. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)(1)
Glasgal Communications, Inc.
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(Name of issuer)
Common Stock, $.001 par value per share
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(Title of class of securities)
376817 10 2
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(CUSIP number)
ROBERT FRIEDMAN, ESQUIRE
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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(Name, address and telephone number of person
authorized to receive notices and communications)
October 31, 1996
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
/ /.
Check the following box if a fee is being paid with the statement / /.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7).
Note. six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Continued on following pages)
(Page 1 of 10 Pages)
Exhibit Index on Page 9
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(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
CHRISTOPHER J. CAREY
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,718,518(1)(2)
OWNED BY -------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
-------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,718,518(1)(2)
-------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,718,518(1)(2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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(1) Includes (i) 96,296 shares held by the Amy Carey GRAT, a trust formed
for the benefit of Mr. Carey's daughter, and (ii) 96,296 shares held by the
Christopher Carey GRAT, a trust formed for the benefit of Mr. Carey's son.
Christopher J. Carey has full voting and dispositive power over all such shares.
(2) Excludes 118,518 shares beneficially owned by Mr. Carey's wife, Mary
Carey, of which Mr. Carey disclaims beneficial ownership.
<PAGE>
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AMY CAREY GRAT
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OR ORGANIZATION
NEW JERSEY
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 96,296
OWNED BY --------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
--------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
96,296
--------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
96,296
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than 1%
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14 TYPE OF REPORTING PERSON*
OO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
CHRISTOPHER CAREY GRAT
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OR ORGANIZATION
NEW JERSEY
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 96,296
OWNED BY --------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 0 -
--------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
96,296
--------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
96,296
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than 1%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. SECURITY AND ISSUER.
This statement relates to shares (the "Shares") of the common
stock, par value $.001 per share ("Common Stock"), of Glasgal Communications,
Inc., a Delaware corporation (the "Issuer"). The principal executive offices of
the Issuer are located at 151 Veterans Drive, Northvale, New Jersey 07647.
Item 2. IDENTITY AND BACKGROUND.
(a) This Statement is filed, pursuant to Rule 13d- 1(f)(1)
under the Securities Exchange Act of 1934, as amended (the "Act") by Christopher
J. Carey ("Carey"), Amy Carey GRAT, a trust formed for the benefit of Carey's
daughter, and Christopher Carey GRAT, a trust formed for the benefit of Carey's
son (the Amy Carey GRAT and the Christopher Carey GRAT are collectively referred
to hereinafter as the "Trusts").
Each of the foregoing are referred to as a "Reporting Person"
and collectively as the "Reporting Persons". By virtue of his position as the
sole trustee of each of the Trusts, Carey has full voting and dispositive power
of all shares held by the Trusts. Accordingly, the Reporting Persons are hereby
filing a joint Schedule 13D.
(b) The principal business address of each Reporting Person is
c/o Datatec Industries Inc., 1633 Littleton Road, Parsippany, New Jersey 07054.
(c) The principal business of Carey is President and Chief
Executive Officer of Datatec Industries Inc., a subsidiary of which the Issuer
owns approximately 98.5% of the issued and outstanding capital stock.
(d) No Reporting Person has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) No Reporting Person has, during the last five years, been
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Carey is a citizen of the United States of America. Each
of the Trusts were organized under the laws of the State of New Jersey.
<PAGE>
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Shares were acquired by the Reporting Persons pursuant to
the acquisition of Datatec Industries Inc., a New Jersey corporation
("Datatec"), by the Issuer. The Reporting Persons, as former shareholders of
Datatec, acquired the Shares as consideration for their respective equity
interests in Datatec pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") which is attached hereto as an Exhibit.
Item 4. PURPOSE OF TRANSACTION.
The Reporting Persons acquired the shares of Common Stock that
are reported in Item 5 hereof for investment purposes. Pursuant to the terms of
the Stock Purchase Agreement, (i) the number of directors constituting the
entire Board of Directors of the Issuer will be increased to eight, and Carey
will be elected to fill the vacancy thereby created until his successor is duly
elected and qualified, and (ii) the Issuer has agreed to file a registration
statement to register a portion of the shares of Common Stock beneficially owned
by the Reporting Persons. Other than as described above, each of the Reporting
Persons has no present plans or intentions that would result in or relate to any
of the transactions required to be described in Item 4 of Schedule 13D.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate percentage of Shares of Common Stock
reported owned by each person named herein is based upon 20,564,146 shares of
the Issuer's Common Stock outstanding as of November 5, 1996. As of such date,
Carey beneficially owned 3,718,518(1)(2) shares of the Issuer's Common Stock
representing approximately 18.1% of the shares of the Issuer's Common Stock
issued and outstanding as of such date. As of November 5, 1996, each of the
Trusts beneficially owned 96,296 shares of the issuers Common Stock representing
less than 1% of the Issuer's Common Stock issued and outstanding as of such
date.
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(1) Includes (i) 96,296 shares held by the Amy Carey GRAT, a trust
formed for the benefit of Carey's daughter, and (ii) 96,296 shares held by the
Christopher Carey GRAT, a trust formed for the benefit of Carey's son. Carey has
full voting and dispositive power over all such shares.
(2) Excludes 118,518 shares beneficially owned by Mr. Carey's
wife, Mary Carey, of which Mr. Carey disclaims beneficial ownership.
<PAGE>
(b) Carey currently has the sole power to vote and dispose of
all of the shares of the Issuer's Common Stock referred to in paragraph (a)
above.
(c) See "Item 3. Source and Amount of Funds" above for
information as to the Shares of the Issuers Common Stock recently acquired by
the Reporting Persons. Except as disclosed therein, the Reporting Persons have
not acquired, within the past 60 days, any shares of the Issuer's Common Stock.
(d) No person other than the Reporting Persons have the right
to receive or power to direct the receipt of dividends from, or proceeds from
the sale of the Shares that are subject to this Schedule 13D.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
None.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement
2. Stock Purchase Agreement dated October 31, 1996 by
and among Glasgal Communications, Inc., Datatec
Industries Inc. and certain shareholders listed on
Schedule 1.1 thereto. (The Reporting Persons hereby
agree to furnish supplementally a copy of any omitted
schedule or exhibit to such agreement to the
Commission upon request).
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: November 7, 1996
/S/ CHRISTOPHER CAREY
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CHRISTOPHER J. CAREY
AMY CAREY GRAT
By: /S/ CHRISTOPHER CAREY
------------------------------------
Christopher Carey, Trustee
CHRISTOPHER CAREY GRAT
By: /S/ CHRISTOPHER CAREY
------------------------------------
Christopher Carey, Trustee
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
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1. Joint Filing Agreement 10
2. Stock Purchase Agreement 11
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f)(1)(iii) under the Securities
Exchange Act of 1934, as amended, the persons named below agree to the joint
filing on behalf of each of them of a Statement on Schedule 13D dated October
31, 1996 (including amendments thereto) with respect to the Common Stock of
Glasgal Communications, Inc. This Joint Filing Agreement shall be filed as an
Exhibit to such Statement.
Dated: November 7, 1996
/S/ CHRISTOPHER CAREY
----------------------------------------
CHRISTOPHER J. CAREY
AMY CAREY GRAT
By: /S/ CHRISTOPHER CAREY
------------------------------------
Christopher Carey, Trustee
CHRISTOPHER CAREY GRAT
By: /S/ CHRISTOPHER CAREY
------------------------------------
Christopher Carey, Trustee
STOCK PURCHASE AGREEMENT
By and Among
Datatec Industries Inc.,
Those Stockholders Listed on Schedule 1.1 Hereto
and
Glasgal Communications, Inc.
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Dated as of October 31, 1996
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<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
SALE OF SHARES
1.1 Delivery of Shares.............................................1
1.2 Purchase Consideration.........................................1
ARTICLE II
CLOSING
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DATATEC AND CAREY
3.1 Corporate Organization; Requisite Authority to
Conduct Business; Articles of Incorporation and
By-Laws...................................................2
3.2 Capitalization and Shareholdings...............................3
3.3 Subsidiaries, etc..............................................3
3.4 Authority Relative to and Validity of this
Agreement.................................................3
3.5 Required Filings and Consents; No Conflict.....................4
3.6 Financial Statements...........................................5
3.7 Absence of Certain Changes and Events..........................5
3.8 Taxes and Tax Returns..........................................6
3.9 Employee Benefit Plans.........................................7
3.10 Title to Property..............................................7
3.11 Trademarks, Patents and Copyrights.............................8
3.12 Legal Proceedings, Claims, Investigations, etc.................9
3.13 Insurance......................................................9
3.14 Material Contracts............................................10
3.15 Certain Transactions..........................................10
3.16 Inventory.....................................................11
3.17 Receivables...................................................11
3.18 Broker........................................................11
3.19 Environmental Matters.........................................11
3.20 Illegal Payments..............................................12
3.21 Compliance with Law...........................................12
3.22 Business Relationships........................................13
3.23 Suppliers and Customers.......................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.1 Capitalization................................................13
4.2 Authority Relative to and Validity of this
Agreement................................................13
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<PAGE>
PAGE
4.3 Brokers' or Finders' Fees.....................................14
4.4 Sellers' Addresses, Access to Information,
Experience, Etc..........................................14
4.5 Purchase Entirely for Own Account........................14
4.6 Restricted Securities.........................................14
4.7 Legends.......................................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1 Corporate Organization; Requisite Authority to
Conduct Business.........................................15
5.2 Execution and Delivery........................................16
5.3 No Conflicts; Absence of Defaults.............................16
5.4 Investment Intent.............................................17
5.5 Capitalization................................................17
5.6 Subsidiaries..................................................17
5.7 SEC Reports and Financial Statements..........................17
5.8 No Undisclosed Liabilities....................................18
5.9 Broker........................................................18
ARTICLE VI
COVENANTS OF DATATEC, THE SELLERS AND THE BUYER
6.1 Covenants of Datatec and Carey Regarding Conduct
of Business Operations Pending the Closing...............18
6.2 No Other Negotiations.........................................20
6.3 Options.......................................................21
6.4 Board Representative..........................................21
6.5 Removal of Carey as Guarantor.................................21
6.6 Capital Contribution..........................................21
6.7 Carey Lock-Up.................................................21
6.8 Compliance with Requirements of Datatec's Lender..............22
6.9 Certain Operations............................................22
6.10 Bridge Loan...................................................22
6.11 Additional Covenants of Datatec, the Sellers and
the Buyer................................................23
ARTICLE VII
REGISTRATION OF GLASGAL COMMON SHARES
7.1 Filing of Registration Statements.............................24
7.2 Registration Procedures.......................................26
7.3 Expenses of Registration......................................28
7.4 Sellers' Agreements...........................................29
7.5 Exception to Filing of Registration Statement.................29
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<PAGE>
PAGE
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
8.1 Representations and Warranties True...........................30
8.2 Performance of Covenants......................................30
8.3 No Proceedings................................................30
8.4 Consents and Approvals........................................30
8.5 Employment Agreements.........................................30
8.6 Opinion of the Buyer's Counsel................................30
8.7 Material Changes..............................................31
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
9.1 Representation and Warranties True............................32
9.2 Performance of Covenants......................................32
9.3 No Proceedings................................................32
9.4 Consents and Approvals........................................32
9.5 Employment Agreement..........................................32
9.6 Opinion of Datatec's and the Sellers' Counsel.................32
9.7 Material Changes..............................................33
9.8 Requisite Authority to Conduct Business. ...................33
9.9 Proprietary Information.......................................33
9.10 Lease Amendment...............................................33
9.11 Termination of Datatec Options................................33
9.12 Pooling Letter................................................33
9.13 Bank Agreement................................................34
9.14 Plan C, L.L.C. Agreement......................................34
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Carey and Koch.............................34
10.2 Indemnification by the Sellers................................35
10.3 Notice of Claim; Defense of Action............................35
10.4 Indemnification by the Buyer..................................36
10.5 Survival......................................................36
10.6 Limitations...................................................36
10.7 Reduction for Insurance.......................................37
10.8 Contribution..................................................37
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<PAGE>
PAGE
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination..................................................38
11.2 Effect of Termination........................................39
11.3 Amendment....................................................39
ARTICLE XII
MISCELLANEOUS
12.1 Expenses.....................................................39
12.2 Notices......................................................39
12.3 Entire Agreement.............................................40
12.4 Binding Effect, Benefits, Assignments........................40
12.5 Applicable Law...............................................40
12.6 Jurisdiction.................................................40
12.7 Headings.....................................................41
12.8 Counterparts.................................................41
ANNEXES
Annex A Employment Agreement of Christopher Carey
Annex B Employment Agreement of Raymond Koch
SCHEDULES
1.1 Datatec Stockholders
3.2 Options
3.5 Consents
3.4 Restrictions
3.6 Liabilities
3.7 Certain Changes
3.8 Tax Returns
3.9 Employee Benefits
3.10 Property
3.11 Datatec Rights
3.12 Legal Proceedings
3.13 Insurance
3.14 Contracts
3.15 Certain Transactions
3.16 Obsolete Inventory
3.17 Non-Collectible Receivables
3.18 Datatec Brokers
3.19 Environmental Matters
3.22 Business Relationships
3.23 Suppliers and Customers
4.3 Sellers Broker
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<PAGE>
4.4 Sellers Investment Experience
5.5 Rights to Acquire the Buyer's Securities
5.9 Buyer Brokers
6.1 Stock Redemptions
6.3 Replacement Options
6.5 Datatec Obligations Guaranteed by Carey and Mary Carey
9.6 Form of Sellers Legal Opinion
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
October 31, 1996, by and among Datatec Industries Inc., a New Jersey corporation
("Datatec"), each of the stockholders listed on SCHEDULE 1.1 hereto (each a
"Seller" and collectively the "Sellers") and Glasgal Communications, Inc., a
Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Sellers own an aggregate of 6,750,000 shares (the
"Shares") of Datatec common stock, no par value ("Datatec Common Stock"), which
constitutes approximately 98.5% of the issued and outstanding capital stock of
Datatec; and
WHEREAS, the Buyer desires to purchase, and the Sellers desire
to sell all of the Shares, representing approximately 98.5% of the issued and
outstanding capital stock of Datatec; and
WHEREAS, for accounting purposes it is intended that the
transactions contemplated hereby shall be accounted for as a pooling of
interests transaction under United States generally accepted accounting
principles ("U.S. GAAP");
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, and mutual covenants and agreements herein
contained, the parties hereby agree as follows:
ARTICLE I
SALE OF SHARES
Section 1.1 DELIVERY OF SHARES. On the terms and subject to
the conditions of this Agreement, on the Closing Date (as defined below), the
Buyer shall purchase such number of shares as set forth under the column
"Datatec Shares Held" on SCHEDULE 1.1 hereto from each Seller for an amount
equal to the Purchase Price (as defined below) and each Seller shall sell his
Shares to the Buyer. On the Closing Date, each Seller will transfer, assign,
convey and deliver to the Buyer a certificate or certificates representing all
of his Shares. Each of the certificates shall be duly endorsed for transfer or
accompanied by appropriate stock powers duly executed, in either case in favor
of the Buyer.
Section 1.2 PURCHASE CONSIDERATION. The purchase price for
each Seller's Shares (the "Purchase Price") shall consist of such number of
shares as set forth under the column "Glasgal Shares to be Received" on SCHEDULE
1.1 hereto, for an aggregate payment by the Buyer of 4,000,000 shares (the
"Glasgal
<PAGE>
Common Shares") of common stock, $.001 par value per share ("Glasgal Common
Stock").
ARTICLE II
CLOSING
The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place as soon as practicable after satisfaction or
waiver of all conditions set forth herein at the offices of Olshan Grundman
Frome & Rosenzweig LLP, 505 Park Avenue, New York, New York 10022, or at such
other time and place as the Buyer and the Sellers shall agree (the date on which
such Closing occurs being herein referred to as the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DATATEC AND CAREY
Each of Datatec, Carey and Koch, jointly and severally,
represent and warrant to the Buyer as follows:
Section 3.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO
CONDUCT BUSINESS; ARTICLES OF INCORPORATION AND BYLAWS. Datatec and each
Subsidiary (as defined in Section 3.3 hereof) is a corporation duly organized,
validly existing and in good standing under its respective jurisdictions of
incorporation. Datatec and each Subsidiary has provided the Buyer with true and
complete copies of its articles of incorporation (certified by the appropriate
official of its respective jurisdiction of incorporation) and By-laws (certified
by the Secretaries of Datatec and each Subsidiary) as in effect on the date
hereof. Prior to the Closing, the minute books of Datatec and each Subsidiary
will be delivered to the Buyer, and will contain true and complete records of
all meetings and consents in lieu of meeting of the Board of Directors and
stockholders of Datatec and each Subsidiary since the date of such corporation's
inception, which accurately reflect in all material respects all transactions
referred to in such minutes and consents in lieu of meeting, except where such
failure would not cause a Datatec Material Adverse Effect (as defined below).
Datatec and each Subsidiary has all corporate power and authority to own,
operate and lease its properties and to carry on its business as the same is now
being conducted, and is duly qualified or licensed to do business and is in good
standing as a foreign corporation in every jurisdiction in which the conduct of
its business or the ownership or leasing of its properties requires it to be so
qualified or licensed, except where the failure to be so qualified or licensed,
individually or in the aggregate, will not have a material adverse effect on the
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<PAGE>
business, properties, prospects, assets, liabilities, financial condition or
operations of Datatec and the Subsidiaries, taken as a whole (a "Datatec
Material Adverse Effect").
Section 3.2 CAPITALIZATION AND SHAREHOLDINGS. The authorized
capital stock of Datatec consists of 10,000,000 shares of Datatec Common Stock,
6,850,000 of which are issued and outstanding on the date hereof. The capital
stock of Datatec is duly authorized and all issued capital stock has been duly
and validly issued and is fully paid and non-assessable and free of preemptive
rights. Except as set forth on SCHEDULE 3.2, Datatec does not have outstanding,
and is not bound by or subject to, any subscription, option, warrant, call,
right, contract, commitment, agreement, understanding or arrangement to issue
any additional shares of capital stock of Datatec, including any right of
conversion or exchange under any outstanding security or other instrument, and
no shares are reserved for issuance for any purpose. In addition, the options
set forth in Schedule 3.2 shall be terminated by Datatec on or prior to the
Closing Date or upon the issuance of the Replacement Options (as defined below)
pursuant to Section 6.3.
Section 3.3 SUBSIDIARIES, ETC. Datatec does not own (directly
or indirectly) any equity interest in any corporation, partnership, limited
liability company, joint venture, affiliate, association or other entity, other
than Datatec Industries Canada, Ltd., an Ontario corporation, Datatec Industries
UK, Limited, and Ultimate S.A., a French corporation (each a "Subsidiary" and
collectively the "Subsidiaries"). With respect to each Subsidiary Datatec will
own at or prior to closing 100% of the issued and outstanding capital stock and
except as set forth on SCHEDULE 3.3, there are no subscriptions, options,
warrants, calls, rights, contracts, commitments, agreements, understandings or
arrangements to issue any additional shares of capital stock, including any
right of conversion or exchange under any outstanding security or other
instrument, and no shares are reserved for issuance for any purpose. Datatec
also owns a 15% equity interest in each of Quadrix Corporation, an Illinois
corporation and ShopperTrak Limited, a United Kingdom corporation.
Section 3.4 AUTHORITY RELATIVE TO AND VALIDITY OF THIS
AGREEMENT. Datatec has full corporate power and authority to execute and deliver
this Agreement and to assume and perform all of its obligations hereunder. The
execution and delivery of this Agreement by Datatec and the performance by
Datatec of its obligations hereunder have been duly authorized by its Board of
Directors and no further authorization on the part of Datatec is necessary to
authorize the execution and delivery by it of, and the performance of its
obligations under, this Agreement. Except as set forth on SCHEDULE 3.4, there
are no corporate, contractual, statutory or other restrictions of any kind upon
the
-3-
<PAGE>
power and authority of Datatec to execute and deliver the Agreements and to
consummate the transactions contemplated hereunder and thereunder and no action,
waiver or consent by any federal (United States or otherwise), state, municipal
or other governmental department, commission or agency ("Governmental
Authority") is necessary to make the Agreements valid instruments binding upon
Datatec in accordance with their respective terms. This Agreement has been duly
executed and delivered by Datatec and constitutes a legal, valid and binding
obligation of Datatec, enforceable in accordance with its terms, except (i) as
such enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (ii) as such obligations are subject to general principles of equity,
and (iii) as rights to indemnity may be limited by federal or state securities
laws or by public policy.
Section 3.5 REQUIRED FILINGS AND CONSENTS; NO CONFLICT. Except
as set forth on SCHEDULE 3.5, neither Datatec nor any Subsidiary is required to
submit any notice, report or other filing with any Governmental Authority in
connection with the execution, delivery or performance of this Agreement or the
Agreements. Except as disclosed on SCHEDULE 3.5 hereto, the execution, delivery
and performance of the Agreements by Datatec and the consummation of the
transactions contemplated hereby and thereby do not and will not (a) conflict
with or violate any law, regulation, judgment, order or decree binding upon
Datatec or any Subsidiary, (b) conflict with or violate any provision of the
certificate of incorporation or Bylaws of Datatec or any Subsidiary, or (c)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of Datatec or any
Subsidiary pursuant to, or cause or permit the acceleration prior to maturity of
any amounts owing under, any indenture, loan agreement, mortgage, deed of trust,
lease, contract, license, franchise or other agreement or instrument to which
Datatec or any Subsidiary is a party or which is or purports to be binding upon
Datatec or the Subsidiaries or by which any of their properties are bound,
except for conflicts, breaches, defaults, events of default or impositions that
would not have a Datatec Material Adverse Effect. The execution, delivery and
performance of the Agreements by Datatec and the consummation of the
transactions contemplated hereby and thereby will not result in the loss of any
license, franchise, legal privilege or permit possessed by Datatec or the
Subsidiaries or give a right of termination to any party to any agreement or
other instrument to which Datatec or any of the Subsidiaries is a party or by
which any of its properties are bound, except for losses or rights of
termination that would not have a Datatec Material Adverse Effect.
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Section 3.6 FINANCIAL STATEMENTS. The following financial
statements, together with the notes thereto, have been previously delivered to
the Buyer (collectively the "Financial Statements"):
(i) consolidated balance sheets of Datatec and the
Subsidiaries as of April 30, 1995, April 30, 1996 and July 31,
1996 (the "Balance Sheets");
(ii) consolidated statements of income and retained earnings
of Datatec and the Subsidiaries for the twelve month periods
ended April 30, 1994, April 30, 1995, and April 30, 1996 and
the three month period ended July 31, 1996 (the "Income
Statements"); and
(iii) consolidated statements of cash flows of Datatec and the
Subsidiaries for the twelve month periods ended April 30,
1994, April 30, 1995, and April 30, 1996 and the three month
period ended July 31, 1996
(the "Cash Flow Statements").
The Financial Statements and notes thereto fairly present in
all material respects the financial condition of Datatec and its consolidated
Subsidiaries as of the dates thereof with respect to the Balance Sheets and as
to the periods then ended with respect to the Income Statements and Cash Flow
Statements and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied. Except as disclosed on
SCHEDULE 3.6 hereto, neither Datatec nor any Subsidiary had at July 31, 1996 any
liability or obligation of any kind or manner, either liquidated, unliquidated,
direct, accrued, absolute, contingent or otherwise, whether due or to become
due, which was required to be reflected by generally accepted accounting
principles consistently applied, and which were not accurately reflected in the
Financial Statements.
Section 3.7 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as
set forth on SCHEDULE 3.7, since July 31, 1996, there has not been, with respect
to Datatec or any Subsidiary, (i) any Datatec Material Adverse Effect; (ii) any
strike, picketing, work slowdown or labor disturbance; (iii) any material
damage, destruction or loss (whether or not covered by insurance) with respect
to any assets or properties; (iv) any redemption or other acquisition by it of
common stock or any declaration or payment of any dividend or other distribution
in cash, stock or property with respect thereto except as set forth in Section
6.1(b)(i) and distributions to shareholders necessary to pay taxes at the 42%
marginal rates of income allocable to the shareholders from May 1, 1996 through
the Closing; (v) any entry into any material commitment or transaction
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business or as contemplated by this Agreement; (vi)
any
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transfer, assignment or sale of, or rights granted under, any material leases,
licenses, agreements, patents, trademarks, trade names, copyrights or other
assets other than those transferred, assigned, sold or granted in the ordinary
course of business and consistent with past practice; (vii) any mortgage,
pledge, security interest or imposition of any other encumbrance on any assets
or properties except in the ordinary course of business; any payment of any
debts, liabilities or obligations ("Liabilities") of any kind other than
Liabilities currently due; any cancellation of any debts or claims or
forgiveness of amounts owed to Datatec or any Subsidiary; or (viii) any change
in accounting principles or methods (except insofar as may have been required by
a change in U.S. GAAP). Since July 31, 1996, Datatec and each Subsidiary has
conducted its business only in the ordinary course and in a manner consistent
with past practice and has not made any material change in the conduct of its
business or operations except as agreed to in writing by the Buyer or otherwise
disclosed herein.
Section 3.8 TAXES AND TAX RETURNS. (a) For purposes of this
Agreement, (i) the term "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, property, sales, license, payroll and franchise taxes, imposed by the
United States, or any state, local or foreign government or subdivision or
agency thereof whether computed on a unitary, combined or any other basis; and
such term shall include any interest and penalties or additions to tax; and (ii)
the term "Tax Return" shall mean any report, return or other information
required to be filed with, supplied to or otherwise made available to a taxing
authority in connection with Taxes.
(b) Except as set forth on SCHEDULE 3.8, Datatec and each
Subsidiary has (i) duly filed with the appropriate taxing authorities all Tax
Returns required to be filed by or with respect to Datatec and each Subsidiary,
or are properly on extension and all such duly filed Tax Returns are true,
correct and complete in all material respects, and (ii) paid in full or made
adequate provisions for on its balance sheet (in accordance with GAAP) all Taxes
shown to be due on such Tax Returns. There are no liens for Taxes upon the
assets of Datatec or any Subsidiary except for statutory liens for current Taxes
not yet due and payable or which may thereafter be paid without penalty or are
being contested in good faith. Except as set forth on SCHEDULE 3.8, neither
Datatec nor any Subsidiary has received any notice of audit, is undergoing any
audit of its Tax Returns, or has received any notice of deficiency or assessment
from any taxing authority with respect to liability for Taxes of Datatec or such
Subsidiary which have not been fully paid or finally settled. There have been no
waivers of statutes of limitations by Datatec or any Subsidiary with respect to
any Tax Returns which relate to Datatec or such Subsidiary. Neither Datatec nor
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any Subsidiary has filed a request with the Internal Revenue Service or any
other taxing authority for changes in accounting methods within the last two
years which change would effect the accounting for tax purposes, directly or
indirectly, of Datatec or such Subsidiary.
Section 3.9 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.9 hereto
comprises a listing of each bonus, stock option, stock purchase, benefit, profit
sharing, savings, retirement, liability, insurance, incentive, deferred
compensation, and other similar fringe or employee benefit plans, programs or
arrangements for the benefit of or relating to, any employee of, or independent
contractor or consultant to, and all other compensation practices, policies,
terms or conditions, whether written or unwritten (the "Datatec Employee Plans")
which Datatec or any Subsidiary presently maintains, to which Datatec or any
Subsidiary presently contributes or under which Datatec or any Subsidiary has
any liability and which relates to employees or independent contractors of
Datatec or any Subsidiary. Datatec Employee Plans administered by Datatec or any
Subsidiary have been administered in all material respects in accordance with
all requirements of applicable law and terms of each such plan. Each Datatec
Employee Plan that is required or intended to be qualified under applicable law
or registered or approved by a governmental agency or authority, has been so
qualified, registered or approved by the appropriate governmental agency or
authority and, to the best of Datatec's knowledge, nothing has occurred since
the date of the last qualification, registration or approval to adversely
affect, or cause, the appropriate governmental agency or authority to revoke
such qualification, registration or approval. Except as set forth in SCHEDULE
3.9 all contributions (including premiums) in material amounts required by law
or contract to have been made or approved by Datatec or any Subsidiary under or
with respect to Datatec Employee Plans have been paid or accrued by Datatec or
such Subsidiary. Without limiting the foregoing, there are no material unfunded
liabilities under any Datatec Employee Plan except as set forth in SCHEDULE 3.9.
Neither Datatec nor any Subsidiary has received notice of any investigations,
litigation or other enforcement actions against Datatec or such Subsidiary with
respect to any of the Datatec Employee Plans. Except as set forth in SCHEDULE
3.9, there are no pending actions, suits or claims by former or present
employees of Datatec or any Subsidiary (or their beneficiaries) with respect to
Datatec Employee Plans or the assets or fiduciaries thereof (other than routine
claims for benefits).
Section 3.10 TITLE TO PROPERTY. Datatec and each Subsidiary
has good and marketable title, or valid leasehold rights (in the case of leased
property), to all real property and all personal property purported to be owned
or leased by it or used in the operation of its business, free and clear of all
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encumbrances, excluding (i) liens for taxes, fees, levies, imposts, duties or
governmental charges of any kind which are not yet delinquent or are being
contested in good faith by appropriate proceedings which suspend the collection
thereof; (ii) liens for mechanics, materialmen, laborers, employees, suppliers
or other which are not yet delinquent or are being contested in good faith by
appropriate proceedings; (iii) liens created in the ordinary course of business
in connection with the leasing or financing of office, computer and related
equipment and supplies; (iv) easements and similar encumbrances ordinarily
created for fuller utilization and enjoyment of property; (v) liens set forth on
SCHEDULE 3.10; and (vi) liens or defects in title or leasehold rights that
either individually or in the aggregate do not and will not have a Datatec
Material Adverse Effect. All of such owned or leased property with a value in
excess of $10,000 is listed on SCHEDULE 3.10 hereto, as well as a brief
description of each such property, which if leased shall include the termination
date and the conditions of renewal of such lease.
Section 3.11 TRADEMARKS, PATENTS AND COPYRIGHTS. (a) For
purposes of this Agreement, the term "Datatec Rights" shall mean all worldwide
industrial and intellectual property rights, including, without limitation, each
patent, patent rights, license, patent application, trade name, trademark, trade
name and trademark registration, copyright, copyright registration, copyright
application, service mark, brand mark and brand name, trade secrets relating to
or arising from any proprietary process, formula, source or object code, owned
or possessed by Datatec and each Subsidiary. Datatec and each Subsidiary owns or
has the right to use, sell or license all Datatec Rights and such Datatec Rights
are sufficient for the conduct of the businesses of Datatec and each Subsidiary
as such businesses are being conducted on the date hereof or proposed to be
conducted. SCHEDULE 3.11 hereto lists each patent, patent right, patent
application, tradename registration, trademark registration, copyright
registration, copyright application, source and object code owned or possessed
by Datatec and each Subsidiary;
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any instrument or agreement governing any Datatec Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Datatec Rights or impair the right of Datatec
to use, sell or license any Datatec Rights or any portion thereof;
(c) Neither the manufacture, marketing, license, sale or
intended use of any product currently licensed or sold by Datatec or any
Subsidiary or currently under development by Datatec or any Subsidiary violates
any license or agreement
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between Datatec or any Subsidiary, on one hand, and any third party, on the
other hand, relating to such product or infringes any intellectual property
right of any other party, and there is no pending or, to the best knowledge of
Datatec, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Datatec Right nor, to the best
knowledge of Datatec is there any basis for any such claim, nor has Datatec or
any Subsidiary received any notice asserting that any Datatec Right or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor, to the best knowledge of Datatec, is
there any basis for any such assertion; and
(d) Neither Datatec nor any Subsidiary has received notice,
and to the best knowledge of Datatec, no current or prior officers, employees or
consultants of Datatec or any Subsidiary claim an ownership interest in any
Datatec Rights as a result of having been involved in the development of such
property while employed by or consulting to Datatec or such Subsidiary or
otherwise.
Section 3.12 LEGAL PROCEEDINGS, CLAIMS, INVESTIGATIONS, ETC.
Except as set forth in SCHEDULE 3.12, there is no legal, administrative,
arbitration or other action or proceeding or governmental investigation pending,
or to the knowledge of Datatec, threatened, against Datatec or any Subsidiary,
any director, officer or employee thereof relating to the business of Datatec or
such Subsidiary. Except as set forth in SCHEDULE 3.12, Datatec and Carey have
not been informed of any violation of or default under, any laws, ordinances,
regulations, judgments, injunctions, orders or decrees (including without
limitation, any immigration laws or regulations) of any court, governmental
department, commission, agency, instrumentality or arbitrator applicable to the
businesses of Datatec or any Subsidiary. Except as set forth on SCHEDULE 3.12,
neither Datatec nor any Subsidiary is currently subject to any material
judgment, order, injunction or decree of any court, arbitral authority,
administrative agency or other governmental authority.
Section 3.13 INSURANCE. SCHEDULE 3.13 hereto sets forth a list
and brief description of all existing insurance policies maintained by Datatec
and the Subsidiaries pertaining to their business properties, personnel or
assets. Neither Datatec nor any Subsidiary is in default with respect to any
provision contained in any insurance policy, and has not failed to give any
notice or present any claim under any insurance policy in due and timely
fashion. Prior to the Closing, all such policies shall have been delivered to
the Buyer and are in full force and effect. All payments with respect to such
policies are current and neither Datatec nor any Subsidiary has received any
notice threatening a suspension, revocation, modification or cancellation of any
such policy.
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Section 3.14 MATERIAL CONTRACTS. (a) Except as set forth in
SCHEDULE 3.14 hereto, neither Datatec nor any Subsidiary is a party to or is
bound by any contract or has any commitment (including contracts or commitments
pertaining to employment), whether written or oral which has a term in excess of
one year and will result in payments in excess of $10,000 or require material
performance on the part of Datatec or any Subsidiary. Each of the contracts and
commitments set forth in SCHEDULE 3.14 hereto and each of the other material
contracts and commitments to which Datatec or any Subsidiary is a party, is
valid and existing, in full force and effect and enforceable in accordance with
its terms, except (i) as such enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium , or other similar laws
affecting creditors' rights generally, and (ii) and as such obligations are
subject to general principles of equity, and there is no material default or
claim of default against Datatec or any Subsidiary or any notice of termination
with respect thereto. Datatec and each Subsidiary has complied in all material
respects with all requirements of, and performed all of its obligations under,
such contracts and commitments as are required to have been performed on or
prior to the date hereof. In addition no other party to any such contract or
commitment is, to the best of Datatec's knowledge, in default under or in breach
of any material term or provision thereof, and there exists no condition or
event which, after notice or lapse of time or both, would constitute a material
default by any party to any such contract or commitment. Copies of all the
written documents and a synopsis of all oral contracts and commitments described
in SCHEDULE 3.14 hereto have heretofore been made available to the Buyer and are
true and complete and include all amendments and supplements thereto and
modifications thereof to and including the date hereof.
(b) Except as set forth in SCHEDULE 3.14 hereto, neither
Datatec nor any Subsidiary is a party to any oral or written (i) agreement with
any consultant, executive officer or other key employee the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of the transactions contemplated by this Agreement, or (ii) agreement
or plan, including any stock option plan and the like, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of the transactions contemplated by this
Agreement.
Section 3.15 CERTAIN TRANSACTIONS. Except as set forth in
SCHEDULE 3.15 hereto, neither Datatec, any Subsidiary nor any officer, director
or, to the knowledge of Datatec, any employee of Datatec or any Subsidiary, nor
any member of any such person's immediate family will be a party to any material
transaction with Datatec or any Subsidiary relating to the businesses of Datatec
or such Subsidiary following the Closing, including without limitation, any
contract, agreement or other
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arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (iii) otherwise requiring
payments to (other than for services as officers, directors or employees of
Datatec or any Subsidiary), any such person or any corporation, partnership,
trust or other entity in which any such person has a substantial interest as a
stockholder, officer, director, trustee or partner.
Section 3.16 INVENTORY. Except as set forth on SCHEDULE 3.16,
all inventory of Datatec and the Subsidiaries, whether reflected in the Balance
Sheets or otherwise, consists of a quality and quantity usable and salable in
the ordinary course of business. The quantities of all inventory of Datatec and
the Subsidiaries are reasonable for their businesses and consistent with past
practice.
Section 3.17 RECEIVABLES. Except as set forth on SCHEDULE
3.17, all Accounts Receivable of Datatec and the Subsidiaries reflected on the
July 31, 1996 Balance Sheet and which continue to be outstanding, and all
Accounts Receivable arising subsequent to such date, represent good and valid
Accounts Receivable which arose in the ordinary course of Datatec's and each
Subsidiaries' businesses.
Section 3.18 BROKER. Except as set forth in SCHEDULE 3.18
hereto, no broker, finder or investment banker is entitled to any brokerage or
finder's fee or other commission in connection with the transactions
contemplated hereby based on the arrangements made by or on behalf of Datatec or
the Sellers.
Section 3.19 ENVIRONMENTAL MATTERS. (a) Neither Datatec nor
any Subsidiary is the subject of, or being threatened to be the subject of (i)
any enforcement proceeding, or (ii) any investigation, brought in either case
under any Federal (United States or otherwise), state or local environmental
law, rule, regulation, or ordinance at any time in effect or (iii) any third
party claim relating to environmental conditions on or off the properties of
Datatec or the Subsidiaries. Neither Datatec nor any Subsidiary has been
notified that it must obtain any permits and licenses or file documents for the
operation of its business under federal, state and local laws relating to
pollution protection of the environment. Except as set forth in SCHEDULE 3.19
hereto, neither Datatec nor any Subsidiary has been notified of any conditions
on or off the properties of Datatec or any Subsidiary which will give rise to
any liabilities, known or unknown, under any Federal (United States or
otherwise), state or local environmental law, rule, regulation or ordinance, or
as the result of any claim of any third party. For the purposes of this Section
3.19, an investigation shall include, but is not limited to, any written notice
received by Datatec or any Subsidiary which relates to the onsite or offsite
disposal, release,
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discharge or spill of any waste, waste water, pollutant or contaminants.
(b) Except as set forth in SCHEDULE 3.19 hereto, there are no
toxic wastes or other toxic or hazardous substances or materials, pollutants or
contaminants which Datatec or any Subsidiary (or, to the best of Datatec's
knowledge, without independent inquiry, any previous occupant of Datatec's
facilities) has used, stored or otherwise held in or on any of the facilities of
Datatec or any Subsidiary, which, are present at or have migrated from the
facilities, whether contained in ambient air, surface water, groundwater, land
surface or subsurface strata. The facilities have been maintained by Datatec and
each Subsidiary in material compliance with all environmental protection,
occupational, health and safety or similar laws, ordinances, restrictions,
licenses, and regulations. Neither Datatec nor any Subsidiary has disposed of or
arranged (by contract, agreement or otherwise) for the disposal of any material
or substance that was generated or used by Datatec or any Subsidiary at any
off-site location that has been or is listed or proposed for inclusion on any
list promulgated by any Governmental Authority for the purpose of identifying
sites which pose a danger to health and safety. There have been no environmental
studies, reports and analyses made or prepared in the last five years relating
to the facilities of Datatec or any Subsidiary. Neither Datatec nor any
Subsidiary has installed any underground storage tanks in any of its facilities
and, to the best of Datatec's knowledge, none of such facilities contain any
underground storage tanks.
Section 3.20 ILLEGAL PAYMENTS. Neither Datatec nor any
Subsidiary has, directly or indirectly, paid or delivered any fee, commission or
other sum of money or item of property, however characterized, to any finder,
agent, government official or other party, in the United States or any other
country, which is in any manner related to the business or operations of Datatec
or any Subsidiary, which Datatec knows or has reason to believe to have been
illegal under any federal, state or local laws or the laws of any other country
having jurisdiction. Neither Datatec nor any Subsidiary has participated,
directly or indirectly, in any boycotts affecting any of its actual or potential
customers.
Section 3.21 COMPLIANCE WITH LAW. Datatec and each Subsidiary
has complied in all respects with all laws, rules, regulations, arbitral
determinations, orders, writs, decrees and injunctions which are applicable to
or binding upon Datatec or the Subsidiaries or their properties, except where
such failure would not cause a Datatec Material Adverse Effect.
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Section 3.22 BUSINESS RELATIONSHIPS. Except as set forth on
SCHEDULE 3.22, neither Datatec nor any Subsidiary has any material business
relationship or arrangements of any nature whatsoever which Datatec knows or has
reason to believe will not be available to Datatec or any Subsidiary, following
the sale of shares of Datatec Common Stock hereunder, on the same terms or
conditions as they are currently available to Datatec or such Subsidiary.
Section 3.23 SUPPLIERS AND CUSTOMERS. Except as set forth in
SCHEDULE 3.23 hereto, no material supplier or customer of Datatec or any
Subsidiary has during the past twelve months cancelled or otherwise terminated
its services or supplies to Datatec or such Subsidiary or its use or purchase of
the products or services of Datatec or such Subsidiary, or has communicated any
threat to Datatec's or such Subsidiary's management to do so. Datatec has no
knowledge that any such supplier or customer intends to cancel or otherwise
terminate its relationship with Datatec or any Subsidiary or the usage or
purchase of the products of Datatec or any Subsidiary, or that the transactions
contemplated by this Agreement will result in any such termination.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller individually hereby represents and warrants to the
Buyer, with respect to such Seller as follows:
Section 4.1 CAPITALIZATION. Each Seller owns the number of
shares of Datatec Common Stock as set forth next to his name under the column
"Datatec Shares Held" on SCHEDULE 1.1 hereto, free and clear of all liens,
claims or encumbrances. Each Seller has full right, power, legal capacity and
authority to transfer and deliver the Shares pursuant to this Agreement.
Section 4.2 AUTHORITY RELATIVE TO AND VALIDITY OF THIS
AGREEMENT. This Agreement has been duly executed and delivered by each of the
Sellers and constitutes the legal, valid and binding obligations of such Seller,
enforceable in accordance with its terms, except (i) as such enforceability may
be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally, (ii) as
such obligations are subject to general principles of equity and (iii) as rights
to indemnity may be limited by federal or state securities laws or by public
policy. Neither the execution and delivery by the Sellers of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate any
provision of law, any order of any court or other agency of government, or any
judgment, award or decree or any indenture, agreement or other instrument to
which each
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Seller is a party, or by which he or any of his properties or assets is bound or
affected, or result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of such Seller.
Section 4.3 BROKERS' OR FINDERS' FEES. Except as set forth in
SCHEDULE 3.18 hereto, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Sellers directly
with the Buyer, without the intervention of any person on behalf of the Seller
in such manner as to give rise to any claim by any person against the Buyer for
a finder's fee, brokerage commission or similar payment.
Section 4.4 SELLERS' ADDRESSES, ACCESS TO INFORMATION,
EXPERIENCE, ETC.
(a) The address set forth on the signature pages of
this Agreement is each Seller's true and correct business, residence or domicile
address. Each Seller has received and read and is familiar with this Agreement.
Each Seller has had an opportunity to ask questions of and receive answers from
representatives of the Buyer concerning the terms and conditions of this
investment. Each Seller and/or his financial advisor has substantial experience
in business and financial affairs and is capable of evaluating the merits and
risks of his investment decision to purchase of the Glasgal Common Shares
hereby.
(b) Each Seller acknowledges that it has had an
opportunity to evaluate all information regarding the Buyer as it has deemed
necessary or desirable in connection with the transactions contemplated by this
Agreement, has independently evaluated the transactions contemplated by this
Agreement and has reached its own decision to enter into this Agreement.
Section 4.5 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Glasgal
Common Shares to be received by each Seller pursuant to the terms hereof will be
acquired for investment for each Seller's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof.
Section 4.6 RESTRICTED SECURITIES. Each Seller understands
that the Glasgal Common Shares it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Buyer in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. In this regard, each Seller represents that it is familiar with
Rule 144 promulgated under
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the Securities Act ("Rule 144"), as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
Section 4.7 LEGENDS. It is understood that the certificates
evidencing the Glasgal Common Shares may bear a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE
ACT SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO AND THEY
SHALL HAVE BEEN REGISTERED OR QUALIFIED FOR SALE UNDER THE
APPROPRIATE STATE SECURITIES LAWS OR (II) IN THE OPINION OF
COUNSEL TO THE CORPORATION, REGISTRATION AND QUALIFICATION
UNDER THE ACT AND THE SECURITIES LAWS OF THE APPROPRIATE STATE
IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER."
The legend referred to above shall be removed by the Buyer
from any certificate at such time as the holder of the shares represented by the
certificate delivers an opinion of counsel reasonably satisfactory to the Buyer
to the effect that such legend is not required in order to establish compliance
with any provisions of the Securities Act, or at such time as the holder of such
shares satisfies the requirements of Rule 144(k) under the Securities Act,
provided that the Buyer has received from the holder a written representation
that (i) such holder is not an affiliate of the Buyer and has not been an
affiliate of the Buyer during the preceding three (3) months, (ii) such holder
has beneficially owned the shares represented by the certificate for a period of
at least three (3) years or such shorter period as required by Rule 144(k), and
(iii) such holder otherwise satisfies the requirements of Rule 144(k) as then in
effect with respect to such shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as
follows:
Section 5.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO
CONDUCT BUSINESS. The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Buyer has
provided the Sellers with true and complete copies of its certificate of
incorporation (certified by the Secretary of State of the State of Delaware) and
By-laws (certified by the Secretary of the Buyer) as in
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effect on the date hereof. The Buyer has full corporate power and authority to
enter into the Agreements, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby; and each of
the Agreements has been duly authorized and approved by its Board of Directors
and no further action on the part of the Buyer is necessary to authorize the
execution and delivery by it of, and the performance of its obligations under,
the Agreements. There are no corporate, contractual, statutory or other
restrictions of any kind upon the power and authority of the Buyer to execute
and deliver the Agreements and to consummate the transactions contemplated
hereunder and thereunder and no action, waiver or consent by any Governmental
Authority is necessary to make the Agreements valid instruments binding upon the
Buyer in accordance with their respective terms.
Section 5.2 EXECUTION AND DELIVERY. The Buyer has full
corporate power and authority to execute and deliver this Agreement and the
Employment Agreements (as defined below) (this Agreement together with the
Employment Agreement, the "Agreements") and to assume and perform all of its
obligations hereunder and thereunder. The execution and delivery of the
Agreements by the Buyer and the performance by the Buyer of its obligations
hereunder and thereunder have been duly authorized by its Board of Directors and
no further authorization on the part of the Buyer is necessary to authorize the
execution and delivery by it of, and the performance of its obligations under,
the Agreements. The Buyer is not required to submit any notice, report or other
filing with any Governmental Authority in connection with the execution,
delivery or performance of the Agreements. This Agreement has been duly executed
and delivered by the Buyer and constitutes and the Employment Agreements, when
executed and delivered by the Buyer and Carey and Raymond Koch ("Koch"),
respectively, in accordance with their respective terms will constitute, legal,
valid and binding obligations of the Buyer, enforceable in accordance with their
respective terms, except (i) as such enforceability may be limited by or subject
to any bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) as such obligations are subject to
general principles of equity and (iii) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
Section 5.3 NO CONFLICTS; ABSENCE OF DEFAULTS. The execution,
delivery and performance of the Agreements by the Buyer and the consummation of
the transactions contemplated hereby and thereby does not and will not conflict
with or violate (a) the Buyer's Certificate of Incorporation or By-laws or (b)
any agreement governing the organization, management, business or affairs of the
Buyer, Signatel Ltd., its Canadian subsidiary ("Signatel"), Computer-Aided
Software Integration, Inc., a Delaware corporation ("CASI") or HH
Communications, Inc., an
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Illinois corporation ("HH") or, in any material respect, any agreement or
instrument to which the Buyer, Signatel, CASI or HH may be a party or by which
the Buyer, Signatel, CASI or HH (or any of their respective properties) is
bound, or (c) any material law, administrative regulation or rule or court
order, judgment or decree applicable to the Buyer; nor will the execution and
delivery of this Agreement or the consummation of the transaction contemplated
hereby constitute a material breach of, or any event of default under, any
material contract or agreement to which the Buyer, Signatel, CASI or HH is
bound, or by which the Buyer, Signatel, CASI or HH (or any of their respective
properties) may be bound or affected.
Section 5.4 INVESTMENT INTENT. The Buyer is acquiring each
Sellers shares for its own account for investment purposes only and not with a
view to or for distributing or reselling such shares or any part thereof or
interest therein, without prejudice, however, to the Buyer's right, subject to
the provisions of this Agreement at all times to sell or otherwise dispose of
all or any part of such Shares under an exemption from registration and in
compliance with applicable Federal and State securities laws.
Section 5.5 CAPITALIZATION. The authorized capital stock of
the Buyer consists of (i) 34,000,000 shares of Glasgal Common Stock and (ii)
4,000,000 shares of preferred stock, par value $.001 per share, 275,000 of which
are issued and outstanding. As of October 23, 1996, 16,549,146 shares of Glasgal
Common Stock were issued and outstanding. Except as set forth on SCHEDULE 5.5,
there are no outstanding options, warrants or contracts, commitments,
understandings, or arrangements by which the Buyer is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The capital stock of the Buyer is duly
authorized and all issued capital stock has been duly and validly issued and is
fully paid and nonassessable and free of preemptive rights. Based upon
representations made by the Buyer's transfer agent as of August 22, 1996, the
Buyer's Common Stock was beneficially owned by more than 1,000 stockholders.
Section 5.6 SUBSIDIARIES. The Buyer does not own directly or
indirectly any equity interest in any corporation, partnership, limited
liability company, joint venture, association or other entity other than
Signatel, CASI and HH.
Section 5.7 SEC REPORTS AND FINANCIAL STATEMENTS. The Buyer
has filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to the Sellers true and complete copies of all forms,
reports, schedules, statements and other documents required to be filed by it
under the Securities Act and the Securities and Exchange Act of 1934,
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as amended (the "Exchange Act") (as such documents have been amended or
supplemented since the time of their filing, collectively, the "SEC Reports").
As of their respective dates, the SEC Reports (including without limitation, any
financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (b) complied in all material respects
with the applicable requirements of the Securities Act and Exchange Act (as the
case may be) and all applicable rules and regulations of the SEC promulgated
thereunder. Each of the consolidated financial statements included in the SEC
Reports have been prepared from, and are in accordance with, the books and
records of the Buyer, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Buyer as at the dates thereof or for the periods presented therein.
Section 5.8 NO UNDISCLOSED LIABILITIES. Except as described in
the SEC Reports, the Buyer has no material debts, liabilities or obligations of
any kind, whether accrued, absolute, contingent or other, whether due or to
become due, except as incurred in the ordinary course of business, that would
have a material adverse effect on the Buyer.
Section 5.9 BROKER. Except as disclosed on SCHEDULE 5.9
hereto, no broker, finder or investment banker is entitled to any brokerage or
finder's fee or other commission in connection with the transactions
contemplated hereby based upon the arrangements made by or on behalf of the
Buyer.
ARTICLE VI
COVENANTS OF DATATEC, THE SELLERS AND THE BUYER
Section 6.1 COVENANTS OF DATATEC AND CAREY REGARDING CONDUCT
OF BUSINESS OPERATIONS PENDING THE CLOSING. Datatec and Carey covenant and agree
that between the date of this Agreement and the Closing Date, Datatec and the
Subsidiaries will carry on their respective businesses in the ordinary course
and consistent with past practice, will use their best efforts to (i) preserve
their business organizations intact, (ii) retain the services of their present
employees, and (iii) preserve the good will of their suppliers and customers,
and will not, except in the ordinary course of business, purchase, sell, lease
or dispose of
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any property or assets or incur any liability or enter into any other
extraordinary transaction. By way of amplification and not limitation, Datatec
and Carey shall not (except as contemplated hereunder), between the date of this
Agreement and the Closing Date, directly or indirectly, do any of the following
without the prior written consent of the Buyer:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize,
or propose the issuance, sale, pledge, disposition, encumbrance or authorization
of any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest, of Datatec or any Subsidiary;
(ii) amend or propose to amend the articles of incorporation or By-laws of
Datatec or any Subsidiary; (iii) split, combine or reclassify any of the
outstanding shares of Datatec or any Subsidiary, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or otherwise
with respect thereto; or (iv) except as set forth on SCHEDULE 6.1, redeem,
purchase or otherwise acquire any shares of capital stock of Datatec or any
Subsidiary;
(b) (i) make any acquisition (by merger, consolidation, or
acquisition of stock or assets) of any corporation, partnership or other
business organization or division thereof; (ii) except in the ordinary course of
business and in a manner consistent with past practice, sell, pledge, dispose
of, or encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any of its assets, provided, however, that notwithstanding
anything to the contrary herein, Datatec may sell the assets of its French
subsidiary, Ultimate S.A. to a Management buy-out group; (iii) other than under
any existing credit facility or pursuant to amendments to the existing
facilities and loan agreements with New Jersey National Bank- CoreStates, which
amendments will become effective on or prior to the Closing Date, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, partnership, firm or
corporation, or make any loans or advances to any individual, partnership, firm,
or corporation, or enter into any contract or agreement to do so, except in the
ordinary course of business and consistent with past practice; (iv) authorize
any single capital expenditure or series of related capital expenditures each of
which, individually or in the aggregate, is in excess of $10,000; or (v) release
or assign any indebtedness owed to it or any claims held by it, except in the
ordinary course of business and consistent with past practice;
(c) take any action other than in the ordinary course of
business and in a manner consistent with past practice (none of which actions
shall be unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than
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pursuant to its policies in effect on the date hereof) or with respect to any
increase of benefits payable under its severance or termination pay policies in
effect on the date hereof;
(d) make any payments (except in the ordinary course of
business and in amounts and in a manner consistent with past practice) under any
Datatec Employee Plan to any employee, independent contractor or consultant,
enter into any new Datatec Employee Plan or any new consulting agreement grant
or establish any awards under such Datatec Employee Plan or agreement, in any
such case providing for payments of more than $10,000, or adopt or otherwise
amend any of the foregoing;
(e) take any action except in the ordinary course of business
and in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures,
other than such actions deemed necessary to comply with U.S. GAAP (including
without limitation its procedures with respect to the payment of accounts
payable);
(f) enter into or terminate any material contract or agreement
or make any material change in any material contract or agreement of Datatec or
any Subsidiary, other than (i) in the ordinary course of business and (ii)
agreements, if any, relating to the transactions contemplated hereby; or
(g) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any of their respective
representations or warranties contained in this Agreement untrue or incorrect in
any material respect as of the date when made or as of a future date.
Section 6.2 NO OTHER NEGOTIATIONS. Datatec and Carey agree
that, between the date hereof and the earlier to occur of (i) December 31, 1996
or (ii) the termination of this Agreement pursuant to the provisions of Article
XI hereof (the "Termination Date"), Datatec will not, nor will it permit any of
its affiliates (including any officers, directors, employees, financial
advisors, brokers, stockholders or any other person acting on their behalf) to,
(i) enter into any agreement with a third party with respect to the acquisition,
directly or indirectly, of the Shares or other securities of Datatec or any
Subsidiary or a material part of their assets, (ii) enter into negotiations with
a third party regarding such an agreement, or (iii) provide a third party with
general access to their books, records or employees for the purpose of enabling
such third party to conduct a purchase investigation of the legal, financial or
business condition of them; provided, however, that notwithstanding anything to
the contrary herein, Datatec may sell the assets of its French subsidiary,
Ultimate S.A.
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Section 6.3 OPTIONS. Within thirty days following the Closing
Date, the Buyer covenants and agrees to issue options (the "Replacement
Options") to purchase shares of Glasgal Common Stock to the holders of the
currently outstanding options to purchase 811,107 shares of Datatec Common Stock
(the "Datatec Options") as set forth on SCHEDULE 6.3 hereto. The Replacement
Options will be issued to each such holder in such amount as to entitle each
such holder to acquire such number of shares of Glasgal Common Stock as set
forth on SCHEDULE 6.3 hereto, with the exercise price and vesting provisions as
set forth on SCHEDULE 6.3 hereto, and all other terms and conditions
substantially the same as the Datatec Options. The Buyer shall use its best
efforts to register the shares underlying the Replacement Options not later than
December 31, 1997.
Section 6.4 BOARD REPRESENTATIVE. The Buyer shall appoint
Carey to its Board of Directors at the earliest practical date following the
Closing Date and shall nominate and recommend the re-election of Carey at its
next Annual Meeting of Stockholders following the 1996 Annual Meeting.
Section 6.5 REMOVAL OF CAREY AS GUARANTOR. As soon as
practicable following the Closing Date, the Buyer agrees to use its best efforts
to cause the removal of Carey and Mary Carey as guarantors of Datatec
indebtedness set forth on SCHEDULE 6.5 hereof, to which they are currently
guarantors.
Section 6.6 CAPITAL CONTRIBUTION. On or prior to the Closing
Date, the Buyer will make to Datatec a $2,000,000 cash payment in the form of
paid in equity capital. In addition, until such time as the indebtedness set
forth on SCHEDULE 6.5 is satisfied or Carey and Mary Carey are no longer
guarantors of such indebtedness, the Buyer will make monthly cash payments to
Datatec after the Closing which will be deemed paid in equity capital. Such cash
payments, if required, shall be received by Datatec on or before the dates and
in the amounts set forth below:
November 15, 1996:- $1,500,000
November 30, 1996:- $1,000,000
December 31, 1996:- $ 750,000
January 31, 1997:- $ 750,000
February 29, 1997:- $ 500,000
----------
Total: $4,500,000
Section 6.7 CAREY LOCK-UP. In the event that the Buyer
commences an offering of its securities, Carey agrees to enter into with the
managing underwriter of such offering, and perform its obligations under a
lock-up agreement similar in form and substance to lock-up agreements executed
by other executive officers and directors of the Buyer, provided, however that
this
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Section 6.7 shall not be applicable to the Glasgal Common Shares registered
pursuant to Section 7.1(a)(i).
Section 6.8 COMPLIANCE WITH REQUIREMENTS OF DATATEC'S LENDER.
The Buyer acknowledges that Datatec and Plan C, L.L.C. are negotiating certain
amendments to their respective loan agreements and credit facilities (the
"Credit Facilities") with New Jersey National Bank-CoreStates ("CoreStates").
The Buyer shall use commercially reasonable efforts to assist Datatec and Plan
C, L.L.C. in negotiating and consummating the amendments to said loan agreements
and credit facilities, including without limitation, executing agreements with
CoreStates to:
(a) provide CoreStates with information regarding the
planned sale of the Buyer's Northvale office;
(b) prohibit upstreaming or transferring of funds from
Datatec to the Buyer or the Buyer's subsidiaries as
long as the CoreStates loan is in effect;
(c) provide a guaranty to CoreStates in a form reasonably
satisfactory to CoreStates;
(d) commit additional financial support to Datatec to
enable Datatec to comply with CoreStates financial
covenants;
(e) not purchase, pool or merge with another company nor
incur additional debt prior to obtaining CoreStates'
written permission; and
(f) provide CoreStates with all of the information it
requests on a timely basis and allow Datatec to
comply as long as the CoreStates loan is in effect,
and provide information regarding the Buyer's ability
to raise additional funds.
Section 6.9 CERTAIN OPERATIONS. Following the Closing, the
Buyer will cause CASI to sell its software to Datatec at the lowest price sold
to any third party and shall provide training to the employees of Datatec at the
lowest rates charged to any third party. In addition, with the exception of its
CASI products and services, all products and services sold or provided by the
Buyer or any of its subsidiaries shall be marketed, sold, and provided under the
"Datatec" name.
Section 6.10 BRIDGE LOAN. As soon as practicable following the
sale of property located at 1633 Littleton Road, Parsippany, New Jersey by Plan
C, L.L.C. and the subsequent payment (the "Plan C Payment") of the after tax net
proceeds (after deducting customary expenses of such transaction) from
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such sale by Plan C, L.L.C. to the Buyer for immediate payment to CoreStates as
required by the Credit Facilities, the Buyer shall issue a promissory note to
Plan C, L.L.C. (the "Plan C Note"). In addition, following the payment by Carey
to CoreStates of an amount up to $500,000 (the "Carey Payment"), the Buyer shall
issue a note to Carey (the "Carey Note"). The Plan C Note and the Carey Note
shall be in amounts equal to the amount of the Plan C Payment or the Carey
Payment, respectively, shall be due no later than 24 months from the respective
payment date, and shall accrue interest at a rate of 12.5% per annum. The Plan C
Note shall be subject to certain prohibitions on the ability of the Buyer or
affiliates of the Buyer to make payments to Plan C, L.L.C. prior to the
repayment in full of amounts owed by the Buyer or affiliates of the Buyer to
CoreStates, however, to the extent that any amounts are owed to Plan C, L.L.C.
under the Plan C Note, once such prohibitions are no longer in effect, the Buyer
shall pay all amounts due thereunder. In addition, the Buyer shall issue 15,000
additional shares of Glasgal Common Stock to Plan C, L.L.C. on the Closing Date.
Section 6.11 ADDITIONAL COVENANTS OF DATATEC, THE SELLERS AND
THE BUYER. Each of Datatec, the Sellers and the Buyer covenant and agree:
(a) BEST EFFORTS. To proceed diligently and use its best
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper and advisable to consummate the transactions
contemplated by this Agreement, including the execution and delivery of the
Employment Agreements.
(b) COMPLIANCE. To comply in all material respects with all
applicable rules and regulations of any Governmental Authority in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby; to use all reasonable efforts to obtain in a
timely manner all necessary waivers, consents and approvals and to take, or
cause to be taken, all other actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
(c) NOTICE. To give prompt notice to the other party or
parties of (i) the occurrence, or failure to occur, of any event whose
occurrence or failure to occur, would be likely to cause any representation or
warranty contained in this Agreement to be untrue or incorrect in any material
respect at any time from the date hereof to the Closing Date and (ii) any
material failure on its part, or on the part of any of its officers, directors,
employees or agents, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any such
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notice shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
(d) ACCESS. To cause its affiliates, officers, directors,
employees, auditors and agents to afford the officers, employees and agents of
the other party hereto complete access at all reasonable times and upon
reasonable notice to its properties, offices and other facilities and to all
books and records, and shall furnish such other party with all financial,
operating and other data and information as the other party through its
officers, employees or agents, may reasonably request, provided that the party
providing such access and furnishing such data and information to the other
party incurs no cost in doing so.
(e) CONFIDENTIALITY. To hold in strict confidence all data and
information obtained from the other party hereto or any subsidiary, division,
associate, representative, agent or affiliate of any such party (unless such
information is or becomes publicly available without the fault of any
representative of such party, or public disclosure of such information is
required by law in the opinion of counsel to such party) and shall insure that
such representatives do not disclose information to others without the prior
written consent of the other party hereto, and in the event of the termination
of this Agreement, to cause its representatives to return promptly every
document furnished by the other party hereto or any subsidiary, division,
associate, representative, agent or affiliate of any such party in connection
with the transactions contemplated hereby and any copies thereof which may have
been made, other than documents which are publicly available.
(f) ANNOUNCEMENTS. That all public announcements, statements
and press releases concerning the transactions contemplated by this Agreement
shall be mutually agreed to by Datatec and the Buyer before the issuance or the
making thereof and, subject to the advice of counsel, no party shall issue any
such press releases or make any such public statement prior to such mutual
agreement, except as may be required by law.
ARTICLE VII
REGISTRATION OF GLASGAL COMMON SHARES
Section 7.1 FILING OF REGISTRATION STATEMENTS. (a) The Buyer
will file a registration statement ("Registration Statement") with respect to
the resale by the Sellers (i) of such number of shares having an aggregate share
value (as defined below) of $2,000,000, as soon as reasonably practicable
following the publication by the Buyer of results of its operations which
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contain 30 days of results of combined operations of the Buyer and Datatec and
(ii) of 15,000 shares in excess of such number of shares having an aggregate
Share Value of $1,000,000, as soon as reasonably practicable following the
completion by the Buyer of the audit of its financial statements for the fiscal
year ending April 30, 1997. The individual Share Value shall be the average
closing price of Glasgal Common Stock for the ten trading days ending on the
third trading day prior to the filing of any such Registration Statement. Each
of the Registration Statements described above will register the Glasgal Common
Shares pro rata as among the Sellers.
(b) If the Buyer at any time or from time to time subsequent
to the effective date of the Registration Statement described in Section
7.1(a)(ii) proposes to register any Glasgal Common Stock under the Securities
Act for its own account (other than pursuant to a registration statement
(including pre-effective amendments thereto) (i) on Form S-8 or any successor
form to such form, (ii) on Form S-4 or any successor form to such form, (iii)
filed in connection with an exchange offer or an offering of Glasgal Common
Stock or of securities convertible or exchangeable into Glasgal Common Stock
made solely to its existing shareholders in connection with a rights offering or
solely to employees of the Buyer, or a post-effective amendment to any then
effective registration statement), it will give written notice to each of the
Sellers of its intention at least twenty (20) days in advance of the filing of
any Registration Statement with respect thereto. Notwithstanding anything to the
contrary herein, any notice otherwise required by this Section shall not apply
if any agreement to which the Buyer is now, or to which the Buyer later becomes,
a party prohibits the inclusion of the Glasgal Common Stock from any given
Registration Statement and any similar provision to which the Buyer is subject
has not been waived with respect to any other party. Upon the written request of
any of the Sellers given within fifteen (15) days after receipt of such notice,
the Buyer, subject to Section 7.1(c) below, will cause the Glasgal Common Shares
requested by the Sellers to be registered, to be so registered.
(c) (i) In the case of an underwritten offering by the Buyer
of Glasgal Common Stock, the Buyer shall, with respect to Glasgal Common Shares
that a Seller then desires to sell, enter into an underwriting agreement with
the same underwriters engaged by the Buyer with respect to securities being
offered by the Buyer and cause such underwriters to include in any such
underwriting all of the Glasgal Common Shares that a Seller then desires to
sell; PROVIDED, HOWEVER, that such underwriting agreement is in substantially
the same form as the underwriting agreement that the Buyer enters into in
connection with the primary offering it is making.
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(ii) If the managing underwriter with respect to an
offering pursuant to this Section 7.1 requests in writing that the number of
Glasgal Common Shares of a Seller that are entitled to be registered pursuant to
this Section 7.1 be reduced because in the judgment of the managing underwriter
the offering would be materially and adversely affected, then the Glasgal Common
Shares of the Sellers that they wish to register pursuant to this Section 7.1
shall be reduced by such amount as the managing underwriter may determine in
writing so as to not materially and adversely affect the proposed offering,
which reduced number of Glasgal Common Shares shall be included on a pro rata
basis among the Sellers who are participating in such offering.
Section 7.2 REGISTRATION PROCEDURES. Each Registration
Statement filed pursuant to this Article VII shall be pursuant to the procedures
set forth below:
(a) The Buyer shall, in accordance with the Securities Act and
the rules and regulations of the SEC, prepare and file with the SEC a
Registration Statement in the form of an appropriate registration statement with
respect to the Glasgal Common Shares covered by such Registration Statement and
use its best efforts to cause such Registration Statement to become effective as
soon as possible after each Registration Statement is filed, and remain
continuously effective, until the earlier of (i) all of the Glasgal Common
Shares covered by such Registration Statement has been sold in accordance with
the intended methods of disposition of the seller or sellers set forth in such
Registration Statement and (ii) 270 days after such Registration Statement has
been declared effective PROVIDED, that if for any portion of such period the
Registration Statement is not effective, then such requirement for maintaining
the effectiveness of the Registration Statement shall be extended by the length
of such interruption(s), and the Buyer shall prepare and file with the SEC such
amendments to each such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep each such Registration Statement
effective and each such Registration Statement and prospectus accurate and
complete during such period;
(b) The Buyer shall notify the Sellers participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such Registration Statement and each post-effective amendment thereto
has become effective or a supplement to any prospectus forming a part of such
Registration Statement has been filed;
(c) The Buyer shall furnish to the Sellers such reasonable
number of copies of the Registration Statement and prospectus and such other
documents as Sellers may reasonably request in order to facilitate the public
offering of the Glasgal Common Shares;
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(d) The Buyer shall use its best efforts to register or
qualify the Glasgal Common Shares covered by such Registration Statement under
such state securities or blue sky laws of such jurisdictions as the Sellers may
reasonably request, PROVIDED, HOWEVER, that the Buyer shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to subject
itself to taxation in connection with any such registration or qualification of
such securities;
(e) The Buyer shall notify the Sellers participating in such
registration promptly of any request by the SEC for the amending or
supplementing of such Registration Statement or prospectus or for additional
information;
(f) The Buyer shall prepare and file with the SEC, promptly
upon the request of any Seller participating in such registration, the
Registration Statement and any amendments or supplements to such Registration
Statement or prospectus which, in the reasonable opinion of counsel for the
Sellers is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Glasgal Common Shares by
the Sellers or to otherwise comply with the requirements of the Securities Act
and such rules and regulations;
(g) The Buyer shall prepare and promptly file with the SEC and
promptly notify the Sellers of the filing of such amendments or supplements to
such Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Glasgal Common Shares securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any such
prospectus or any other prospectus then in effect may include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Buyer shall make available to the Sellers and to the underwriters any such
supplement or amendment. The Sellers agree that, upon receipt of any notice from
the Buyer of the occurrence of any event of the kind described in this
subsection (g), the Sellers will forthwith discontinue the offer and sale of
Glasgal Common Shares pursuant to the Registration Statement covering such
Glasgal Common Shares until receipt by the Sellers and underwriters of the
copies of such supplemented or amended prospectus and, if so directed by the
Buyer, the Sellers will deliver to the Buyer all copies, other than permanent
file copies then in the Sellers' possession, of the most recent prospectus
covering such Glasgal Common Shares at the time of receipt of such notice. In
the event the Buyer shall give such notice, the Buyer shall extend the period
during which such Registration Statement shall be maintained effective as
provided in Section 7.2(a) hereof by the number of days during the period
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from and including the date of the giving of such notice to the date when the
Buyer shall make available to the Sellers such supplemented or amended
prospectus;
(h) The Buyer shall advise the Sellers participating in such
registration, promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
(i) The Buyer shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make generally
available to the Buyer's security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than forty-five (45)
days after the end of any twelve (12) month period (or ninety (90) days, if such
a period is a fiscal year) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of a Registration Statement;
(j) The Buyer shall not file any amendment or supplement to a
Registration Statement or prospectus to which a majority in interest of the
Sellers participating in such registration has objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations thereunder,
after having been furnished with a copy thereof at least three business days
prior to the filing thereof unless the Buyer shall have obtained an opinion of
counsel that such amendment is required under the Securities Act or the rules or
regulations adopted thereunder in connection with the distribution of Glasgal
Common Shares by the Sellers.
(k) The Buyer may, at its option, register additional shares
of Glasgal Common Stock in a Registration Statement for sale by other holders of
its Common Stock or include the Glasgal Common Shares in a registration in which
shares of its Common Stock are sold to an underwriter for reoffering to the
public (an "Underwritten Offering").
Section 7.3 EXPENSES OF REGISTRATION. All expenses of the
Buyer incident to the Buyer's performance of or compliance with the provisions
of this Article VII shall be borne by the Buyer including without limitation:
(a) All registration and filing fees;
(b) Fees and expenses of compliance with all securities or
blue sky laws (including fees and disbursements of
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counsel for the Buyer in connection with blue sky qualifications of the Glasgal
Common Shares; PROVIDED, HOWEVER, that the Buyer shall not be required to
consent to general service of process in any such state);
(c) Fees and disbursements of counsel for the Buyer and its
independent auditors.
Nothing in this Section 7.3 shall be deemed to require the
Buyer to pay or bear any expenses of any Seller's attorneys or accountants or
any other personal expenses or any underwriting discounts relating to the
Glasgal Common Shares, selling commissions or similar fees attributable pro rata
to the Glasgal Common Shares if such registration results in an Underwritten
Offering of all or any portion of the Glasgal Common Shares.
Section 7.4 SELLERS' AGREEMENTS.
(a) The Sellers shall promptly provide all information
concerning Datatec, the Subsidiaries and/or the Sellers required to be included
in each Registration Statement which is requested by the Buyer.
(b) Except with respect to an offering of Glasgal Common
Shares pursuant to Section 7.1(a)(i), in the event any of the Glasgal Common
Shares are included in an Underwritten Offering, each Seller agrees to enter
into with the managing underwriter of such offering, and perform its obligations
under, (i) an underwriting agreement, in usual and customary form and (ii) a
lock-up agreement similar in form and substance to lock-up agreements executed
by other executive officers and directors of the Buyer.
Section 7.5 EXCEPTION TO FILING OF REGISTRATION STATEMENT.
Notwithstanding the provisions of this Article VII, the Buyer shall have no
further obligation to file any Registration Statements hereunder, include any
Glasgal Common Shares in a Registration Statement pursuant to Section 7.1(b)
hereunder, or maintain the effectiveness of any Registration Statement filed
with respect to any Seller in the event all of the Glasgal Common Shares owned
by such Seller (i) have been effectively registered under the Securities Act and
disposed of in accordance with a Registration Statement covering them, (ii) have
been distributed to the public pursuant to Rule 144 (or any similar provisions
then in force) under the Securities Act, or (iii) are otherwise freely
transferable without restriction under the Securities Act, and Sellers have
received an opinion of their legal counsel to such effect.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers and Datatec under this
Agreement are subject to the satisfaction, on or prior to the Closing Date,
unless waived in writing, of each of the following conditions:
Section 8.1 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of the Buyer contained in this Agreement shall be
true and correct in all material respects as of the date when made and at and as
of the Closing Date, with the same force and effect as if made on and as of the
Closing Date, and the Sellers shall have received a certificate to that effect
and as to the matters set forth in Section 8.2 hereof, dated the Closing Date,
from the President or Chief Executive Officer of the Buyer.
Section 8.2 PERFORMANCE OF COVENANTS. The Buyer shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by it
on or before the Closing Date.
Section 8.3 NO PROCEEDINGS. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any
state, federal or local court or other governmental agency or of any foreign
jurisdiction which prohibits the consummation of the transactions which are the
subject of this Agreement or prohibits the Buyer's ownership of the Shares shall
have been issued or entered and remain in effect.
Section 8.4 CONSENTS AND APPROVALS. All filings and
registrations with, and notifications to, all federal, state, local and foreign
authorities required for consummation of the transactions contemplated by this
Agreement shall have been made, and all consents, approvals and authorizations
of all federal, state, local and foreign authorities and parties to material
contracts, licenses, agreements or instruments required for consummation of the
transactions contemplated by this Agreement shall have been received and shall
be in full force and effect.
Section 8.5 EMPLOYMENT AGREEMENTS. The employment agreements
among Datatec and each of Carey and Koch, substantially in the form of Annexes A
and B attached hereto ("the Employment Agreements"), shall have been executed by
the parties thereto.
Section 8.6 OPINION OF THE BUYER'S COUNSEL. Datatec and the
Sellers shall have received the opinion of Olshan
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Grundman Frome & Rosenzweig LLP, counsel to the Buyer, dated as of the Closing
Date, in a form reasonably satisfactory to Datatec, substantially to the effect
that: (i) the Buyer is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation; (ii) the Buyer has
the corporate power to enter into the Agreements, and to consummate the
transactions contemplated hereby and thereby; (iii) the execution and delivery
of the Agreements, and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate action on the
part of the Buyer; (iv) this Agreement has been duly executed and delivered by
the Buyer and (assuming that it is a valid and binding obligation of the other
parties thereto) is a valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except (a) as enforceability may
be limited by any bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally, and as such enforceability is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), provided that
the opinion in (iv) shall not be interpreted as constituting an opinion that any
of the provisions of the Agreement do not contravene a provision of law, have
the legal effect that they purport to have or are specifically enforceable, (v)
the Glasgal Common Shares are duly authorized, validly issued, fully-paid and
nonassessable; and (vi) the execution, delivery or performance of the Agreement
by the Buyer and the consummation by the Buyer of the transactions herein, to
the best of such counsel's knowledge, do not conflict with or result in a breach
of, or default under, the Buyer's certificate of incorporation or bylaws or any
material indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note agreement or other material agreement or other
material instrument to which the Buyer is a party or by which the Buyer is bound
or to which any of the property of the Buyer is subject. Such opinion shall be
limited to the laws of the State of New York and United States federal law.
Insofar as the opinion expressed in (iv) above relates to matters that are
governed by the laws of the State of New Jersey, the Buyer's counsel may assume
that the laws of the State of New Jersey are identical to the laws of the State
of New York.
Section 8.7 MATERIAL CHANGES. Since the date hereof, there
shall not have been any material adverse change in the business, operations,
financial condition, assets, liabilities, prospects or regulatory status of the
Buyer.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject
to the satisfaction, on or prior to the Closing Date, unless waived in writing,
of each of the following conditions:
Section 9.1 REPRESENTATION AND WARRANTIES TRUE. The
representations and warranties of Datatec, Carey and the Sellers contained in
this Agreement shall be true and correct in all material respects as of the date
when made and at and as of the Closing Date, with the same force and effect as
if made on and as of the Closing Date, and the Buyer shall have received a
certificate to that effect and as to the matters set forth in Section 9.2
hereof, dated the Closing Date, from the President or Chief Executive Officer of
Datatec and from each Seller.
Section 9.2 PERFORMANCE OF COVENANTS. Datatec, Carey and the
Sellers shall have performed or complied in all material respects with all
agreements, conditions and covenants required by this Agreement to be performed
or complied with by them on or before the Closing Date.
Section 9.3 NO PROCEEDINGS. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any
state, federal or local court or other governmental agency or of any foreign
jurisdiction which prohibits the consummation of the transactions which are the
subject of this Agreement or prohibits the Buyer's ownership of the Shares or
operation of Datatec's and each Subsidiary's business shall have been issued or
entered and remain in effect.
Section 9.4 CONSENTS AND APPROVALS. All filings and
registrations with, and notifications to, all Governmental Authorities required
for consummation of the transactions contemplated by this Agreement shall have
been made, and all consents, approvals and authorizations of all Governmental
Authorities and parties to material contracts, licenses, agreements or
instruments required for consummation of the transactions contemplated by this
Agreement shall have been received and shall be in full force and effect.
Section 9.5 EMPLOYMENT AGREEMENT. The Employment Agreements
shall have been executed by the parties thereto.
Section 9.6 OPINION OF DATATEC'S AND THE SELLERS' COUNSEL. The
Buyer shall have received the opinion of Podvey, Sachs, Meanor, Catenacci,
Hildner & Cocoziello, P.C. counsel to Datatec and the Sellers, dated the Closing
Date, in the form annexed hereto as SCHEDULE 9.6.
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Section 9.7 MATERIAL CHANGES. Since the date hereof, there
shall not have been any material adverse change in the business, operations,
financial condition, assets, liabilities, prospects or regulatory status of
Datatec and the Subsidiaries, taken as a whole.
Section 9.8 REQUISITE AUTHORITY TO CONDUCT BUSINESS. Datatec
and each Subsidiary shall be duly qualified or licensed to do business and shall
be in good standing as a foreign corporation in each jurisdiction in which the
conduct of its business or the ownership or leasing of its properties requires
it to be so qualified or licensed, except where the failure to be so qualified
or licensed and in good standing would not have a Datatec Material Adverse
Effect.
Section 9.9 PROPRIETARY INFORMATION. Datatec and the
Subsidiaries shall have taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and their proprietary
rights in, all Datatec Rights. All officers, employees and consultants of
Datatec and the Subsidiaries having access to or involved in the development of
material proprietary and confidential information shall have executed and
delivered to Datatec or the Subsidiaries, an agreement regarding the protection
of proprietary information and the assignment to Datatec or the Subsidiaries of
all intellectual property rights arising from the services performed for Datatec
or the Subsidiaries by such person, copies of which shall have been provided to
the Buyer.
Section 9.10 LEASE AMENDMENT. Datatec shall have entered into
an amendment to the lease agreement with Plan C, L.L.C. relating to property
located at 1633 Littleton Road, Parsippany, New Jersey, reducing the term of
such lease such that Datatec's obligations thereunder will expire on the
anniversary of the Closing Date. A fully executed copy of the lease amendment
shall be delivered to the Buyer on or before the Closing Date, in a form
acceptable to the Buyer.
Section 9.11 TERMINATION OF DATATEC OPTIONS. Either (a) all
Datatec Options shall be cancelled, or, if the Datatec Options are not
cancelled, (b) the Buyer shall be satisfied, in its reasonable discretion, that
(i) all Datatec Options are cancelable upon the issuance of the Replacement
Options and (ii) that no Datatec Options have been exercised since the date
hereof or will be exercised prior to the issuance of the Replacement Options and
the cancellation of the Datatec Options.
Section 9.12 POOLING LETTER. The Buyer shall have received a
letter from Arthur Andersen & Co. to the effect that the acquisition of the
Shares by the Buyer should be accounted for as of pooling of interests
transaction.
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Section 9.13 BANK AGREEMENT. The Amended and Restated Loan and
Security Agreement dated January 4, 1995 between Datatec, Plan C, L.L.C.,
Datatec Industries Canada Ltd. and CoreStates shall have been amended in a
manner satisfactory to the Buyer in its sole discretion.
Section 9.14 PLAN C, L.L.C. AGREEMENT. The Consulting
Agreement between Datatec and Plan C, L.L.C. shall have been amended to reduce
the term to expire 4 months after the date hereof.
ARTICLE X
INDEMNIFICATION
Section 10.1 INDEMNIFICATION BY CAREY AND KOCH. Subject to the
limits set forth in this Article X, Carey and Koch agree, pro rata in proportion
to the number of their respective Datatec Shares being sold pursuant to this
Agreement, to indemnify, defend and hold the Buyer and each of its directors and
officers harmless from and against any and all loss, liability, damage, costs
and expenses (including interest, penalties and attorneys' fees) (collectively,
"Losses") that the Buyer or any of its affiliates may incur or become subject to
arising out of or due to any (i) inaccuracy of any representation or the breach
of any warranty or covenant of Carey, Koch, or Datatec contained in this
Agreement (it being understood that the indemnity obligation set forth in this
Section 10.1(i) shall not apply to any claim made by a former, current or future
stockholder of the Buyer based on an inaccuracy of any representation or the
breach of any warranty or covenant of Carey, Koch or Datatec contained in this
Agreement) or (ii) Losses relating to the Securities Act, the Securities
Exchange Act of 1934, as amended or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement of any material fact
contained in a Registration Statement or any amendment or supplement thereto and
which was included in a Registration Statement or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Buyer by Carey and the Sellers who are members of Carey's immediate family
or are trusts for the benefit of Carey or his immediate family or by Koch,
specifically stating that it is for use in the preparation thereof, provided,
however, that Carey shall not be liable for any misstatement relating
specifically to Koch and the Datatec Shares owned by Koch and Koch shall not be
liable for any misstatement relating specifically to Carey and the Datatec
Shares owned by Carey. Subject to Section 10.3 hereof, Carey and Koch will
reimburse the Buyer and each controlling person pro rata, as provided above, for
any legal or any other expenses
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reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding.
Section 10.2 INDEMNIFICATION BY THE SELLERS. Subject to the
limits set forth in this Article X, each of the Sellers, solely as to their
individual representations and warranties and covenants, agrees to indemnify,
defend and hold the Buyer and each of its directors and officers harmless from
and against any and all Losses, that the Buyer or any of its affiliates may
incur or become subject to arising out of or due to any (i) inaccuracy of any
representation or the breach of any warranty or covenant of the Sellers
contained in this Agreement or (ii) Losses relating to the Securities Act, the
Exchange Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement of any material fact contained in a Registration
Statement or any amendment or supplement thereto and which was included in a
Registration Statement or any amendment or supplement thereto in reliance upon
and in conformity with written information furnished to the Buyer by such Seller
specifically stating that it is for use in the preparation thereof. Each such
Seller will reimburse the Buyer and each controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding.
Section 10.3 NOTICE OF CLAIM; DEFENSE OF ACTION. In the event
that any legal proceedings should be instituted or that any claim or demand
should be asserted by any third party in respect of which the obligation to
indemnify may arise under the provisions of Section 10.1, the Buyer shall give
to Carey and Koch prompt written notice thereof, and Carey and Koch shall have
the right, at their option and expense, to be represented by counsel of their
choice in connection with the defense of any such claim or proceeding, but not
to control the defense or settlement thereof, except as hereinafter provided.
Carey and Koch may assume control of the defense or settlement of any such claim
or proceeding which may result in liability to Carey and Koch in excess of
$150,000 unless in the reasonable judgment of the Buyer the assumption of such
control by Carey and Koch creates a significant risk of a significant continuing
adverse effect on the Buyer's business operations, in which case neither Carey
nor Koch shall be entitled to assume the control of the defense or settlement of
such claim. If Carey and Koch are entitled to assume control of the defense or
settlement of any such claim or proceeding pursuant to the preceding sentence
and either of them has indicated to the Buyer its willingness to do so in a
reasonably timely manner, but the Buyer does not permit them to do so for the
reasons set forth in the preceding sentence or for any reason, neither Carey nor
Koch shall have any obligation to indemnify the Buyer with respect to such claim
or proceeding. In any event, Carey and Koch, on one hand, and the
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Buyer on the other hand, agree to cooperate with each other in connection with
the defense of any such legal proceeding, claim, or demand. In addition, if
Carey and Koch assume the defense of any such claim and the result is that the
Buyer is not responsible for damages, the Buyer will reimburse Carey and Koch
for all reasonable expenses in connection with such defense.
Section 10.4 INDEMNIFICATION BY THE BUYER. Subject to the limits set
forth in this Article X, the Buyer agrees to indemnify, defend and hold the
Sellers harmless from and against any and all Losses that the Sellers or its
affiliates may incur or become subject to arising out of or due to (i) any
inaccuracy of any representation or the breach of any warranty or covenant of
the Buyer contained in this Agreement or (ii) the Securities Act, the Exchange
Act or otherwise, insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in a
Registration Statement or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, PROVIDED
that the Buyer shall not be liable in any such case to the extent that any such
Losses (or action or proceeding in respect thereof) arise out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement or amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the Buyer
through an instrument duly executed by the Sellers specifically stating that it
is for use in the preparation thereof. The Buyer will reimburse the Sellers for
any legal or other expenses reasonably incurred by him in connection with
investigating or defending any such loss, claim, liability, action or
proceeding.
Section 10.5 SURVIVAL. The representations and warranties of
Datatec, Carey, the Sellers and the Buyer set forth in Articles III, IV and V of
this Agreement shall survive the Closing until the earlier to occur of (i) the
first anniversary of the Closing Date and (ii) the completion and publication of
a 12 month audit of the combined results of operations of the Buyer and Datatec.
The covenants and agreements of the Sellers, the Buyer, Datatec and Carey shall
not survive the Closing, except for the covenants and agreements set forth in
Sections 6.3, 6.4, 6.5, 6.6 6.7, 6.9 and 6.10 and under Articles VII and X
hereof.
Section 10.6 LIMITATIONS. Notwithstanding anything in this
Article X to the contrary, in no event shall Carey, Koch or any other Seller be
liable for indemnification under this Article X or otherwise in an amount in
excess of $2,400,000 pro rata in proportion to the number of their respective
Datatec Shares being sold pursuant to this Agreement. In addition,
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except as may otherwise be provided in this Agreement, no party shall assert any
claim against any other party or parties for indemnification hereunder with
respect to any inaccuracy or breach of such warranties, representations,
covenants or agreements unless and until the amount of all such claims shall
exceed $25,000, and then only for the excess above $25,000, PROVIDED, HOWEVER,
that any claim against Carey relating to a breach of a representation or
warranty contained in Article IV or Sections 3.2, 3.3, or 3.8 shall not be
limited by this provision. With respect to possible future obligations of
Datatec which are set forth in (i) Item 1 of Schedule 3.6 hereto and (ii) Items
1, 2, and 3 of Schedule 3.8 hereto, no party shall assert any claim against any
other party for indemnification hereunder with respect to any liability in
excess of the amounts disclosed in such Item unless and until the liability for
any such individual Item exceeds the amount disclosed in the relevant Item by
more than $150,000, and then only for the amount in excess of $150,000.
Section 10.7 REDUCTION FOR INSURANCE. The gross amount which
an indemnifying party is liable to, for, or on behalf of the indemnified party
pursuant to this Article X (the "Indemnifiable Loss") shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such indemnified party related to the
Indemnifiable Loss. If an indemnified party shall have received or shall have
had paid on its behalf an indemnity payment in respect of an Indemnifiable Loss
and shall subsequently receive directly or indirectly insurance proceeds in
respect of such Indemnifiable Loss, then such indemnified party shall pay to
such indemnifying party the net amount of such insurance proceeds or, if less,
the amount of such indemnity payment.
Section 10.8 CONTRIBUTION. If the indemnification provided for
in this Article X is unavailable to an indemnified party in respect of any
Losses relating to the Securities Act or the Exchange Act, then each
indemnifying party, in lieu of indemnifying such indemnified party as a result
of such Losses, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Buyer on the one hand and of
the Sellers, Carey or Koch, as the case may be, on the other in connection with
any untrue statement or alleged untrue statement of a material fact contained in
a Registration Statement or any amendment or supplement thereto or any omission
or alleged omission to state a material fact in a Registration Statement or any
amendment or supplement thereto. The relative fault of the Buyer on the one hand
and of the Sellers, Carey or Koch, as the case may be, on the other shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity
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to correct or prevent such untrue statement or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. In no event shall the obligation of any indemnifying party to
contribute under this Section 10.8 exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under Sections 10.1, Section 10.2 or 10.3 (as
limited by Section 10.6) had been available under the circumstances.
The Buyer, the Sellers, Carey and Koch agree that it would not
be just and equitable if contribution pursuant to this Section 10.8 were
determined by PRO RATA allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the Losses referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth in the preceding
sentence, any legal or other expenses reasonable incurred by such indemnified
party in connection with investigating or defending any such action or claim.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 TERMINATION. This Agreement may be terminated and
the transactions contemplated by this Agreement abandoned at any time prior to
the Closing:
(a) By mutual written consent of the Buyer and the Sellers
holding at least 5,000,000 shares of Datatec Common Stock;
(b) By either the Buyer or the Sellers holding at least
5,000,000 shares of Datatec Common Stock if the transactions contemplated by
this Agreement shall not have been consummated on or before December 31, 1996,
other than as a result of the breach of this Agreement by such terminating
party;
(c) By the Sellers holding at least 5,000,000 shares of
Datatec Common Stock if any condition specified in Article VIII hereto has not
been met, or waived by the Sellers holding at least 5,000,000 shares of Datatec
Common Stock, at such time as such condition can no longer be satisfied; or
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(d) By the Buyer if any condition specified in Article IX
hereto has not been met, or waived by the Buyer, at such time as such condition
can no longer be satisfied; or
(e) By either the Buyer or the Sellers holding at least
5,000,000 shares of Datatec Common Stock if a court of competent jurisdiction or
Governmental Authority shall have issued a final, non-appealable order, decree
or ruling or taken any other action (which order, decree or ruling the parties
hereto shall use their best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement.
Section 11.2 EFFECT OF TERMINATION. In the event of any
termination of this Agreement in accordance with Section 11.1(a), (b) or (e)
hereof, this Agreement shall forthwith become void and there shall be no
liability under this Agreement on the part of any party hereto or their
respective affiliates, officers, directors, employees or agents by virtue of
such termination.
Section 11.3 AMENDMENT. This Agreement may be amended by the
written agreement of the Buyer and the Sellers holding at least 5,000,000 shares
of Datatec Common Stock.
ARTICLE XII
MISCELLANEOUS
Section 12.1 EXPENSES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses regardless of the
termination of this Agreement or the failure to consummate the transactions
contemplated hereby.
Section 12.2 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered personally
or by facsimile transmission, in either case with receipt acknowledged, or three
days after being sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the Buyer to:
Glasgal Communications Inc.
151 Veterans Drive
Northvale, New Jersey 07647
Attention: Chief Executive Officer
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with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman, Esq.
(b) If to the Sellers, to the address listed on the
signature pages hereto, if to Datatec to:
Datatec Industries, Inc.
1633 Littleton Road
Parsippany, New Jersey 07054
with a copy to:
Podvey, Sachs, Meanor, Catenacci, Hildner &
Cocoziello, P.C.
One Riverfront Plaza
Newark, New Jersey 07102-5497
Attention: Mark K. Lipton, Esq.
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 12.2.
Section 12.3 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements, representations and
understandings among the parties hereto including the letter of intent dated
August 30, 1996 among the Buyer, Datatec and Carey and the Confidentiality
Agreement dated September 3, 1996 between Datatec and the Buyer.
Section 12.4 BINDING EFFECT, BENEFITS, ASSIGNMENTS. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns; nothing in this Agreement,
expressed or implied, is intended to confer on any other person, other than the
parties hereto or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement. This Agreement
may not be assigned without the prior written consent of the other parties
hereto.
Section 12.5 APPLICABLE LAW. This Agreement and the legal
relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of New Jersey, without regard to
principles of conflicts of law.
Section 12.6 JURISDICTION. The parties hereto agree to submit
to the jurisdiction of any Federal or state court
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located in the State of New Jersey for the purpose of resolving any action or
claim arising out of the performance of the provisions of this Agreement.
Section 12.7 HEADINGS. The headings and captions in this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
Section 12.8 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first set forth.
GLASGAL COMMUNICATIONS, INC.
By: /s/ ISAAC J. GAON
---------------------------------------
Name: Isaac J. Gaon
Title: Chief Executive Officer
DATATEC INDUSTRIES INC.
By: /s/ CHRISTOPHER CAREY
---------------------------------------
Name: Christopher Carey
Title: Chief Executive Officer
/s/ CHRISTOPHER CAREY
- ---------------------------------------
CHRISTOPHER CAREY
Address:
450 Claremont Road
Bernardsville, NJ 07924
/s/ MARY CAREY
- ---------------------------------------
MARY CAREY
Address:
450 Claremont Road
Bernardsville, NJ 07924
/s/ AMY CAREY GRAT
- ---------------------------------------
AMY CAREY GRAT
Address:
450 Claremont Road
Bernardsville, NJ 07924
/s/ CHRISTOPHER CAREY GRAT
- ---------------------------------------
CHRISTOPHER CAREY GRAT
Address:
450 Claremont Road
Bernardsville, NJ 07924
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<PAGE>
/s/ RAYMOND KOCH
- ---------------------------------------
RAYMOND KOCH
Address:
P.O. Box 493
201 Pleasant Valley Rd.
Mendham, NJ 07945
/s/ RONALD FREY
- ---------------------------------------
RONALD FREY
Address:
670 Summit Avenue
Hackensack, NJ 07601
/s/ GRAEME HOWARD
- ---------------------------------------
GRAEME HOWARD
Address:
c/o Howard, Lawson & Co.
2 Penn Center Plaza
Philadelphia, PA 19102
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SCHEDULE 1.1
Glasgal Shares
Datatec to be
Name of Stockholder Shares Held Received
------------------- ----------- --------
Christopher J. Carey 5,950,000 3,525,926
Mary Carey 200,000 118,518
Amy Carey GRAT 162,500 96,296
Christopher Carey GRAT 162,500 96,296
Raymond Koch 200,000 118,518
Ronald Frey 50,000 29,631
Graeme Howard 25,000 14,815
--------- ---------
6,750,000 4,000,000
