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EXHIBIT 4(b)
NATIONAL DATACOMPUTER, INC.
OFFERING OF UNITS, EACH UNIT CONSISTING OF
FIVE HUNDRED (500) SHARES OF
SERIES E CONVERTIBLE PREFERRED STOCK,
$.08 PAR VALUE PER SHARE,
OF NATIONAL DATACOMPUTER, INC.
AND A WARRANT TO PURCHASE UP TO
SEVEN HUNDRED THOUSAND (700,000)
SHARES OF COMMON STOCK,
$.08 PAR VALUE PER SHARE
OF NATIONAL DATACOMPUTER, INC.
SUBSCRIPTION AGREEMENT
FOR ACCREDITED INVESTORS ONLY
January 27, 1998
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY AGENCY NOR HAS THE COMMISSION NOR ANY STATE SECURITIES REGULATORY
AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OR ANY OFFERING MATERIALS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED FOR OFFERING AND
SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS ANY STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY APPROVED, PASSED UPON OR ENDORSED THE MERITS
TO THIS OFFERING, NOR IS IT INTENDED THAT ANY SUCH AGENCY WILL DO SO. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY A SUBSCRIBER EXCEPT IN COMPLIANCE WITH
THE FEDERAL AND RELEVANT STATE SECURITIES LAWS AND THE REQUIREMENTS AND
LIMITATIONS IN THE SUBSCRIPTION AGREEMENT AS WELL AS A SATISFACTORY OPINION OF
COUNSEL REGARDING SAME. NO ASSURANCE CAN BE GIVEN THAT A PUBLIC MARKET FOR THE
SECURITIES WILL EVER DEVELOP. THE TRANSFER OF THE SECURITIES WILL BE SUBJECT TO
CERTAIN RESTRICTIONS UNDER REGULATION S.
INVESTMENT IN THE CORPORATION INVOLVES CERTAIN RISKS AND RESTRICTIONS
ON TRANSFER. IN VIEW OF THESE RISKS AND THE RESTRICTIONS ON TRANSFER, THE
PURCHASE OF SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS OF SUBSTANTIAL MEANS
WHO HAVE NO NEED FOR LIQUIDITY WITH RESPECT TO THIS INVESTMENT, WHO CAN HOLD
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN BEAR THE ECONOMIC
RISK OF A TOTAL LOSS OF THEIR INVESTMENT. IN ADDITION, TO THE EXTENT THAT A
SUBSCRIBER'S INVESTMENT RESULTS IN DEFERRAL OF TAX LIABILITY, ONLY SUBSCRIBERS
WHOSE INCOME IS TAXABLE AT RELATIVELY HIGH RATES MAY BE IN A POSITION TO REALIZE
SIGNIFICANT FINANCIAL BENEFIT FROM SUCH DEFERRAL.
NO PERSON HAS BEEN AUTHORIZED BY THE CORPORATION TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OF ANY KIND WHATSOEVER CONCERNING THE
CORPORATION OR THIS OFFERING OTHER THAN THE REPRESENTATIONS CONTAINED OR
REFERRED TO HEREIN, AND, IF GIVEN OR MADE, SUCH OTHER REPRESENTATIONS OR
INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION. NEITHER THE DELIVERY OF THIS OFFER NOR ANY SALES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE PARTIES DESCRIBED HEREIN SINCE THE DATE HEREOF, OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF
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ANY TIME AFTER THE DATE IT WAS FIRST OFFERED. THIS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THE OFFERING PRICE OF THE SECURITIES HAS BEEN FIXED ARBITRARILY BY THE
CORPORATION. NO ESTABLISHED MARKET VALUE FOR THE SECURITIES EXISTS. EACH
PROSPECTIVE SUBSCRIBER IS URGED TO MAKE AN INDEPENDENT EVALUATION OF THE
FAIRNESS OF THE OFFERING PRICE.
EACH SUBSCRIBER IS CAUTIONED TO CONSULT WITH HIS OWN LEGAL COUNSEL,
ACCOUNTANT, AND INVESTMENT REPRESENTATIVE, IF ANY, AS TO TAX AND RELATED MATTERS
CONCERNING THE CORPORATION AND INVESTMENTS HEREIN. NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED CONCERNING ANY
ECONOMIC RETURN OR TAX ADVANTAGES WHICH MAY ACCRUE AS A RESULT OF AN INVESTMENT
IN THE CORPORATION.
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SUBSCRIPTION AGREEMENT
Limited Offering of Units, each Unit consisting of
five hundred (500) shares of Series E Convertible Preferred Stock,
$.08 par value per share, at $1,000.00 per share,
and a Warrant to purchase up to seven hundred thousand (700,000)
shares of Common Stock, $.08 par value,
of NATIONAL DATACOMPUTER, INC.
(a) Number of Units subscribed for 1
(b) Total Subscription Price
(multiply (a) by $500,000 per Share) $500,000
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THE UNDERSIGNED ("Subscriber") hereby subscribes for the number of
Units (the "Units"), offered by NATIONAL DATACOMPUTER, INC. (the "Corporation"),
a Delaware corporation, set forth in (a) above.
The Subscriber hereby agrees to pay the amount set forth in (b) above
upon execution of this Agreement, subject to and in accordance with the
following terms, conditions, and investment risks.
SECTION 1. SUBSCRIPTION FOR UNITS
1.1 Subscriber hereby deposits with Xxxxx, Xxxxx, Xxxx, Xxxxxx, Xxxxxxx
and Xxxxx, P.C., as escrow agent for the Corporation, the amount set forth in
(b) above via wire transfer. Should this Agreement not be accepted by the
Corporation, the proceeds shall be returned to the Subscriber.
1.2 Within five (5) days from the date of acceptance of this Agreement,
there shall be a closing (the "Closing") of the purchase of the Unit and the
Corporation shall deliver to the Subscriber a stock certificate representing the
shares of Series E Convertible Preferred Stock purchased by Subscriber
hereunder, registered in the Subscriber's name and a warrant for the purchase of
the shares of Common Stock underlying the Warrant. The Unit issued hereunder,
when delivered to the Subscriber in accordance with the terms hereof, shall be
duly authorized by
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appropriate corporate action and shall constitute validly issued and outstanding
securities of the Corporation.
THE SUBSCRIBER UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES OF THE
CORPORATION IS SPECULATIVE, AND IT HAS CAREFULLY CONSIDERED THE IMPACT OF THE
FOLLOWING RISKS:
SECTION 2. RISK FACTORS
2.1 FINANCIAL CONDITION. The Corporation's ongoing business has been
operating at a net operating loss for the majority of the last five years. Sales
of the Corporation's products have not sustained the Corporation to date, and no
assurance can be given that the Corporation's products can be produced and
marketed on a profitable basis. A copy of the Corporation's most recent
published financial statements for the period ending September 30, 1997 as filed
on Form 10-Q has been provided to Subscriber.
2.2 NEED FOR ADDITIONAL FINANCING. The Corporation will use the
proceeds of this offering for general working capital purposes. The Corporation
believes that the anticipated proceeds from the sale of the Unit will be
sufficient to sustain the Corporation's operations for the next six (6) months.
However, the Corporation may require additional future financing for general
working capital and other purposes. In addition, the Corporation may require
additional capital to commence and/or continue research and development of other
planned products. No assurance can be given that subsequent financings will be
available to the Corporation, or if such financing is available, that it will be
on terms favorable to the Corporation.
2.3 DEPENDENCE UPON KEY PERSONNEL. The Corporation's ability to
continue to develop new products, to market its products and to establish and
maintain a competitive position will depend in part upon its ability to attract
and retain qualified management, technical and sales personnel. Competition for
such personnel is intense, and no assurance can be given that the Corporation
will be able to attract and retain such personnel.
2.4 RAPID TECHNOLOGICAL CHANGE; FUTURE DEVELOPMENT EFFORTS; AND
COMPETITION. The Corporation is engaged in the field of data collection,
computer and electronics, which is characterized by extensive research and rapid
technological innovations and intense competition. The Corporation's ability to
compete effectively will depend in large part upon whether it is able to develop
and manufacture superior and innovative products. The Corporation's competitors
generally have greater capital resources and larger research and development and
marketing staffs and facilities than the Corporation. No assurance can be given
that (i) products which will render the Corporation's products inferior or too
costly are not already in development by these competitors and (ii) the
Corporation can adapt to a potentially evolving market, develop new products
which have significant market acceptance, and maintain a technological
advantage, and the failure of the Corporation to do so would have a materially
adverse impact on the Corporation.
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2.5 PATENTS AND PROPRIETARY INFORMATION. The Corporation holds no
patents on any element of its products. However, the Corporation does not
believe that patents are necessary for the protection of its technology or that
the failure to obtain patents would be materially adverse to its business taken
as a whole. The Corporation relies primarily on unpatented proprietary know-how
and unregistered copyright protection of its software. Although the Corporation
relies upon confidentiality agreements with its employees, no assurance can be
given that others do not have or will not develop substantially equivalent
proprietary information or otherwise obtain access to the Corporation's know-how
or that others may not obtain patents which require licensing by the Corporation
for the pursuit of its business.
2.6 PRIOR ISSUANCES OF PREFERRED STOCK. As reflected in its filings
with the Securities and Exchange Commission, the Corporation has previously
issued preferred stock which preferred stock retains liquidation and certain
other preferences over the Series E Preferred Stock, as well as the Common Stock
of the Corporation.
2.7 NO MARKET FOR RESALE OF UNREGISTERED SECURITIES. The securities
offered hereby are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), and may not be resold unless and until such time as the
securities are registered under applicable federal and state securities laws or
unless an exemption from registration is available. The certificates
representing the Series E Preferred Stock and the shares underlying the Warrant
will bear a legend to the effect that such securities cannot be sold or
transferred unless registered under the Securities Act or unless an opinion of
counsel satisfactory to the Corporation is received to the effect that such
registration is not required. The Corporation's Common Stock is currently traded
on the NASDAQ Small Cap Market under the symbol "IDCP" and the public market for
the Common Stock into which the securities may be converted (the "Conversion
Shares") is very limited. No assurance can be given that an active market for
the Common Stock is likely to further develop in the near future. If, as a
result of some change in circumstances arising from an event not presently
contemplated, a Subscriber wishes to transfer his securities or any portion
thereof, he may find no market for such securities.
2.8 DETERMINATION OF OFFERING PRICE. The offering price of the Unit has
been fixed arbitrarily by the Corporation and bears no direct relationship to
earnings, book value or other objective standards of worth and is not to be
considered a representation that the Unit has a market value of $500,000 or
could be resold at this price. No established market for the Units exists. Each
Subscriber is urged to make an independent evaluation of the fairness of the
offering price.
SECTION 3. REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGEMENTS
OF SUBSCRIBERS
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The Subscriber acknowledges that the Corporation is offering the Unit
in reliance upon the representations, warranties, and other information
presented by the Subscriber herein. The Subscriber undertakes to notify the
Corporation immediately of any changes in any of the representations,
warranties, and other information contained herein.
In order to induce the Corporation to accept the subscription made
hereby, the Subscriber hereby represents, warrants and acknowledges to the
Corporation as follows:
3.1 SOPHISTICATION. The Subscriber represents that it has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of acquisition of the Unit and of making an
informed investment decision with respect thereto.
3.2 ACCESS TO INFORMATION. The Subscriber acknowledges that it and its
representatives, if any, have been given access through meetings with
representatives of the Corporation to current and other information about the
Corporation as well as an opportunity to ask questions of the Corporation's
officers and directors about the information to which it and its representatives
have been given access. The Subscriber understands all of the risk factors
related to the purchase of the Unit. The Subscriber or its legal counsel or
investment advisor has been given a full opportunity to ask questions of, and to
receive answers from, the Corporation and its officers and directors concerning
the terms and conditions of the offering and the business of the Corporation and
to obtain additional information necessary to verify the accuracy of the
information concerning the Corporation, or such other information as it or its
legal counsel or investment advisor desired in order to evaluate an investment
in the Unit, and all such questions have been answered to the full satisfaction
of the undersigned.
3.3 INVESTMENT REPRESENTATION. The Subscriber represents that it is
acquiring the securities hereunder for the accounts of its clients (the
"Investors"), each of whom would individually qualify as an investor eligible to
participate in a Regulation S offering, and not with a view to reselling or
otherwise distributing such securities in violation of any federal securities
laws and understands and agrees that the securities to be issued hereunder are
restricted on transfer and must be held unless they are registered under the
Securities Act or an exemption from registration is available, and the
Corporation has received an opinion of counsel, in form and substance
satisfactory to it, to such effect. No Investor will even after full conversion
of all preferred shares ever beneficially own more than 4,9% of the outstanding
common shares of the Company. The Subscriber does not have voting control or
power of disposition over securities owned by the Investors and no Investor is
an affiliate of another Investor. This representation is hereby acknowledged and
accepted by the Company. Whenever the term Subscriber is used in this
transaction it refers to the actual Investors and RBB Bank has full
authorization from all investors to make the representations.
Each Subscriber agrees that the Unit and the shares of Common Stock
issuable thereunder may only be transferred if registered under the Securities
Act or pursuant to an exemption from such registration requirements.
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3.4 AUTHORITY. The Subscriber represents that it has full legal power
and authority to enter into this Subscription Agreement and to purchase the
Unit.
3.5 VALUATION OF THE UNITS. The Subscriber understands that the
valuation placed upon the Units has been made solely by the Corporation and not
by an independent accountant, auditor or other third party. The Subscriber
represents that it has independently evaluated the fairness of the offering
price for the Unit.
3.6 NET WORTH EFFECT FROM INVESTMENT; ABILITY TO RISK LOSS OF
INVESTMENT. The Subscriber represents that its overall commitment to investments
which are not readily marketable is not disproportionate to its net worth and
that his investment in the Corporation will not cause such overall commitment to
become excessive. The Subscriber further warrants and represents that (a) its
financial condition is such that it is able to bear all risks of (i) holding the
Unit for an indefinite period of time and (ii) losing its entire investment and
(b) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of acquisition of the Unit and
of making an informed investment decision with respect thereto.
3.7 DECISION TO INVEST. In making its decision to purchase the Unit
herein subscribed for, the Subscriber has relied solely upon the public
information filings about the Corporation provided to it and upon independent
investigations made by it or its legal counsel or investment advisor. It is not
relying on any representations or warranties from the Corporation or any of its
officers, directors, affiliates, employees or agents other than the information
provided by the Corporation to it in writing in this offering. The Subscriber
has consulted with its own legal counsel, accountant, and investment
representative as to tax and related matters concerning the Corporation and
investments therein; no representations or warranties of any kind are intended
or should be inferred concerning any economic returns or tax related effects
which may result from an investment in the Corporation. No assurances are given
that existing tax or securities laws will not be changed or interpreted
adversely to the Subscriber. In addition, it is not subscribing pursuant hereto
for any Unit as a result of or subsequent to (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or (ii) any seminar or meeting whose
attendees, including the undersigned, had been invited as a result of,
subsequent to, or pursuant to, any of the foregoing.
3.8 UNREGISTERED SECURITIES. The Subscriber understands that the Unit
and the securities underlying the Unit have not been registered under the
Securities Act in reliance upon specific exemptions from registration
thereunder, and it agrees that the securities underlying the Unit may be neither
sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed
of except in compliance with the Securities Act and applicable state securities
laws. The undersigned has been advised that the Corporation may be unable to
comply with any exemption under that Act. The undersigned understands that it is
not anticipated that there will be any market for resale of the securities
underlying the Unit and that it may not be possible for
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the undersigned to liquidate an investment in the securities underlying the Unit
on an emergency basis.
3.9 SUBSCRIBER'S UNDERSTANDING. The Subscriber has read and understands
the written material supplied by the Corporation. This Agreement contains the
complete understanding between Subscriber and the Corporation and no
representative of the Corporation or any other person has any power or authority
to change or alter the terms hereof. This Agreement is subject to acceptance by
the Corporation, which may accept or reject subscriptions in whole or in part,
in its sole discretion, and is not assignable without the written consent of the
Corporation.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to the Subscribers that
as of the date hereof, except as otherwise set forth herein:
4.1 AUTHORIZATION OF SERIES E CONVERTIBLE PREFERRED STOCK. The
Corporation has duly authorized the sale and issuance of up to five hundred
(500) shares of Series E Convertible Preferred Stock containing the rights and
preferences set forth in the Certificate of Amendment to be filed with the
Delaware Secretary of State, a copy of which is attached hereto as Exhibit "A."
4.2 ORGANIZATION AND CORPORATE POWER. The Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to do business as a foreign corporation in
each jurisdiction in which such qualification is required, except where failure
so to qualify would not have a material adverse effect on the Corporation. The
Corporation has all required corporate power and authority to own its property,
to carry on its business as presently conducted or contemplated, to enter into
and perform this Agreement and generally to carry out the transactions
contemplated hereby. The Corporation is not in violation of any term of its
Certificate of Incorporation or its Bylaws, or any material instrument,
agreement, judgment, decree, order, statute, rule or regulation of any federal,
state or local government or agency applicable to the Corporation.
4.3 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of the Corporation consists of 5,000,000 shares of Common Stock,
$.08 par value per share. The Corporation's issued and outstanding securities
are as reflected on Exhibit "B" attached hereto. The Series E Convertible
Preferred Stock has the rights and preferences set forth in the Certificate of
Amendment attached hereto as Exhibit A. As of the date of this offering, the
Corporation has a sufficient number of authorized shares of Common Stock for
issuance upon the conversion of all of the securities, upon exercise of all
outstanding options and warrants. Subject to the provisions of applicable
federal securities laws, upon the consummation of the transactions contemplated
hereby, the Series E Convertible Preferred Stock, the Common Stock issued
thereunder and under the Warrant and the shares of Common Stock issuable
thereunder after payment of the exercise price for such shares will be free and
clear of all liens and
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encumbrances, other than liens, encumbrances or restrictions on transfer arising
out of agreements entered into or actions taken by the Subscribers or as may be
imposed by federal securities laws. The Corporation does not have outstanding
any other equity securities including any options, warrants or other rights to
purchase or any securities convertible or exchangeable into any shares of its
capital stock or other equity securities, other than options and warrants to
purchase shares of Common Stock granted under the Corporation's stock option
plans.
4.4 AUTHORIZATION. This Agreement, and all documents and instruments
executed pursuant hereto, are legal, valid and binding obligations of the
Corporation, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws applicable to
creditors' rights and remedies and to the exercise of judicial discretion in
accordance with general principles of equity. The execution, delivery and
performance of this Agreement and the issuance of the shares of Series E
Convertible Preferred Stock and the Warrant have been duly authorized by all
necessary corporate or other action of the Corporation.
4.5 TAX MATTERS. All federal, state, county and local taxes, and all
applicable taxes owed to foreign jurisdictions and for which the Corporation has
been billed, have been paid by the Corporation. No billed and unpaid assessments
nor any basis for the assessment of additional federal income taxes on the
Corporation for any fiscal period exists. The Corporation has duly filed all
federal, state, county and local tax returns required to have been filed by it
and there are in effect no waivers of applicable statutes of limitations with
respect to taxes for any fiscal period. The federal tax returns of the
Corporation have not been audited by the Internal Revenue Service, and no notice
of audit has been received by the Corporation.
4.6 EFFECT OF TRANSACTIONS. The execution, delivery and performance by
the Corporation of this Agreement and the agreements and transactions
contemplated hereby will not conflict with or result in any default under any
material contract, obligation or commitment of the Corporation, or any charter
provision, bylaw or corporate restriction of the Corporation, or the creation of
any lien, charge, restriction or encumbrance of any nature upon any of the
properties or assets of the Corporation. The Corporation's execution and
delivery of this Agreement and its performance of the transactions contemplated
hereby and thereby, will not violate any material instrument, agreement,
judgment, decree, order, statute, rule or regulation of any federal, state or
local government or agency applicable to the Corporation.
SECTION 5. COVENANTS OF THE CORPORATION
The Corporation shall comply with the covenants set forth in paragraphs
5.1 through 5.5 below, until such time as all of the Series B, C, D, and E
classes of Convertible Preferred Stock are converted to Common Stock of the
Corporation as follows:
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5.1 CORPORATE EXISTENCE. The Corporation shall maintain its corporate
existence and comply with all laws, government regulations, rules and ordinances
and judicial orders, judgments, or decrees applicable to the Corporation, its
subsidiaries, their business and properties.
5.2 MAINTENANCE OF PROPERTIES. The Corporation shall maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted.
5.3 AFFILIATE TRANSACTIONS. All transactions by and between the
Corporation and any officer, key employee or stockholder of the Corporation, or
persons controlled by or affiliated with such officer, key employee or
stockholder, shall be conducted on an arm's-length basis, shall be on terms and
conditions no less favorable to the Corporation than could be obtained from
non-related persons and shall be approved in advance by the Board of Directors
(excluding interested Directors, where applicable) after full disclosure of the
terms thereof.
5.4 USE OF PROCEEDS. The Corporation shall use the proceeds of the sale
of the Units for general working capital purposes.
5.5 REDUCTION IN CONVERSION PRICE; CANCELLATION OF WARRANTS; REDEMPTION
OF SERIES B PREFERRED STOCK; APPOINTMENT OF INDEPENDENT DIRECTORS.
(a) The Corporation shall take all action necessary to reduce
the conversion prices of the Series B, Series C, and Series D classes of the
Corporation's Convertible Preferred Stock to $2.74 and to provide to such
classes of Convertible Preferred Stock "anti-dilution" protection for any
issuances below the then applicable Conversion Price for such class of Preferred
Stock in form identical to the protection provided for holders of the Series E
Preferred Stock as set forth in Section 6(h) of the Certificate of Designation
of the Series E Convertible Preferred Stock (including the provisions relating
to termination of the anti-dilution protection as set forth in Section 6(h) of
the Certificate of Designation).
(b) If at any time prior to January 31, 2003, the
Corporation's stockholders equity at the end of any fiscal quarter (as reported
on the Company's Form 10-Q or Form 10-K filing with the Securities and Exchange
Commission) does not exceed $1,500,000 plus 50% of the net proceeds of any
future equity financing, then the Conversion Price for the Series B, C and D
classes of Convertible Preferred Stock shall equal the lesser of $2.74 or sixty
percent (60%) of the Corporation's average closing price for the five trading
days prior to the conversion. If, after this date (a) the closing price (or the
average of the closing bid and asked price if the principal exchange on which
the Corporation's common stock trades does not report a closing price) for the
Corporation's Common Stock shall trade below $1.00 for any twenty (20)
consecutive trading days on the NASDAQ Small Cap Market, the NASDAQ National
Market System, or the American Stock Exchange, and (b) the holders of a majority
of the Convertible Preferred Stock request that the Corporation seek a reverse
stock split, which reverse split is necessary in order to
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maintain a listing on its then current trading exchange, then the Corporation
agrees to take all efforts necessary to effect an appropriate reverse stock
split of the Corporation's Common Stock. In the event of such a reverse stock
split, the Conversion Price described above shall not be modified.
Notwithstanding the foregoing, the provisions of this paragraph 5.5 (b) shall
terminate immediately following the issuance of a majority of the Corporation's
Common Stock (or other securities convertible into Common Stock) to a third
party or parties in a merger or similar transaction.
(c) In further consideration for the preceding provisions,
which consideration is hereby acknowledged and received, the Subscriber (being
the holder of all of the Series B, Series C and Series D Convertible Preferred
Stock of the Corporation) hereby returns to the Corporation, for cancellation
upon acceptance of this Subscription Agreement by the Corporation, Warrants Nos.
RBB-1 and RBB-2, constituting warrants to purchase 700,000 shares of the
Corporation's Common Stock at $4.00 per share. In further consideration for the
agreements contained herein, and in consideration of the payment of Two Thousand
One Hundred Dollars ($2,100.00) from the Corporation to the Subscriber
simultaneous with the closing of this Agreement, the Subscriber hereby agrees to
deposit with the Corporation's counsel certificates representing 2,100 shares of
the Series B Preferred Stock (the "Escrowed Shares"). The Escrowed Shares shall
not be convertible for a period through January 31, 2000 and, at the option of
the Corporation at any time through January 31, 2000, may be redeemed at a price
of One Thousand Two Hundred Fifty Dollars ($1,250) per share.
(d) For as long as any of the shares of Series B, C, D, or E
classes of Convertible Preferred Stock are issued and outstanding, the Company
shall nominate for election at the Annual Meeting of the Stockholders an
independent director nominated by RBB Bank and reasonably acceptable to the
Company's Board of Directors. Notwithstanding the foregoing, the provisions of
this Section 5.5(d) shall terminate immediately following the issuance of a
majority of the Corporation's Common Stock (or other securities convertible into
Common Stock) to a third party or parties in a merger or similar transaction.
5.6 RIGHT OF FIRST REFUSAL. The Corporation hereby grants the
Subscriber, which right shall not be assignable, the Right of First Refusal, as
set forth herein.
(a) RIGHT OF FIRST REFUSAL. Before the Corporation shall
issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, any (i) shares of Common
Stock, (ii) any other equity security of the Corporation, including without
limitation, shares of Preferred Stock, (iii) any convertible debt security of
the Corporation, including without limitation, any debt security which by its
terms is convertible into or exchangeable for any equity security of the
Corporation, (iv) any security of the Corporation that is a combination of debt
and equity, or (v) any option, warrant or other right to subscribe for, purchase
or otherwise acquire any interest relating to such equity or debt security of
the Corporation, the Corporation shall, in each case, first offer to sell such
securities (the "Offered Securities") to the Subscriber then holding capital
stock of the Corporation as
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follows: The Corporation shall offer to sell to each Subscriber that portion of
the Offered Securities as the number of shares of Preferred Stock (on an
as-converted basis) then held by a Subscriber bears to the total number of
outstanding shares of capital stock of the Corporation including the shares
issuable upon conversion of the Preferred Stock (the "Basic Amount"), at a price
and on such other terms as shall have been specified by the Corporation in
writing delivered to the Subscriber (the "Offer"), which Offer by its terms
shall remain open and irrevocable for a period of fourteen (14) days from
receipt of the Offer.
(b) NOTICE OF ACCEPTANCE. Notice of Subscriber's intention to
accept, in whole or in part, any Offer made pursuant to Section 5.6(a) shall be
evidenced by a writing signed by such Subscriber and delivered to the
Corporation prior to the end of the 14-day period of such offer, setting forth
such of the Subscriber's Basic Amount as such Subscriber elects to purchase (the
"Notice of Acceptance").
(c) CONDITIONS TO ACCEPTANCES AND PURCHASE.
(i) PERMITTED SALES OF REFUSED SECURITIES. In the
event that a Notice of Acceptance is not given by the Subscriber in
respect of all the Offered Securities, the Corporation shall have
seventy-five (75) days from the end of said 14-day period to sell any
such Offered Securities as to which a Notice of Acceptance has not been
given by the Subscriber (the "Refused Securities") to the Person or
Persons specified in the Offer, but only for cash and otherwise in all
respects upon terms and conditions, including, without limitation, unit
price and interest rates, which are no more favorable, in the
aggregate, to such other Person or Persons or less favorable to the
Corporation than those set forth in the Offer.
(ii) REDUCTION IN AMOUNT OF OFFERED SECURITIES. In
the event the Corporation shall propose to sell less than all of the
Refused Securities (any such sale to be in the manner and on the terms
specified in Section 5.6(a) above), then the Subscriber shall reduce
the number of shares or other units of the Offered Securities specified
in its Notice of Acceptance to an amount which shall be not less than
the amount of the Offered Securities which the Subscriber elected to
purchase pursuant to this Section multiplied by a fraction, (i) the
numerator of which shall be the amount of Offered Securities which the
Corporation actually proposes to sell, and (ii) the denominator of
which shall be the amount of all Offered Securities. In the event that
any Subscriber so elects to reduce the number or amount of Offered
Securities specified in its respective Notices of Acceptance, the
Corporation may not sell or otherwise dispose of more than the reduced
amount of the Offered Securities until such securities have again been
offered to the Subscriber in accordance with Section 5.6(a).
(iii) CLOSING. Upon the closing, which shall include
full payment to the Corporation, of the sale to such other Person or
Persons of all or less than all the Refused Securities, the Subscriber
shall purchase from the Corporation, and the Corporation shall
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sell to the Subscriber, the number of Offered Securities specified in
the Notices of Acceptance, as reduced pursuant to Section 5.6(c)(ii) if
the Subscriber has so elected, upon the terms and conditions specified
in the Offer. The purchase by the Subscriber of any Offered Securities
is subject in all cases to the preparation, execution and delivery by
the Corporation and the Subscriber of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance
to the Subscriber and its respective counsel.
(d) FURTHER SALE. In each case, any Offered Securities not
purchased by the Subscriber or other Person or Persons in accordance with
Section 5.6(c) may not be sold or otherwise disposed of until they are again
offered to the Subscriber under the procedures specified in Sections 5.6(a), (b)
and (c).
(e) TERMINATION AND WAIVER OF RIGHT OF FIRST REFUSAL. The
rights of the Subscriber under this Section 5.6 may be waived only upon the
prior written consent of the holders of 60% of the outstanding shares of
Preferred Stock and shall terminate on January 31, 2000.
(f) EXCEPTION. The rights of the Subscriber under this Section
5.6 shall not apply to:
(i) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of
shares of Common Stock;
(ii) Preferred Stock or Common Stock issued as a
dividend to holders of Preferred Stock upon any subdivision or
combination of shares of Preferred Stock;
(iii) the Conversion Shares or shares issued upon
conversion of currently outstanding shares of Preferred Stock;
(iv) Shares of Common Stock, or options or warrants
exercisable therefor, issued on or after the date hereof to directors,
officers, employees or consultants of the Corporation and any
subsidiary pursuant to any qualified or non-qualified stock option plan
or agreement, employee stock ownership plan, employee benefit plan,
stock purchase agreement, stock plan, stock restriction agreement, or
consulting agreement or such other options, warrants, equity
arrangements, agreements or plans approved by two-thirds of the members
of the Board of Directors of the Corporation;
(v) Shares of capital stock or options or warrants
therefor, to be issued to equipment leasing organizations in connection
with any equipment leasing arrangements to which the Corporation is a
party and which have been approved by the Board of Directors including
a majority of the Investor Directors; or
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(vi) shares of capital stock issued in connection
with a merger or acquisition approved by the Board of Directors or a public
offering of the Company's securities.
Each of the foregoing numbers shall be subject to equitable adjustment
in the event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event.
5.7 LOCK-UP AGREEMENT. The Corporation shall enter into an agreement
with Xxxxxxx Xxxxx prohibiting him from selling any of his stock of the
Corporation or receiving any additional stock options (other than options which
he typically receives under his existing employment agreement with the
Corporation) upon the earlier of (I) the date the Corporation makes any public
announcements announcing the issuance of a majority of the Corporation's Common
Stock to a third party in a merger or similar transaction, or (II) August 15,
1998.
5.8 STOCK OPTIONS. As long as any shares of Series B, C, D, or E
classes of Convertible Preferred Stock are issued and outstanding, the
Corporation shall not issue stock options to any employee or consultant at a
price lower than the greater of (a) fair market value price of such stock which
price shall equal the closing bid price of the Corporation's Common Stock as
reported on the principal stock exchange on which the Corporation's Common Stock
is then traded on the date such option is issued. or (b) $.75, for any officer
or director or any affiliate of an officer or director.
SECTION 6. MISCELLANEOUS PROVISIONS.
6.1 DEFINITION OF COMMON STOCK. As used in this Agreement, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
$.08 par value per share.
6.2 USE OF SPEECH. All pronouns contained herein and any variations
thereof, shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the parties may require.
6.3 WAIVER. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver, and no waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or of any other right
arising under this Agreement.
6.4 ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement between the parties and supersedes any prior understanding or
agreements concerning the subject matter hereof. This Agreement may be amended,
modified, or terminated only by a written instrument signed by the Corporation
and at least holders of two-thirds (2/3) of the Units issued to the Subscribers
hereunder.
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6.5 SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
6.6 GOVERNING LAW. This Agreement shall be deemed to have been made and
defined in the Commonwealth of Massachusetts and the validity and interpretation
hereof and thereof and the performance hereunder and thereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts (without regard to the conflict of law principles thereof). Venue
for any dispute relating to the provisions of this Agreement shall be in the
United States District Court for the District of Massachusetts.
6.7 NOTICES. All notices, requests, demands, and communications related
to this Agreement will be deemed given if and when delivered personally or sent
by registered or certified mail, return receipt requested, postage prepaid, to
the following addresses:
If to the Corporation: National Datacomputer, Inc.
000 Xxxxxxxxx Xxxxxxxx, Xxxxxxxx 0
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
With a copy to: Xxxxx, Xxxxx, Xxxx, Xxxxxx, Xxxxxxx and
Xxxxx, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Xxxx X. Xxxxxxx, Esquire
or, as to each of the foregoing, at such other address as shall be designated by
the addressee in a written notice to the other parties complying as to delivery
with the terms of this Section 6.7 Notwithstanding anything to the contrary
contained in this Agreement, all notices, requests, demands and other
communications shall be effective when received.
6.8 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives and
successors.
6.9 HEADINGS. Headings contained in this Agreement are only as a matter
of convenience and in no way define, limit, extend, or describe the scope of
this Agreement or the intent of any provisions hereof.
6.10 UNENFORCEABILITY. If any provision of this Agreement is or becomes
or is deemed invalid, illegal, or unenforceable in any jurisdiction, to the
maximum extent permissible, such provision shall be deemed amended to conform to
applicable laws so as to be materially altering the intention of the parties, it
shall be stricken and the remainder of this Agreement shall remain in full force
and effect.
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6.11 ASSIGNMENT. The Subscriber may not assign this Agreement or its
rights hereunder without the Corporation's written consent.
6.12 MULTIPLE SUBSCRIBERS. If more than one person is signing this
Agreement, each representation, warranty, and undertaking stated herein shall be
the joint and several representation, warranty, and undertaking of each such
person. The Subscribers understand the meaning and legal consequences of the
representations and warranties contained in this Agreement.
6.13 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as a sealed instrument as of the day and year first above written.
NATIONAL DATACOMPUTER, INC.
By:
----------------------------
Xxxxxxx X. Xxxxx, President
The undersigned represents that (a) it has read and understands the
Subscription Agreement, and (b) the person signing the Subscription Agreement on
behalf of the Subscriber has been duly authorized by all requisite action on the
part of the Subscriber to acquire the Units and sign the Subscription Agreement
on behalf of the Subscriber and, further, that the undersigned Subscriber has
all requisite authority to purchase the Units and enter into the Subscription
Agreement.
1
------------------------------ ----------------------------------------
Number of Units Subscribed for Date
----------------------------------------
Name of Corporation (Please Type or Print)
By:
------------------------------------
Signature
Title:
---------------------------------
(Please Type or Print)
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY
COUNSEL TO THE CORPORATION, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION
OF SUCH SECURITIES IS NOT REQUIRED.
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