EXHIBIT 10.3
 
SECURITY AGREEMENT

SECURITY AGREEMENT made by National Datacomputer, Inc., a Delaware corporation
(the “Debtor”) in favor of Bruna Bucacci, in her capacity as agent for the
Secured Parties (as defined herein, the “Agent” and in her capacity as Lender),
the Lenders who agree to the terms of this Agreement either by executing the
signature page hereto or by executing a counterpart signature in the form
attached to this Agreement (such investors collectively, the “Secured Parties”).
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Secured Convertible Notes purchased and to be purchased by the
Secured Parties pursuant to the Company’s Confidential Private Offering
Memorandum dated April 21, 2010 and those certain subscription agreements
(collectively, the “Subscription Agreements”) by and between Debtor and each of
the Secured Parties (the “Notes”). In consideration of the agreement of the
Secured Parties to make loans to the Debtor in accordance with the terms and
conditions set forth in the Notes, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Debtor hereby agrees for the benefit of the Secured Parties, as follows:

1.           Grant of Security Interest. As collateral security for the payment
and performance when due of all Obligations (defined below), the Debtor hereby
collaterally assigns, mortgages, and pledges to the Agent, for the benefit of
herself and the Secured Parties, and hereby grants to the Agent, for the benefit
of herself and the Secured Parties, a continuing security interest in and right
of setoff against, all of the Debtor’s right, title and interest in, to and
under the Collateral (defined below).

(a)           “Collateral” means all the Debtor’s present and future right,
title and interest in and to any of the following property, wherever located and
whether now owned or hereafter acquired (together with all other collateral
security for the Obligations at any time granted to or held or acquired by the
Secured Parties): All of the Debtor’s tangible and intangible personal property,
including without limitation, all inventory, equipment and other goods, all
accounts receivable, notes, drafts, acceptances, instruments and documents,
chattel paper, general intangibles (including, without limitation, Intellectual
Property (hereinafter defined)), deposit accounts (and all monies, credit
balances, deposits and other property of Debtor now or hereafter held or
received by or in transit to the Agent or any Secured Party or at any depositary
or other institution from or for the account of Debtor, whether for safekeeping,
pledge, custody, transmission, collection or otherwise), investment property,
commercial tort claims, letters of credit and banker’s acceptances, books and
records, and all cash and non-cash proceeds of the foregoing in whatever form
received, including without limitation insurance proceeds and claims against
third parties for loss or damage to or destruction of or other involuntary
conversion of any kind or nature of any or all of the other Collateral. Any of
the foregoing terms which are specifically defined in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts shall have the meanings
given therein (“UCC”).

(b)           “Intellectual Property” means all of Debtor’s right, title and
interest in and to any and all of the following, whether now owned or hereafter
arising or acquired: patents, patent rights, patent applications, copyrights,
 
 
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works which are the subject matter of copyrights, copyright registrations,
trademarks, trade names, trade styles, trademark and service mark applications,
and licenses and rights to use any of the foregoing; all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of any of the
foregoing; all rights to sue for past, present and future infringement of any of
the foregoing; inventions, trade secrets, formulae, processes, compounds,
drawings, designs, blueprints, surveys, reports, manuals, and operating
standards; goodwill (including any goodwill associated with any trademark or the
license of any trademark); customer and other lists in whatever form maintained;
and trade secret rights, copyright rights, rights in works of authorship, domain
names and domain name registrations; software and contract rights relating to
software, in whatever form created or maintained.

(c)           “Loan Documents” shall mean this Agreement, the Notes, the
Subscription Agreements and the any agreements, documents and instruments
executed and/or delivered in connection herewith and/or therewith.

(d)           “Obligations” means any and all payment and performance
obligations of every kind, nature and description of the Debtor to Agent and the
Secured Parties arising under the Notes and under the other Loan Documents,
including, without limitation, principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, debtor or
otherwise, now existing or hereafter arising, direct or indirect, absolute or
contingent, due or to become due, primary or secondary, secured or unsecured,
liquidated or unliquidated, whether arising after the commencement of any case
with respect to Debtor under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case).

(e)           “Permitted Liens” shall mean liens for taxes, assessments or other
governmental charges or levies not yet delinquent and liens securing purchase
money indebtedness, or capitalized leases for the acquisition of capital assets.

(f)           “Person” or “person” shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter status under the Internal Revenue Code), limited liability company,
limited liability partnership, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

(g)           “Required Secured Parties” shall mean, at any time, those Secured
Parties who hold a majority of the aggregate of the Principal Amount of the
Notes then outstanding.

(h)           “UCC” shall have the meaning set forth in the definition of
Collateral above.

 
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2.           Perfection of Security Interests.

(a)           Debtor irrevocably and unconditionally authorizes the Agent to
file, on behalf of the Secured Parties, at any time and from time to time such
financing statements with respect to the Collateral naming the Agent and/or
Secured Parties as the secured party and Debtor as debtor, as the Agent may
require, and including any other information with respect to Debtor or otherwise
required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as the Agent may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Debtor hereby
ratifies and approves all financing statements naming the Agent and/or Secured
Parties as secured party and Debtor as debtor with respect to the Collateral
(and any amendments with respect to such financing statements) filed by or on
behalf of the Agent and/or Secured Parties prior to the date hereof and ratifies
and confirms the authorization of the Agent to file such financing statements
(and amendments, if any). Debtor hereby authorizes the Agent to adopt on behalf
of Debtor any symbol required for authenticating any electronic filing. In no
event shall Debtor at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming the Agent
and/or Secured Parties as secured party and Debtor as debtor, except as provided
in Section 9-509(d) of the UCC.

(b)           Debtor shall take any other actions reasonably requested by the
Agent from time to time to cause the attachment, perfection and preserve the
first priority of (subject only to certain of the Permitted Liens), and enable
Agent to enforce the security interest of the Agent and/or Secured Parties in
any and all of the Collateral (on behalf of itself and the Secured Parties),
including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the UCC or
other applicable law, to the extent, if any, that Debtor’s signature thereon is
required therefor, (ii) causing the Agent’s name to be notated as secured party
on any certificate of title with respect to Debtor’s titled goods if such
notation is a condition to attachment, perfection or priority of, or ability of
the Agent to enforce, the security interest of Agent and the Secured Parties in
such Collateral, (iii) complying with any provision of any statute, regulation
or treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Agent to enforce, the security interest of Agent and the Secured Parties in
such Collateral, (iv) obtaining the consents and approvals of any governmental
authority or third party, including, without limitation, any consent of any
licensor, lessor or other Person obligated on Collateral, and taking all actions
required by any earlier versions of the UCC or by other law, as applicable in
any relevant jurisdiction and (v) obtaining control agreements with respect to
each of the Debtor’s deposit accounts and investment accounts, if any.
 
3.           Representations and Warranties. Debtor hereby represents and
warrants to Agent and the Secured Parties the following (which shall survive the
execution and delivery of this Agreement):

(a)           Corporate Existence, Power and Authority. Debtor is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified
 
 
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as a foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on Debtor’s financial condition, results of operation or business
or the rights of Agent and the Secured Parties in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Loan
Documents and the transactions contemplated hereunder and thereunder (i) are all
within Debtor’s corporate powers, (ii) have been duly authorized, (iii) are not
in contravention of law or the terms of any Debtor’s certificate of
incorporation or by-laws, or any indenture, agreement or undertaking to which
Debtor is a party or by which Debtor or its property are bound which has not
been waived and (iv) will not result in the creation or imposition of, or
require or give rise to any obligation to grant, any lien, security interest,
charge or other encumbrance upon any property of Debtor other than as
contemplated in this Agreement and the other Loan Documents. This Agreement and
the other Loan Documents to which Debtor is a party constitute legal, valid and
binding obligations of Debtor enforceable in accordance with their respective
terms except to the extent that the enforceability of any or all of the same may
be affected by proceedings in bankruptcy.
 
(b)           Name; State of Organization; Chief Executive Office; Collateral
Locations. The exact legal name of Debtor is as set forth on the signature page
of this Agreement. Debtor has not, during the five years prior to the date of
this Agreement, been known by or used any other corporate or fictitious name.
Debtor is a Delaware corporation. The chief executive office and mailing address
of Debtor and Debtor’s records concerning accounts are located only at the
address identified as such set forth on Schedule 3(b) hereto and its only other
places of business and the only other locations of Collateral, if any, are the
addresses set forth on Schedule 3(b) hereto. Schedule 3(b) hereto correctly
identifies any of such locations which are not owned by Debtor and sets forth
the owners and/or operators thereof.

(c)           Priority of Liens; Title to Properties. The security interests and
liens granted to Agent and the Secured Parties under this Agreement and the
other Loan Documents constitute valid and perfected first priority liens and
security interests in and upon the Collateral junior only to the Permitted Liens
in existence on the date hereof. Debtor has good, valid and merchantable title
to all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except the Permitted
Liens.

(d)           Intellectual Property. Debtor owns or licenses or otherwise has
the right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Debtor does not have any Intellectual Property registered, or subject to
pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule3(d). No event has occurred which permits or would permit after notice
or passage of time or both, the revocation, suspension or termination of such
rights. To Debtor’s knowledge, no slogan or other advertising device, product,
process, method, substance or other Intellectual Property or goods bearing or
using any Intellectual Property presently contemplated to be sold by or employed
by Debtor infringes any patent, trademark, service mark, trade name, copyright,
license or other Intellectual
 
 
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Property owned by any other Person presently and no claim or litigation is
pending or threatened against or affecting Debtor contesting its right to sell
or use any such Intellectual Property.

(e)           Subsidiaries; Affiliates. Debtor does not have any direct or
indirect subsidiaries or affiliates and is not engaged in any joint venture or
partnership.

(f)           Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement and each of the other Loan Documents
shall survive the execution and delivery of this Agreement and shall be
conclusively presumed to have been relied on by Agent and the Secured Parties
regardless of any investigation made or information possessed by the Agent
and/or any Secured Party. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or warranties
which Debtor gave prior to the date hereof, shall now or hereafter give, or
cause to be given, to Agent or any Secured Party.

4.           Affirmative and Negative Covenants.

(a)           Maintenance of Existence.

(i)           Debtor shall at all times preserve, renew and keep in full force
and effect its corporate existence and rights and franchises with respect
thereto and shall use commercially reasonable efforts to maintain in full force
and effect all licenses, trademarks, trade names, approvals, authorizations,
leases, contracts and permits necessary to carry on the business as presently or
proposed to be conducted.

(ii)           Debtor shall not change its name unless each of the following
conditions is satisfied: (1) Agent shall have received not less than thirty (30)
days prior written notice from Debtor of such proposed change in its corporate
name, which notice shall accurately set forth the new name; and (2) Agent shall
have received a copy of the amendment to the certificate of incorporation of
Debtor providing for the name change certified by the Secretary of State of the
State of Delaware as soon as it is available.

(iii)           Debtor shall not change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Agent shall have received not less than
thirty (30) days’ prior written notice from Debtor of such proposed change,
which notice shall set forth such information with respect thereto as Agent may
require and Agent shall have received such agreements as Agent may reasonably
require in connection therewith. Debtor shall not change its type of
organization, jurisdiction of organization or other legal structure.

(b)           New Collateral Locations. Debtor shall not open any new location
within the continental United States unless the Debtor (i) gives Agent thirty
(30) days prior written notice of the intended opening of any such new location
and (ii) executes and delivers, or causes to be executed and delivered, to Agent
such agreements, docu­ments, and instruments as Agent may deem reasonably
necessary or desirable to protect her interests in the Collateral at such
location.

 
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(c)           Compliance with Laws, Regulations, Etc. Debtor shall, and shall
cause each of its subsidiaries to, at all times, comply in all material respects
with all laws, rules, regulations, licenses, approvals, orders and other permits
applicable to it and duly observe all requirements of any foreign, Federal,
State or local governmental authority.

(d)           Protective Provisions. Debtor shall not, and shall not permit any
of its subsidiaries to, directly or indirectly, without the prior consent of the
Required Secured Parties:

(i)  sell or otherwise dispose of any of its assets, other than in connection
with sales or the grants of non-exclusive licenses to customers in the ordinary
course of business and for the disposition of equipment or inventory reasonably
deemed to be obsolete or unusable;
(ii)  amend or waive any provision of the Company’s Certificate of Incorporation
or By-Laws, as amended to date;

(iii)  authorize or issue (by reclassification or otherwise) any equity
security, including any other security convertible into or exchangeable for any
equity security, having rights, preferences or privileges senior to the
Company’s common stock, par value $.001 per share;

(iv)  effect any liquidation, winding up, or merger of the Company, or sell all
or substantially all of the assets of the Company;

(v)   repurchase or redeem any capital stock of the Company, except to
repurchase vested options and other equity from employees as approved from time
to time by the Company’s Board of Directors;

(vi)  materially change the principal business of the Company;

(vii)      incur indebtedness other than ordinary trade credit and indebtedness
that is expressly subordinated to the Notes; or

(viii)     declare or pay any dividend or other distribution in respect of the
Company’s capital stock.

(e)           Encumbrances. Debtor shall not, and shall not permit any of its
subsidiaries to, create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any security interest or lien with respect to any such assets
or properties, except:

(i)           the security interests and liens of Agent and the Secured Parties;
and

 
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(ii)           the Permitted Liens.

                      (f)           Costs and Expenses. Debtor shall pay to
Agent on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
syndication, administration, collection, liquidation, enforcement and defense of
the Obligations, Agent’s and the Secured Parties’ rights in the Collateral, this
Agreement, the other Loan Documents, and all other documents related hereto or
thereto, including any amendments, supplements or consents which may hereafter
be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (i) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes and intangibles taxes, if appl­icable); (ii) costs and expenses and fees
for insurance premiums, appraisal fees and search fees, costs and expenses of
collecting checks and other items of payment, together with Agent’s customary
charges and fees with respect thereto; (iii) costs and expenses of preserving
and protecting the Collateral; (iv) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Agent and the Secured Parties, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement or the other Loan Documents or defending any claims made or threatened
against the Agent or any Secured Party arising out of the transactions
contemplated hereby and thereby (including preparations for and consultations
concerning any such matters); and (v) the reasonable fees and disbursements of
counsel to Agent in connection with any of the foregoing. Such fees, costs and
expenses shall be added to the Obligations and shall accrue interest at the rate
applicable to Obligations under the Notes.

(g)           Insurance. Debtor shall at all times maintain with financially
sound and reputable insurers adequate insurance with respect to the Collateral
in Agent’s reasonable discretion.

5.           Agent’s and Secured Parties’ Rights and Obligations. Debtor shall
remain liable under all accounts receivable, instruments and documents and
general intangibles. Neither Agent nor any Secured Party shall have any
obligation or liability under any accounts receivable, instruments and documents
or general intangibles by reason of this Agreement or the exercise of Agent’s or
any Secured Party’s rights and remedies hereunder, nor shall Agent or any
Secured Party be required to perform the Debtor’s obligations pursuant thereto.
Neither Agent nor any Secured Party shall have any obligation to inquire as to
the sufficiency of any payment received by it on account of any of Debtor’s
accounts receivable or to take any action to collect or enforce the payment of
any account receivable.

6.           Further Assurances. At Agent’s request from time to time, the
Debtor will execute and deliver or cause to be executed and delivered any and
all such further agreements, instruments and documents and take such further
actions as Agent may reasonably deem desirable to evidence, perfect, maintain
and enforce the security interests of Agent and the Secured Parties and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement and the other Loan Documents.

 
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7.           Events of Default. The occurrence of any event of default under the
Notes, this Security Agreement or any of the other Loan Documents shall each
constitute an event of default hereunder (each, an “Event of Default”).

8.           Remedies Upon Default.

(a)           Without limiting the generality of the foregoing, at any time an
Event of Default exists or has occurred and is continuing, the Agent may, at her
option:

(i)           declare all Obligations secured hereby immediately due and
payable, terminate the Loan Documents and/or shall have all of the rights and
remedies of a secured party under the other Loan Documents, the UCC and under
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by Debtor, except as such notice or consent is expressly
provided for hereunder or required by applicable law.

(ii)           notify Debtor’s account or contract debtors (or other obligors
whose obligations to Debtor secure this agreement) of the security interest of
Agent and the Secured Parties and that such account or contract debtors are to
make payments directly to Agent for the benefit of itself and the Secured
Parties. The Agent may send this notice in Debtor’s name or in Agent’s name, and
at Agent’s request, Debtor will join in Agent’s notice, provide written
confirmation of the security interest of Agent and the Secured Parties and
request that payment be sent to Agent. The Agent, on behalf of herself and the
Secured Parties, may enforce this obligation by specific performance. The Agent,
on behalf of herself and the Secured Parties, may collect all amounts due on the
accounts and accounts receivable. Upon and after notification by Agent to
Debtor, Debtor shall hold any proceeds and collections of any of the collateral
in trust for Agent and shall not commingle such proceeds or collections with any
other of Debtor’s funds, and Debtor shall deliver all such proceeds to Agent,
for the benefit of herself and the Secured Parties, immediately upon Debtor’s
receipt thereof in the identical form received and duly endorsed or assigned to
Agent for the benefit of herself and the Secured Parties.

(iii)           with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral.

(iv)           collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral.

(v)           remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose.

(vi)           sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral (including entering into contracts with respect thereto,
public or private sales at any
 
 
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exchange, broker’s board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with Agent having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Debtor, which right or equity of redemption is
hereby expressly waived and released by Debtor.

(vii)           At the request of Agent, the Debtor shall cause the Collateral,
or such portion of the Collateral as Agent may direct, to be assembled for Agent
at such location (including, without limitation, Debtor’s business address) as
Agent may request.

(viii)           proceed directly against Debtor to collect the Obligations
without prior recourse to the Collateral.

(b)           Debtor expressly waives any right to require Agent to marshal
assets in favor of Debtor or any guarantor of the Obligations and agrees that
Agent may proceed against Debtor or any Collateral in such order as Agent shall
determine in her sole an absolute discretion.

(c)           If any of the Collateral is sold or leased by Agent upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Agent, for the benefit of
itself and the Secured Parties. If notice of disposition of Collateral is
required by law, 10 days prior notice by the Agent to Debtor designating the
time and place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be deemed to be
commercially reasonable notice thereof and Debtor waives any other notice. In
the event Agent institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, Debtor waives the posting of any
bond which might otherwise be required. Any such sale may take place from
Debtor’s location or such other location as Agent may designate.

(d)           Debtor hereby irrevocably appoints Agent as its true and lawful
attorney-in-fact with full power of substitution, effective upon the occurrence
and continuation of an Event of Default, to take any of the actions set forth in
this Section 8 in the name of the Debtor or Agent to carry out the terms of this
Agreement and to protect, enforce, preserve or perfect the rights of Agent and
the Secured Parties hereunder and under the other Loan Documents. Such power of
attorney is irrevocable and shall be deemed to be coupled with an interest.

(e)           For the purpose of enabling Agent to exercise the rights and
remedies hereunder, Debtor hereby grants to Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Debtor) to use, assign, license or sublicense any of the
trademarks, service marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by Debtor, wherever the
same maybe located, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.

 
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(f)           Agent may apply the cash proceeds of Collateral actually received
by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations. Debtor shall remain liable to Agent
and the Secured Parties for the payment of any deficiency with interest at the
highest rate provided for in the Notes and all costs and expenses of collection
or enforcement, including reasonable attorneys’ fees and legal expenses.
 
 9.           Agent.

(a)           Appointment, Powers and Immunities. Each Secured Party hereby
designates and appoints the Agent as its agent, commencing on the date hereof
and terminating upon the earlier to occur of the conversion of the Notes to
equity in accordance with the Notes and the payment of the Obligations in full
in immediately available funds, for purposes of, among other things, collecting,
holding and realizing on Collateral for the benefit of itself and the Secured
Parties, perfecting the security interest of Agent and Secured Parties in the
Collateral, distributing the proceeds of such Collateral and any payments
received by Debtor in accordance with the terms hereof, enforcing Secured
Parties’ rights and remedies (in Agent’s discretion or at the direction of the
Required Secured Parties) hereunder and under the other Loan Documents and for
all other acts to be carried out by Agent (or not carried out by Agent in
Agent’s discretion) pursuant to the terms hereof and the other Loan Documents.
Each Secured Party irrevocably authorizes the Agent to exercise all such powers
as are expressly delegated to the Agent hereunder and in the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Agent (i) shall have no duties or responsibilities except those expressly set
forth in this Agreement and in the other Loan Documents, and shall not by reason
of this Agreement or any other Loan Documents be a trustee or fiduciary for any
Secured Party; (ii) shall not be responsible to Secured Parties for any
recitals, statements, representations or warranties contained in this Agreement
or in any of the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any Loan
Document or any other document referred to or provided for herein or therein or
for any failure by Debtor or any other Person to perform any of its obligations
hereunder or thereunder; and (iii) shall not be responsible to Secured Parties
for any action taken or omitted to be taken by her hereunder or under any Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for her own
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by her in good faith. Each
Secured Party authorizes and directs Agent to enter into this Agreement and the
other Loan Documents. Each Secured Party agrees that any action taken by Agent
or Required Secured Parties in accordance with the terms of this Agreement or
the other Loan Documents, and the exercise by Agent or Required Secured Parties
of their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Secured Parties.

(b)           Reliance by Agent. As to any matters not expressly provided for by
this Agreement or any other Loan Documents, Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder or thereunder in
accordance with instructions given by the Required Secured Parties (unless the
authorization/instruction of all Secured Parties is required under the Loan
Documents), and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all Secured Parties.

 
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(c)           Events of Default. Agent shall take such action with respect to
any continuing Event(s) of Default as shall be directed by the Required Secured
Parties to the extent provided for herein; provided, however, that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event(s) of Default, as she shall deem advisable in the
best interest of Secured Parties. Except with the prior written consent of
Agent, none of the Secured Parties may assert or exercise any enforcement right
or remedy in respect of the Obligations, the Notes, this Agreement, any of the
other Loan Documents or the Subscription Agreement as against the Debtor or any
of the Collateral or other property of the Debtor. Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless
she shall receive further assurances to her satisfaction from Secured Parties of
their indemnification obligations under Section 9(d) hereof against any and all
liability and expense that may be incurred by her by reason of taking or
continuing to take any such action.

(d)           Indemnity. Secured Parties agree to indemnify Agent (to the extent
not reimbursed by Debtor hereunder and without limiting any obligations of
Debtor hereunder) ratably, in accordance with their pro rata share of the
Obligations, for any and all claims of any kind and nature whatsoever that may
be imposed on, incurred by or asserted against Agent (including by any Secured
Party) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Documents or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including the costs and expenses
that Agent is obligated to pay hereunder) or the enforcement of any of the terms
hereof or thereof or of any such other documents; provided, however, that no
Secured Party shall be liable for any of the foregoing to the extent it arises
from the gross negligence or willful misconduct of the party to be indemnified
as determined by a final non-appealable judgment of a court of competent
jurisdiction. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement.

(e)           Collateral Matters. Secured Parties hereby irrevocably authorize
Agent, at her option and in her discretion, to release any security interest in,
or lien upon, any of the Collateral (i) upon satisfaction of all of the
Obligations (other than contingent indemnification Obligations to the extent no
claim giving rise thereto has been asserted), or (ii) constituting property
being sold or disposed of in the ordinary course of Debtor’s business, or (iii)
if required or permitted under the terms of any of the other Loan Documents, or
(iv) approved, authorized or ratified in writing by all of Secured Parties or
(v) the consummation of the conversion of a;; pf the Notes to equity in
accordance with the Notes. Except as provided above, Agent will not release any
security interest in, mortgage or lien upon, any of the Collateral without the
prior written authorization of all of Secured Parties. Upon request by Agent at
any time, Secured Parties will promptly confirm in writing Agent’s authority to
release particular types or items of Collateral pursuant to this Section. Agent
shall have no obligation whatsoever to any Secured Party, to confirm or assure
that the Collateral exists or is owned by Debtor or is cared for,
 
 
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protected or insured or has been encumbered, or that the liens and security
interests granted to Agent pursuant hereto or any of the Loan Documents or
otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner she may
deem appropriate, in her discretion, given Agent’s own interest in the
Collateral as a Secured Party and that Agent shall have no duty or liability
whatsoever to any other Secured Party. Each Secured Party hereby appoints Agent
and each other Secured Party as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral of Agent in assets
which, in accordance with Article 9 of the UCC can be perfected only by
possession (or where the security interest of a secured party with possession
has priority over the security interest of another secured party) and Agent and
each Secured Party hereby acknowledges that it holds possession of any such
Collateral for the benefit of Agent as secured party. Should any Secured Party
obtain possession of any such Collateral, such Secured Party shall notify Agent
thereof, and, promptly upon Agent’s request therefor shall deliver such
Collateral to Agent or in accordance with Agent’s instructions.

(f)           Application of Proceeds of Collateral and Other Payments. Agent
shall apply the proceeds of Collateral and any other payments that she receives
on behalf of the Secured Parties as follows: first, to pay any fees,
indemnities, costs or expense reimbursements then due to Agent and Secured
Parties from Debtor; second, to pay interest due in respect of the Notes and the
other Obligations (on a pro rata basis among the Agent and the Secured Parties
with respect to the amount of Obligations owed to Agent and the Secured
Parties); third, to pay principal due in respect of the Notes and the other
Obligations (on a pro rata basis among the Agent and the Secured Parties with
respect to amount of Obligations owed to Agent and the Secured Parties).

10.           Waiver of Counterclaims. Debtor waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the other Loan Documents, the Obligations, the Collateral or any
matter arising therefrom or relating hereto or thereto.

11.           Indemnity.  Debtor shall indemnify and hold Agent and the Secured
Parties (each, an “Indemnitee”) harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses (including attorneys’ fees and
expenses) imposed on, incurred by or asserted against it in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Loan Documents or any undertaking
or proceeding related to any of the transactions contemplated hereby or any act,
omission, event or transaction related or attendant thereto, including amounts
paid in settlement, court costs, and the fees and expenses of counsel except
that Debtor shall not have any obligation under this Section to indemnify the
Indemnitee with respect to a matter covered hereby resulting from the gross
negligence or willful misconduct of the Indemnitee as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction.  The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement.

 
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12.           Notices.  All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one business day after sending; and if by certified mail, return
receipt requested, five days after mailing. All notices, requests and demands
upon the parties are to be given to the parties hereto at the addresses
referenced on the signature pages hereto (unless each of the parties hereto are
notified of an address change in accordance with this Section).

13.           Waiver of Jury Trial. DEBTOR, AGENT AND THE SECURED PARTIES EACH
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. DEBTOR, AGENT AND THE SECURED PARTIES EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT DEBTOR, AGENT OR ANY SECURED
PARTY MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.

14.           Miscellaneous. Except as specifically provided in the Notes, none
of the terms or provisions of this Agreement or the other Loan Documents may be
waived, altered, modified or amended except by an instrument in writing, duly
executed by Agent (upon the consent of the Required Secured Parties) and the
Debtor. The rights and remedies of Agent and the Secured Parties hereunder,
under the Loan Documents or under any other agreement or instrument shall be
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law. This Agreement shall be governed by
the laws of the Commonwealth of Massachusetts. This Agreement shall be
assignable by Agent and any Secured Party without Debtor’s consent and shall be
binding upon and shall inure to the benefit of Debtor, Agent and the Secured
Parties and their respective successors and assigns; provided, however, that
Debtor may not assign or transfer any rights or obligations hereunder without
the prior written consent of Agent and each Secured Party. This Security
Agreement is supplemental to the Notes. In the event of any irreconcilable
conflict between the provisions of this Agreement and the Notes the provisions
of this Agreement shall control. This Agreement, the other Loan Documents, any
supplements hereto or thereto, and any instru­ments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions,
 
 
13

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representations, warranties, commitments, proposals, offers and contracts
concerning the subject matter hereof, whether oral or written. This Agreement or
any of the other Loan Documents may be executed in any number of counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement or any of the other Loan Documents by telefacsimile shall have
the same force and effect as the delivery of an original executed counterpart of
this Agreement or any of such other Loan Documents (other than the Notes).

[Remainder of Page Intentionally Left Blank]

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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EXECUTED an instrument under seal as of April 21, 2010.

DEBTOR:
 
AGENT:
NATIONAL DATACOMPUTER, INC.
 
 
By:      ______________________________________
Name: Bruna Bucacci
Title:    President and Chief Executive Officer
 
 
 
 
 
_____________________________________
Bruna Bucacci

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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NATIONAL DATACOMPUTER, INC.
 
Counterpart Signature Page to
Security Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized officers under seal, all as of the day and
year first above written.
 
 

 
SECURED PARTY:
                      By: _____________________________________            Name:
           Title:                 ADDRESS: _______________________________      
                         _______________________________           TELEFAX:
_______________________________        

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Schedule 3(b)
 
Collateral Locations

National Datacomputer, Inc.
19B Crosby Drive
Bedford, Massachusetts 01730

Laptop computers and other miscellaneous equipment
are in the possession of employees.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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Schedule 3(c)

Security Interests

None

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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Schedule 3(d)

Registered Trademarks
 

 

 
Registered
U.S. Trademark
Registration
Number
 
               
Routerrider LE
3197629
               
NDI NATIONAL DATACOMPUTER, INC.
2595347
               
Datacomputer
2438569
               
Route Rider
2246404
               
National Datacomputer
1686078
             

 
 
 
 
 
 
 
 
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