATIONAL DATACOMPUTER, INC.
900 MIDDLESEX TURNPIKE, BLDG. 5
BILLERICA, MASSACHUSETTS 01821
------------------------
PROXY STATEMENT
------------------------
DECEMBER 19, 1997
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 (the "Special
Meeting") to be held at the offices of the Corporation, 900 Middlesex Turnpike,
Bldg. 5, Billerica, Massachusetts 01821 at 10:00 a.m. on Friday, January 9, 1998
and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on December 18, 1997, will
be entitled to vote at the meeting or any adjournment thereof. On that date,
1,555,416 shares of Common Stock, $.08 par value (the "Common Stock"), of the
Corporation were issued and outstanding. The Corporation also had issued and
outstanding as of that date 4,200 shares of Series B Convertible Preferred
Stock, $.001 par value per share (the "Series B Stock"), 900 shares of Series C
Convertible Preferred Stock, $.001 par value per share (the "Series C Stock"),
and 350 shares of Series D Convertible Preferred Stock, $.001 par value per
share (the "Series D Stock" and collectively with the Series B Stock and the
Series C Stock, the "Preferred Stock"). Each share of Series B Stock, Series C
Stock and Series D Stock is convertible into 250, 312.5 and 364.9635 shares of
Common Stock, respectively. Collectively, the Preferred Stock is convertible
into an aggregate of 1,458,987 shares of Common Stock. Each holder of Preferred
Stock is entitled to an amount of votes equal to the number of shares of Common
Stock into which such Preferred 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
5.7% 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 December 19, 1997.
<PAGE> 5
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 five (5) times during the fiscal year ended December 29, 1996
("Fiscal 1996"). Messrs. Malcolm M. Bibby and John P. Ward attended all meetings
of the Board and Mr. William Smart attended all meetings of the Board, except
for one. The Corporation has a standing Audit Committee and a standing Stock
Option Committee, each of which is comprised of Messrs. Smart and Ward. The
Corporation has no standing nominating or compensation committees.
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 OFFICES
DIRECTOR NOMINEE AGE WITH THE CORPORATION DIRECTOR SINCE
- ---------------- --- ---------------------- --------------
<S> <C> <C> <C>
Dr. Malcolm M. Bibby.......... 56 Chairman and President 1996
William R. Smart.............. 77 Director 1989
John P. Ward.................. 69 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 (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 Norman Mackinnon who filed
one late Form 4.
BACKGROUND
The following is a brief summary of the background of each Director nominee
of the Corporation:
DR. MALCOLM M. BIBBY 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. ("LXEI"), 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
2
<PAGE> 6
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
served as the Chief Executive Officer and as a Director of Vanzetti Vision
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 founding until December 1986. Prior to the founding of the Corporation,
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 Master of Science degree in Electrical Engineering
from Northeastern University.
EXECUTIVE OFFICERS
The executive officers of the Corporation, their ages and positions held in
the Corporation are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Malcolm M. Bibby........... 56 President
Richard R. Calcaterra...... 57 Vice President of Sales and Marketing
Gerald S. Eilberg.......... 64 Vice President of Finance and Administration,
Chief Financial Officer
Joseph C. Pinto............ 51 Vice President of Operations
Larry F. Yeager............ 48 Vice President of Research and Development
</TABLE>
BACKGROUND
The following is a brief summary of the background of each executive
officer of the Company other than Dr. Malcolm M. Bibby, whose background is
summarized above.
RICHARD C. CALCATERRA joined the Corporation in September 1996 as Vice
President of Sales and Marketing. Mr. Calcaterra has over twenty six years of
sales/marketing and management experience. Prior to joining the Corporation, he
served as the President and Chief Executive Officer of IMG, a company that
developed and marketed software utilizing radio frequency ("RF") and wireless
technologies. Prior to IMG, Mr. Calcaterra was Vice President of Marketing for
Telxon Corporation ("Telxon"), responsible for worldwide marketing, Channel and
Vertical industry sales and marketing, and product planning and development.
Before joining Telxon, he was Vice President of Sales for Norand Corporation
("Norand"), responsible for the retail division covering North America. Mr.
Calcaterra was Director of Sales for Route Accounting for the central region of
the United States when he first joined Norand. Mr. Calcaterra also spent
thirteen years at Honeywell Inc., with increasing levels of responsibility
including Branch Management. Mr. Calcaterra holds a Bachelor of Science degree
in Business Administration from Chaffey College.
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. From September 1982 to September 1986, he
served as President of Direct Marketing Inc. Previous positions included
Division and Corporate Controller positions with large public companies. Mr.
Eilberg is a graduate of the Boston University School of Management and the
Columbia University Graduate School of Business.
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
3
<PAGE> 7
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 Master of Science degree in Systems Management
from Western New England College.
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
("Saddlebrook"), a turnkey systems company. During eight years at Saddlebrook,
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 Master of Science 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.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of December 18, 1997, 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 Preferred 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)......................... 72,800 2.4%
William R. Smart............................ 2,500 *
John P. Ward(4)............................. 31,368 *
Gerald S. Eilberg(5)........................ 8,032 *
Larry F. Yeager(6).......................... 13,430 *
RBB Bank AG(7).............................. 1,779,613 47.9%
Burgring 16
8010 Graz, Austria
All Directors and officers as a Group
(7 persons)(3)(4)(5)(6)(9)................ 141,021 4.6%
</TABLE>
- ---------------
* Less than 1%
(1) The address for all of the named entities other than RBB Bank 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
Preferred Stock voting as a single class.
(3) Includes an aggregate of 45,250 shares of Common Stock underlying vested
options to purchase Common Stock.
(4) Includes 10,137 shares held by Mr. Ward's wife for which Mr. Ward disclaims
beneficial ownership.
(5) Includes 15 shares of Common Stock underlying vested options to purchase
Common Stock.
4
<PAGE> 8
(6) Includes 15 shares of Common Stock underlying vested options to purchase
Common Stock.
(7) Includes an aggregate of 1,458,987 shares of Common Stock issuable upon
conversion of 5,450 shares of Preferred Stock.
(8) Includes an aggregate of 51,670 shares of Common Stock underlying vested
options to purchase Common Stock held by five of the Corporation's officers.
COMPENSATION OF OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth the compensation paid to Dr. Malcolm M.
Bibby, the Corporation's Chief Executive Officer and President and Mr.
Mackinnon, the Corporation's former Chief Executive Officer and President,
during the fiscal years ended December 29, 1996, December 31, 1995, and December
31, 1994 ("Fiscal 1996, 1995 and 1994", respectively) along with the other
current executive officers of the Corporation who earned total compensation in
excess of $100,000 during Fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
--------------------------- (g)
(a) (b) (c) (d) ---------------------
--- ---- -------- ----- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)
--------------------------- ---- -------- ----- ---------------------
<S> <C> <C> <C> <C>
Dr. Malcolm M. Bibby(1)(2) 1996 $ 72,051 $ 0 118,750
Chairman of the Board, President 1995 0 0 0
and Chief Executive Officer 1994 0 0 0
Norman Mackinnon(3)(4) 1996 $133,715 $ 0 0
Former Chairman of the Board, 1995 160,185 0 0
President and Chief Executive Officer 1994 128,829 0 8,429
Gerald S. Eilberg(1)(3) 1996 $102,106 $ 0 5,000
Vice President of Finance and 1995 102,106 0 0
Administration and Chief Financial Officer 1994 85,612 0 13,616
Larry F. Yeager(1)(3) 1996 $100,522 $ 0 5,000
Vice President of Research 1995 100,522 0 0
and Development 1994 97,112 0 14,870
</TABLE>
- ---------------
(1) On August 1, 1996, Incentive Stock Options to purchase 5,000 shares of
Common Stock at an exercise price of $5.00 were granted to each of Messrs.
Eilberg and Yeager. On February 28, 1996, May 31, 1996 and November 30,
1996, Incentive Stock Options to purchase 5,250, 48,000 and 60,000 shares of
Common Stock, respectively, at an exercise price of $6.00 were granted to
Mr. Bibby. Such options were subsequently repriced on August 14, 1997 at an
exercise price of $1.47 per share. See "Report on Repricing of Options." The
options granted to Messrs. Eilberg and Yeager vest 25% in each of 1998,
1999, 2000 and 2001. The options granted to Dr. Bibby have the following
vesting periods: (i) 6,000 options were fully vested upon grant (ii) 16,250
vested fully in 1996, (iii) 23,750 fully vest in 1997, and (iv) the
remaining 72,750 vest fully in ten years, but contain the following
acceleration clauses: (a) 2,750 will vest 50% if net income before taxes for
the five year period ended December 31, 1999 exceeds $1,000,000 and 100% if
net income for the five year period exceeds $2,000,000; (b) 25,000 will vest
if net income before taxes exceeds $750,000 and sales exceed $8,500,000 in
any four consecutive quarters prior to December 31, 1997; (c) up to 45,000
options will vest if sales during any four consecutive quarters exceed
$8,500,00 and the following amounts of net income before taxes are exceeded:
5
<PAGE> 9
<TABLE>
<CAPTION>
NET INCOME BEFORE TAXES OPTIONS THAT VEST
----------------------- -----------------
<C> <S> <C>
$1,000,000 ............................................. 5,000
1,250,000 ............................................. 10,000
1,500,000 ............................................. 15,000
1,750,000 ............................................. 20,000
2,000,000 ............................................. 27,500
2,250,000 ............................................. 35,000
2,500,000 ............................................. 45,000
</TABLE>
(2) Dr. Bibby commenced employment with the Company in April 1996.
(3) 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 $4.00 per
share to all employees of the Corporation who had vacation pay accrued as of
December 31, 1993 (the "Vacation Options"). The Vacation Options, effective
as of December 31, 1993, were issued to employees of the Corporation at the
rate of one share per $4.00 of accrued vacation pay. Under this arrangement,
Messrs. Mackinnon, Eilberg and Yeager were issued options to purchase 8,429,
558 and 3,022 shares of Common Stock, respectively. In March 1994, 28,900,
8,107 and 13,415 shares of Common Stock were issued to Messrs. Mackinnon,
Eilberg and Yeager, respectively, in exchange for promissory notes tendered
in accordance with the Corporation's 1994 cashless stock option exercise
program.
(4) On April 26, 1996, Mr. Mackinnon resigned as President and Chief Executive
Officer. On July 25, 1996, Mr. Mackinnon resigned as Chairman of the Board
and as a Director.
(5) On March 30, 1994, the Corporation granted options to purchase up to 13,058
and 11,848 shares of Common Stock to Messrs. Eilberg and Yeager,
respectively, at an exercise price of $4.00 per share. Such options were
subsequently repriced on August 14, 1997 to an exercise price of $1.47 per
share. See "Report on Repricing of Options." Such options vest completely 10
years from the date of their grant. Vesting of these options accelerates
prior to December 31, 1999, as follows: (i) 50% vested if net income before
taxes exceeds $1,000,000 or 100% if net income before taxes exceeds
$2,000,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each stock option
granted during the Fiscal 1996 to each of the named executive officers. The
potential realizable values that would exist for the respective options are
based on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date of grant over the full term of the option. Actual gains, if any,
on stock options, exercises and Common Stock holdings are dependent on the
future performance of the Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PER SHARE(2) DATE
---- ---------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Dr. Malcolm M. Bibby..................... 5,250 2.1% $ 1.47 02/28/06
48,000 19.2 1.47 05/31/96
65,500 26.1 1.47 11/30/96
Gerald S. Eilberg........................ 5,000 2.0 1.47 11/30/06
Larry F. Yeager.......................... 5,000 2.0 1.47 11/30/06
</TABLE>
- ---------------
(1) On August 1, 1996, Incentive Stock Options to purchase 5,000 shares of
Common Stock at an exercise price of $5.00 were granted to each of Messrs.
Eilberg and Yeager. On February 28, 1996, May 31, 1996 and November 30,
1996, Incentive Stock Options to purchase 5,250, 48,000 and 60,000, shares
of Common Stock, respectively, at an exercise price of $5.00 were granted to
Mr. Bibby. Such options were subsequently repriced on August 14, 1997 to an
exercise price of $1.47 per share. See "Report on
6
<PAGE> 10
Repricing of Options." The options granted to Messrs. Eilberg and Yeager
vest 25% in each of 1998, 1999, 2000 and 2001. The options granted to Dr.
Bibby have the following vesting periods: (i) 6,000 options were fully
vested upon grant (ii) 16,250 vested fully in 1996, (iii) 23,750 fully vest
in 1997, and (iv) the remaining 72,750 vest fully in ten years, but contain
the following acceleration clauses: (a) 2,750 will vest 50% if net income
before taxes for the five year period ended December 31, 1999 exceeds
$1,000,000 and 100% if net income for the five year period exceeds
$2,000,000; (b) 25,000 will vest if net income before taxes exceeds $750,000
and sales exceed $8,500,000 in any four consecutive quarters prior to
December 31, 1997; (c) up to 45,000 options will vest if sales during any
four consecutive quarters exceed $8,500,00 and the following amounts of net
income before taxes are exceeded:
<TABLE>
<CAPTION>
NET INCOME BEFORE TAXES OPTIONS THAT VEST
----------------------- -----------------
<S> <C>
$1,000,000........................................... 5,000
1,250,000........................................... 10,000
1,500,000........................................... 15,000
1,750,000........................................... 20,000
2,000,000........................................... 27,500
2,250,000........................................... 35,000
2,500,000........................................... 45,000
</TABLE>
(2) The original exercise price was equal to the market value on the date of the
grant. The exercise price was subsequently repriced on August 14, 1997 to be
equal to the market value on the date of the repricing. See "Report on
Repricing of Options." The amounts shown as potential realizable value
illustrate what might be realized upon exercise immediately prior to
expiration of the option term using the 5% and 10% appreciation rates
established in regulations of the Securities and Exchange Commission,
compounded annually. The potential realizable value is not intended to
predict future appreciation of the price of the Company's Common Stock. The
values shown do not consider nontransferability, vesting or termination of
the options upon termination of employment.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED
SECURITIES
UNDERLYING VALUE OF
OPTIONS/ UNEXERCISED
SAR'S IN-THE-MONEY
AT FY-END OPTIONS
VALUE EXERCISABLE/ EXERCISABLE/
SHARES ACQUIRED REALIZED UNEXERCISABLE UNEXERCISABLE
ON EXERCISE ($) (#) ($)(1)
--------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Malcolm M. Bibby................................. 0 $ 0 22,250/96,500 $ 0
Norman Mackinnon................................. 0 0 15/0 0
Gerald S. Eilberg................................ 0 0 15/18,059 0
Larry F. Yeager.................................. 0 0 15/16,848 0
</TABLE>
- ---------------
(1) In-the-Money options are 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 29, 1996, Messrs. Bibby, Mackinnon, Eilberg and
Yeager had exercisable options to purchase 22,250, 15, 15 and 15 shares of
Common Stock, respectively, at share exercise prices of $4.00 to $5.00. The
fair market value of the Corporation's Common Stock underlying the options
as of December 29, 1996 was $4.00 (National Quotation Bureau closing bid
price on December 29, 1996).
7
<PAGE> 11
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 1996, the Corporation's Directors received an aggregate cash
compensation of $13,500 for their services as Directors. Messrs. Ward and Smart
received $5,500 respectively. Dr. Bibby received $2,500 as a Director before
becoming President on April 26, 1996. As President, Dr. Bibby receives no
compensation for being a Director.
REPORT ON REPRICING OF OPTIONS
On August 14, 1997, the Board of Directors approved the repricing of all
options that had been granted previously pursuant to the Corporation's 1986,
1989, 1994 and 1995 Stock Option Plans. All outstanding options of the
Corporation were repriced at $1.47 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 August 14, 1997,
the Board noted that the options were significantly out-of-the-money and,
therefore, ceased to be an employee incentive. The Board believes that the
repricing will renew the incentive feature.
BOARD OF DIRECTORS
PROPOSAL NO. 2
PROPOSAL TO APPROVE THE CORPORATION'S 1997 STOCK
OPTION PLAN, UNDER WHICH 200,000 SHARES OF COMMON
STOCK HAVE BEEN RESERVED FOR ISSUANCE
On August 19, 1997, the Board of Directors proposed and approved a 1997
Stock Option Plan (the "Plan"), under which 200,000 shares of Common Stock, were
reserved for issuance.
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.
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.
8
<PAGE> 12
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 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.
9
<PAGE> 13
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 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.
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.
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. 2.
PROPOSAL NO. 3
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 28, 1997. Unless otherwise specified in the proxy, the persons named in
the accompanying form of proxy intend to exercise such proxy to ratify such
selection. A representative of Price Waterhouse, LLP is expected to be present
at the Special Meeting in Lieu of Annual Meeting.
VOTING AT MEETING
The Board of Directors has fixed December 18, 1997, as the record date for
the determination of stockholders entitled to vote at this meeting. At the close
of business on that date, 1,555,416 shares of Common Stock, 4,200 shares of
Series B Stock, 900 shares of Series C Stock and 350 shares of Series D 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).
10
<PAGE> 14
STOCKHOLDER PROPOSALS
In order to be included in proxy material for the 1998 Annual Meeting,
tentatively scheduled for June 11, 1998, Stockholders' proposed resolutions must
be received by the Corporation on or before February 12, 1998. The Corporation
suggests that proponents submit their proposals by certified mail, return
receipt requested, addressed to the President of the Corporation.
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 29, 1996.
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
/s/ Malcolm M. Bibby
----------------------------------
MALCOLM M. BIBBY
Chairman
December 19, 1997
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.
11
<PAGE> 15
NATIONAL DATACOMPUTER, INC.
1997 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Plan is to encourage and enable employees, consultants,
directors and others who are in a position to make significant contributions to
the success of National Datacomputer, Inc. (the "Corporation") upon whose
judgment, initiative and efforts the Corporation depends for the successful
conduct of its business, to acquire a closer identification of their interests
with those of the Corporation by providing them with opportunities to purchase
stock in the Corporation pursuant to options granted hereunder, thereby
stimulating their efforts on behalf of the Corporation and strengthening their
desire to remain involved with the Corporation.
ARTICLE II
DEFINITIONS
2.1 "Affiliated Corporation" means any stock corporation of which a
majority of the voting common or capital stock is owned directly or indirectly
by the Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation or, if one or
more has been appointed, a Committee of the Board of Directors of the
Corporation.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.5 "Committee" means a Committee composed solely of two or more
Non-Employee Directors appointed by the Board to administer the Plan.
2.6 "Corporation" means National Datacomputer, Inc., a Delaware
corporation, or its successor.
2.7 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated Corporation on or after the
effective date of the Plan.
2.8 "Incentive Stock Option" ("ISO") means an option that qualifies as an
incentive stock option as defined in Section 422 of the Code, as amended.
2.9 "Non-Employee Director" means (unless otherwise provided under Rule
16b-3 of the Securities Exchange Act of 1934) a member of the Board who (i) is
not currently an officer or Employee of the Corporation; (ii) does not receive
direct or indirect compensation from the Corporation or a parent or subsidiary
of the Corporation as a consultant or in any other capacity (except as a
Director) in an amount of more than $60,000 per year; (iii) does not possess an
interest in any other transaction for which proxy statement disclosure would be
required under Regulation S-K Item 404(a) (generally, transactions with the
Corporation involving an amount in excess of $60,000); and (iv) who is not
engaged in a business relationship with the Corporation for which disclosure
would be required pursuant to Regulation S-K Item 404(b) (generally involving,
among others, payments or indebtedness in excess of five percent of the
Corporation's or another entity's gross revenues or total assets, depending on
the transaction at issue).
2.10 "Non-Qualified Option" means any option not intended to qualify as an
Incentive Stock Option.
2.11 "Option" means an Incentive Stock Option or Non-Qualified Option
granted by the Board under Article V of this Plan in the form of a right to
purchase Stock evidenced by an instrument containing such provisions as the
Board may establish. Except as otherwise expressly provided with respect to an
Option grant, no Option granted pursuant to the Plan shall be an Incentive Stock
Option.
<PAGE> 16
2.12 "Participant" means a person selected by the Board or by the
Committee to receive an award under the Plan.
2.13 "Plan" means this 1997 Stock Option Plan.
2.14 "Restricted Period" means the period of time selected by the
Committee during which an award may be forfeited by the Participant.
2.15 "Stock" means either the Voting Common Stock, $.08 par value per
share, of the Corporation or any successor, including any adjustments in the
event of changes in capital structure of the type described in Article X.
ARTICLE III
ADMINISTRATION OF THE PLAN
3.1 Administration by Board. This Plan shall be administered by the Board
of Directors of the Corporation. The Board may, from time to time, in its
discretion delegate any of its functions under this Plan to one or more
Committees. All references in this Plan to the Board shall also include the
Committee or Committees, if one or more have been appointed by the Board. From
time to time the Board may increase the size of the Committee or committees and
appoint additional Non-Employee Directors as members thereto, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee or committees
and thereafter directly administer the Plan. No member of the Board or a
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any options granted under it.
If a Committee is appointed by the Board, a majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
under the Plan shall be made by a majority of its members and may be made
without notice or meeting of the Committee by a writing signed by a majority of
Committee members.
3.2 Powers. The Board of Directors and/or any Committee appointed by the
Board shall have full and final authority to operate, manage and administer the
Plan on behalf of the Corporation. This authority includes, but is not limited
to:
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of any instruments
evidencing Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the
incentive features of the Plan, and otherwise to prescribe and rescind
regulations for interpretation, management and administration of the Plan,
(e) The power to delegate responsibility for Plan operation,
management and administration on such terms, consistent with the Plan, as
the Board may establish,
(f) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's purpose, and
(g) The power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purpose, including but not
limited to, banks, insurance companies, brokerage firms and consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of the
Corporation, the Board or any Committee appointed by it shall have full and
final authority in its discretion: (a) to determine the number of shares of
Stock subject to each Option; (b) to determine the time or times at which
Options will be granted; (c) to determine the option price of the shares of
Stock subject to each Option, which price shall be
2
<PAGE> 17
not less than the minimum price specified in Article V of this Plan; (d) to
determine the time or times when each Option shall become exercisable and the
duration of the exercise period (including the acceleration of any exercise
period), which shall not exceed the maximum period specified in Article V; (e)
to determine whether each Option granted shall be an Incentive Stock Option or a
Non-Qualified Option; and (f) to waive, generally and in particular instances,
compliance by a Participant with any obligation to be performed by him under an
Option, to waive any condition or provision of an Option, and to amend or cancel
any Option (and if an Option is canceled, to grant a new Option on such terms as
the Board may specify), except that the Board may not take any action with
respect to an outstanding option that would adversely affect the rights of the
Participant under such Option without such Participant's consent. Nothing in the
preceding sentence shall be construed as limiting the power of the Board to make
adjustments required by Article X.
In no event may the Corporation grant any Employee an Incentive Stock
Option that is first exercisable during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted) exceeds $100,000 (under all stock option plans of the Corporation and
any Affiliated Corporation); provided, however, that this paragraph shall have
no force and effect if its inclusion in the Plan is not necessary for Incentive
Stock Options issued under the Plan to qualify as such pursuant to Section
422(d)(1) of the Code.
ARTICLE IV
ELIGIBILITY
4.1 Eligible Employees. All Employees (including Directors who are
Employees) are eligible to be granted Incentive Stock Option and Non-Qualified
Option Awards under this Plan. Incentive Stock Options shall be granted only to
Employees.
4.2 Consultants, Directors and other Non-Employees. Any consultant,
Director (whether or not an Employee) and any other non-employee is eligible to
be granted Non-Qualified Option Awards under the Plan, provided the person has
not irrevocably elected to be ineligible to participate in the Plan.
4.3 Relevant Factors. In selecting individual Employees, consultants,
Directors and other non-employees to whom Awards shall be granted, the Board
shall weigh such factors as are relevant to accomplish the purpose of the Plan
as stated in Article I. An individual who has been granted an Award may be
granted one or more additional Awards, if the Board so determines. The granting
of an Award to any individual shall neither entitle that individual to, nor
disqualify him from, participation in any other grant of Awards.
ARTICLE V
STOCK OPTION AWARDS
5.1 Number of Shares. Subject to the provisions of Article X of this
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed 200,000 shares. The shares to be delivered upon
exercise of Options under this Plan shall be made available, at the discretion
of the Board, either from authorized but unissued shares or from previously
issued and reacquired shares of Stock held by the Corporation as treasury
shares, including shares purchased in the open market.
Stock issuable upon exercise of an Option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
5.2 Effect of Expiration, Termination or Surrender. If an Option under
this Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Corporation shall reacquire any unvested shares issued pursuant to
Options under the Plan, such shares shall thereafter be available for the
granting of other Options under this Plan, subject to the limits set forth in
Section 5.1 hereof.
5.3 Term of Options. The full term of each Option granted hereunder shall
be for such period as the Board shall determine. In the case of Incentive Stock
Options granted hereunder, the term shall not exceed
3
<PAGE> 18
ten (10) years from the date of granting thereof. Each Option shall be subject
to earlier termination as provided in Sections 6.3 and 6.4. Notwithstanding the
foregoing, the term of Options intended to qualify as Incentive Stock Options
shall not exceed five (5) years from the date of granting thereof if such Option
is granted to any Employee who at the time such Option is granted owns, directly
or indirectly, or is deemed to own by reason of the attribution rules set forth
in Section 425(d) of the Code, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation and its Affiliated
Corporations (a "Ten-Percent Shareholder").
5.4 Option Price. The Option price shall be determined by the Board at
the time any Option is granted. In the case of Incentive Stock Options, the
exercise price shall not be less than 100% of the fair market value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par value), provided that no Incentive Stock Option shall be
granted hereunder to any Employee who is a Ten-Percent Shareholder unless the
Incentive Stock Option price equals not less than 110% of the fair market value
of the shares covered thereby at the time the Incentive Stock Option is granted.
5.5 Fair Market Value. If, at the time an Option is granted under the
Plan, the Corporation's Stock is publicly traded, then "fair market value" shall
be determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded on a national securities exchange; or (ii)
the last reported sale price (on that date) of the Stock on the NASDAQ National
Market List, if the Stock is not then traded on a national securities exchange;
or (iii) the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Stock is not reported on the NASDAQ National Market List. However, if the
Stock is not publicly traded at the time an Option is granted under the Plan,
"fair market value" shall be deemed to be the fair value of the Stock as
determined in good faith by the Board after taking into consideration all
factors that it deems appropriate, including without limitation, recent sale and
offer prices of the Stock in private transactions negotiated at arm's length.
5.6 Non-Transferability of Options. No Option granted under this Plan
shall be transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
5.7 Foreign Nationals. Awards may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
ARTICLE VI
EXERCISE OF OPTION
6.1 Exercise. Each Option granted under this Plan shall be exercisable on
such date or dates and during such period and for such number of shares as shall
be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise of any
option, provided that, the Board shall not accelerate the exercise date of any
Incentive Stock Option granted if such acceleration would violate the annual
vesting limitation contained in Section 422(d)(1) of the Code.
6.2 Notice of Exercise. A person electing to exercise an Option shall
give written notice to the Corporation of such election and of the number of
shares he or she has elected to purchase and shall at the time of exercise
tender the full purchase price of the shares he or she has elected to purchase.
The purchase price can be paid partly or completely in shares of the
Corporation's stock valued at Fair Market Value as defined in Section 5.5
hereof, or by any such other lawful consideration as the Board may determine.
Until such person has been issued a certificate or certificates for the shares
so purchased, he or she shall possess no rights of a record holder with respect
to any of such shares.
4
<PAGE> 19
6.3 Option Unaffected by Change in Duties. No Incentive Stock Option
(and, unless otherwise determined by the Board of Directors, no Non-Qualified
Option granted to a person who is, on the date of the grant, an Employee of the
Corporation or an Affiliated Corporation) shall be affected by any change of
duties or position of the optionee (including transfer to or from an Affiliated
Corporation), so long as he or she continues to be an Employee. Employment shall
be considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Board shall not be considered an interruption of employment under the Plan,
provided that such written approval contractually obligates the Corporation or
any Affiliated Corporation to continue the employment of the optionee after the
approved period of absence.
If the optionee shall cease to be an Employee for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights, if any, which have accrued as of the date of such cessation;
provided that (i) the Board may provide in the instrument evidencing any Option
that the Board may in its absolute discretion, upon any such cessation of
employment, determine (but be under no obligation to determine) that such
accrued purchase rights shall be deemed to include additional shares covered by
such Option; and (ii) unless the Board shall otherwise provide in the instrument
evidencing any Option, upon any such cessation of employment, such remaining
rights to purchase shall in any event terminate upon the earlier of (A) the
expiration of the original term of the Option; or (B) where such cessation of
employment is on account of disability, the expiration of one year from the date
of such cessation of employment and, otherwise, the expiration of three months
from such date. For purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code.
In the case of a Participant who is not an employee, provisions relating to
the exercisability of an Option following termination of service shall be
specified in the award. If not so specified, all Options held by such
Participant shall terminate on termination of service to the Corporation.
6.4 Death of Optionee. Should an optionee die while in possession of the
legal right to exercise an Option or Options under this Plan, such persons as
shall have acquired, by will or by the laws of descent and distribution, the
right to exercise any Options theretofore granted, may, unless otherwise
provided by the Board in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the date of death; provided, that
such Option or Options shall expire in all events no later than the last day of
the original term of such Option; provided, further, that any such exercise
shall be limited to the purchase rights which have accrued as of the date when
the optionee ceased to be an Employee, whether by death or otherwise, unless the
Board provides in the instrument evidencing such Option that, in the discretion
of the Board, additional shares covered by such Option may become subject to
purchase immediately upon the death of the optionee.
ARTICLE VII
TERMS AND CONDITIONS OF OPTIONS
Options shall be evidenced by instruments (which need not be identical) in
such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles V and VI hereof and
may contain such other provisions as the Board deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Board may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to Incentive Stock Options, or to
such other termination and cancellation provisions as the Board may determine.
The Board may from time to time confer authority and responsibility on one or
more of its own members and/or one or more officers of the Corporation to
execute and deliver such instruments. The proper officers of the Corporation are
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the terms of such instruments.
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<PAGE> 20
ARTICLE VIII
BENEFIT PLANS
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Board may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Participant any right to continue as an Employee of, or consultant or
advisor to, the Corporation or an Affiliated Corporation or affect the right of
the Corporation or any Affiliated Corporation to terminate them at any time.
Except as specifically provided by the Board in any particular case, the loss of
existing or potential profits granted under this Plan shall not constitute an
element of damages in the event of termination of the relationship of a
Participant even if the termination is in violation of an obligation of the
Corporation to the Participant by contract or otherwise.
ARTICLE IX
AMENDMENT, SUSPENSION OR TERMINATION
OF THE PLAN
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Board may also amend the Plan from time to time, except that
amendments which affect the following subjects must be approved by stockholders
of the Corporation:
(a) Except as provided in Article X relative to capital changes, the
number of shares as to which Options may be granted pursuant to Article V;
and
(b) The requirements as to eligibility for participation in the Plan.
Awards granted prior to suspension or termination of the Plan may not be
canceled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
ARTICLE X
CHANGES IN CAPITAL STRUCTURE
The instruments evidencing Options granted hereunder shall be subject to
adjustment in the event of changes in the outstanding Stock of the Corporation
by reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of an Award to the same extent as would
affect an actual share of Stock issued and outstanding on the effective date of
such change. Such adjustment to outstanding Options shall be made without change
in the total price applicable to the unexercised portion of such options, and a
corresponding adjustment in the applicable option price per share shall be made.
In the event of any such change, the aggregate number and classes of shares for
which Options may thereafter be granted under Section 5.1 of this Plan may be
appropriately adjusted as determined by the Board so as to reflect such change.
Notwithstanding the foregoing, any adjustments made pursuant to this
Article X with respect to Incentive Stock Options shall be made only after the
Board, after consulting with counsel for the Corporation, determines whether
such adjustments would constitute a "modification" of such Incentive Stock
Options (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Board determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments.
In the event of the proposed dissolution or liquidation of the Corporation,
each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Board.
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<PAGE> 21
Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
No fractional shares shall be issued under the Plan and the optionee shall
receive from the Corporation cash in lieu of such fractional shares.
ARTICLE XI
EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective when approved by the Board. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options may be granted under this Plan on
or after the tenth anniversary of the date on which the Plan was adopted by the
Board or the date on which the Plan was approved by the stockholders of the
Corporation, whichever is earlier. This Plan must be approved by the
stockholders of the Corporation within twelve (12) months of the date it becomes
effective.
ARTICLE XII
CONVERSION OF ISOs INTO NON-QUALIFIED
OPTIONS; TERMINATION OF ISOs
The Board, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's Incentive Stock
Options, that have not been exercised on the date of conversion, into
Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of such Options. At the time of such conversion, the
Board or the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the Board
or the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board or the Committee takes appropriate action. The Board, with
the consent of the optionee, may also terminate any portion of any Incentive
Stock Option that has not been exercised at the time of such termination.
ARTICLE XIII
APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes.
ARTICLE XIV
GOVERNMENTAL REGULATION
The Corporation's obligation to sell and deliver shares of Stock under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
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<PAGE> 22
ARTICLE XV
WITHHOLDING OF ADDITIONAL INCOME TAXES
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Article XVI) the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
ARTICLE XVI
NOTICE TO CORPORATION OF DISQUALIFYING DISPOSITION
Each Employee who receives an Incentive Stock Option must agree to notify
the Corporation in writing immediately after the employee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock
Option. A Disqualifying Disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the date the employee was
granted the Incentive Stock Option or (b) one year after the date the Employee
acquired Stock by exercising the Incentive Stock Option. If the Employee has
died before such Stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.
ARTICLE XVII
CONDITIONS ON DELIVERY OF STOCK
The Corporation shall not be obligated to deliver any shares of Stock
pursuant to Options granted under the Plan until, (a) in the opinion of the
Corporation's counsel, all applicable federal and state laws and regulations
have been complied with, and (b) all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Corporation's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Corporation may require, as a condition to exercise of
the option, such representations or agreements as counsel for the Corporation
may consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
ARTICLE XVIII
GOVERNING LAW; CONSTRUCTION
The validity and construction of the Plan and the instruments evidencing
Options shall be governed by the laws of the State of Delaware (without regard
to the conflict of law principles thereof). In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
8
<PAGE> 23
NATIONAL DATACOMPUTER, INC.
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL
MEETING TO BE HELD ON JANUARY 9, 1998
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 Friday, January 9, 1998 at 10:00
a.m., and at any adjournment or adjourments 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 AND 3
(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 approve the Company's 1997 Stock Option Plan, under
which 200,000 shares of Common Stock have been reserved for
issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposal to ratify the selection of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
<PAGE> 24
(4) 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.
