SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
GLASGAL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was
<PAGE>
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
-2-
<PAGE>
GLASGAL COMMUNICATIONS, INC.
October 24, 1997
Dear Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Glasgal Communications, Inc., which will be held at 23 Madison
Road, Fairfield, New Jersey 07512, on Wednesday, November 19, 1997, at 10:00
A.M., local time.
Information about the Annual Meeting, including a listing and
discussion of the matters on which the Stockholders will act, may be found in
the enclosed Notice of Annual Meeting and Proxy Statement.
We hope that you will be able to attend the Annual Meeting. However,
whether or not you anticipate attending in person, I urge you to complete, sign
and return the enclosed proxy card promptly to ensure that your shares will be
represented at the Annual Meeting. If you do attend, you will, of course, be
entitled to vote in person, and if you vote in person such vote will nullify
your proxy.
Sincerely,
RALPH GLASGAL
Chairman of the Board and President
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
20C COMMERCE WAY
TOTOWA, NEW JERSEY 07512
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------
To our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Glasgal Communications, Inc., a Delaware corporation (the "Company"), will be
held at 23 Madison Road, Fairfield, New Jersey 07512, on Wednesday, November 19,
1997, at 10:00 A.M., local time for the following purposes:
1. To elect seven (7) members to the Board of Directors of the
Company to serve until the next annual meeting of stockholders
and until their successors have been duly elected and shall
have qualified;
2. To approve an amendment to the Company's Certificate of
Incorporation to change the name of the Company from "Glasgal
Communications, Inc." to "[ ]."
3. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
the Company's capital stock from thirty-eight million
(38,000,000) shares to seventy-nine million (79,000,000)
shares;
4. To approve the adoption of the Company's 1996 Senior Executive
Officer Option Plan;
5. To ratify and approve the sale of certain shares of the
Company's Common Stock to Ralph Glasgal;
6. To ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year
ending April 30, 1998; and
7. To consider and act upon such other business as may properly
come before the Annual Meeting or any adjournments thereof.
Only stockholders of record at the close of business on September 26,
1997 will be entitled to notice of, and to vote at, the Annual Meeting.
PLEASE SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, IN ORDER THAT YOUR SHARES MAY BE VOTED FOR
YOU. A RETURN ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
JAMES M. CACI
VICE PRESIDENT-FINANCE, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
Dated: Totowa, New Jersey
October 24, 1997
<PAGE>
GLASGAL COMMUNICATIONS, INC.
20C COMMERCE WAY
TOTOWA, NEW JERSEY 07512
--------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1997
--------------------------
This Proxy Statement is being furnished to the stockholders of Glasgal
Communications, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation by the Board of Directors of the Company of proxies ("Proxies")
for the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 23
Madison Road, Fairfield, New Jersey 07512, on Wednesday, November 19, 1997, at
10:00 A.M., local time. At the Annual Meeting, the stockholders will be asked to
(i) elect seven (7) directors; (ii) approve an amendment to the Company's
Certificate of Incorporation to change the name of the Company from "Glasgal
Communications, Inc." to "[ ]"; (iii) approve an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of the
Company's capital stock from thirty-eight million (38,000,000) shares to
seventy-nine million (79,000,000) shares; (iv) approve the adoption of the
Company's 1996 Senior Executive Officer Option Plan, (v) ratify and approve the
sale of certain shares of the Company's Common Stock to Ralph Glasgal; (vi)
ratify the appointment of Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending April 30, 1998; and (vii) consider
and act upon such other business as may properly come before the Annual Meeting.
It is expected that the Notice of Annual Meeting, Proxy Statement and form of
Proxy will first be mailed to stockholders on or about October 24, 1997.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on Thursday,
September 26, 1997 (the "Record Date") will be entitled to notice of, and to
vote at, the Annual Meeting and any adjournments thereof. As of the close of
business on the Record Date, there were 25,156,700 outstanding shares of the
Company's Common Stock. Each outstanding share of Common Stock is entitled to
one vote. There was no other class of voting securities of the Company
outstanding on the Record Date. A majority of the outstanding shares of Common
Stock present in person or by proxy is required for a quorum.
PROXIES AND VOTING RIGHTS
Shares of Common Stock represented by Proxies, which are properly
executed, duly returned and not revoked, will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
the shares of Common Stock represented thereby will be voted (i) for the
election as Directors of the persons who have been nominated by the Board of
Directors, (ii) for the approval of an amendment to the Company's Certificate of
Incorporation to change the name of the Company from "Glasgal Communications,
Inc." to " [ ]," (iii) for the approval of an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of the
Company's capital stock from thirty-eight million (38,000,000) shares to
seventy- nine million (79,000,000) shares, (iv) for the approval of the adoption
of the Company's 1996 Senior Executive Officer Option Plan, (v) for the approval
and ratification of the sale of certain shares of the Company's Common Stock to
Ralph Glasgal, (vi) for the ratification of the appointment of Arthur Andersen
LLP as the Company's independent public accountants for the fiscal year ending
April 30, 1998, and (vii) for any other matter that may
<PAGE>
properly be brought before the Annual Meeting in accordance with the judgment of
the person or persons voting the Proxy.
The execution of a Proxy will in no way affect a stockholder's right to
attend the Annual Meeting and vote in person. Any Proxy executed and returned by
a stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Annual Meeting, or by execution of a subsequent Proxy which is
presented at the Annual Meeting, or if the stockholder attends the Annual
Meeting and votes by ballot, except as to any matter or matters upon which a
vote shall have been cast pursuant to the authority conferred by such Proxy
prior to such revocation. Broker "non-votes" and the shares of Common Stock as
to which a stockholder abstains are included for purposes of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker "non-votes" are not
counted for purposes of determining whether a proposal has been approved and,
therefore, do not have the effect of votes in opposition in such tabulations. An
abstention from voting on a matter or a Proxy instructing that a vote be
withheld has the same effect as a vote against a matter since it is one less
vote for approval.
The management of the Company knows of no matters which are to be
presented for consideration at the Annual Meeting other than those specifically
described in the Notice of Annual Meeting of Stockholders, but, if other matters
are properly presented, it is the intention of the persons designated as proxies
to vote on them in accordance with their judgment.
All expenses in connection with this solicitation will be borne by the
Company. In addition to the use of the mails, proxy solicitation may be made by
telephone, telegraph and personal interview by officers, directors and employees
of the Company. The Company will, upon request, reimburse brokerage houses and
persons holding shares in the names of their nominees for their reasonable
expenses in sending soliciting material to their principals.
-2-
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of the
Common Stock outstanding as of September 30, 1997, by (i) each person known by
the Company to be the beneficial owner of more than five percent (5%) of the
Company's Common Stock, (ii) each director and nominee for election as a
director, (iii) each of the executive officers named in the summary compensation
table, and (iv) by all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL AMOUNT OF SHARES
OWNER(1) BENEFICIALLY OWNED(2) PERCENTAGE OF CLASS
- ---------------------------------------- --------------------------- ------------------------
<S> <C> <C>
Ralph Glasgal(3) 4,847,020 19.3%
Isaac Gaon(4) 947,336 3.6%
Christopher J. Carey(5) 3,523,036 14.0%
Robert F. Gadd(6) 479,566 1.9%
James Caci(7) 228,667 *
Thomas J. Berry(8) 32,000 *
Robert H. Friedman(9) 63,146 *
David M. Milch(10) 352,505 1.4%
Joseph Salvani(11) 48,000 *
All directors and officers as a group (9
persons)(12) 10,384,008 38.3%
</TABLE>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, all addresses are c/o Glasgal
Communications, Inc., 20C Commerce Way, Totowa, New Jersey 07512.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act ("Rule 13d-3") and unless otherwise indicated,
represents shares for which the beneficial owner has sole voting and
investment power. The percentage of class is calculated in accordance
with Rule 13d-3 and includes options or other rights to subscribe which
are exercisable within sixty (60) days of September 30, 1997.
(3) Mr. Glasgal's beneficial ownership includes (i) 146,752 shares of
Common Stock owned by Ralph Glasgal's wife and (ii) 1,003,706 shares of
Common Stock owned by Direct Connect International Inc. ("DCI") which
Ralph Glasgal has the right to vote pursuant to a voting agreement with
DCI.
(4) Mr. Gaon's beneficial ownership includes options exercisable within
sixty (60) days from September 30, 1997 to purchase 944,336 shares of
Common Stock.
-3-
<PAGE>
(5) Mr. Carey's beneficial ownership includes (i) 118,518 shares of Common
Stock owned by Mary Carey, Mr. Carey's wife, (ii) 96,296 shares held by
the Amy Carey GRAT, a trust formed for the benefit of Mr. Carey's
daughter, (iii) 96,296 shares held by the Christopher Carey GRAT, a
trust formed for the benefit of Mr. Carey's son, and (iv) 15,000 shares
held by Plan C LLC, a limited liability company of which Mr.
Carey is a member.
(6) Mr. Gadd's beneficial ownership includes options exercisable within
sixty (60) days from September 30, 1997 to purchase 479,566 shares of
Common Stock.
(7) Mr. Caci's beneficial ownership includes options exercisable within
sixty (60) days from September 30, 1997 to purchase 228,667 shares of
Common Stock.
(8) Mr. Berry's beneficial ownership includes options exercisable within
sixty (60) days of September 30, 1997 to purchase 32,000 shares of
Common Stock. Mr. Berry's address is P.O. Box 447, Lindsley Road, New
Vernon, New Jersey 07976.
(9) Mr. Friedman's beneficial ownership includes options exercisable within
sixty (60) days from September 30, 1997 to purchase 48,000 shares of
Common Stock. Mr. Friedman's address is 505 Park Avenue, New York, New
York 10022-1170.
(10) Dr. Milch's beneficial ownership includes options exercisable within
sixty (60) days from September 30, 1997 to purchase 8,000 shares of
Common Stock. Dr. Milch's address is 114 East 13th Street, New York,
New York 10003.
(11) Mr. Salvani's beneficial ownership includes options exercisable within
sixty (60) days of September 30, 1997 to purchase 48,000 shares of
Common Stock. Mr. Salvani is also the Chairman of the Board of DCI but
has no power to direct DCI's voting or disposition of its interest in
the Company. Thus the shares of the Company's Common Stock owned by DCI
are not deemed to be attributable to Mr. Salvani. Mr.
Salvani's address is 4800 Highway A-1-A, Vero Beach, Florida 32963.
(12) Includes (i) options exercisable within sixty (60) days of September
30, 1997 to purchase an aggregate of 1,938,770 shares of Common Stock
held by the directors and executive officers of the Company (excludes
options granted by Mr. Glasgal to certain officers of the Company to
purchase 137,268 shares of Common Stock, which have already been
counted as being beneficially owned by Ralph Glasgal) and (ii)
1,003,706 shares of Common Stock owned by DCI which Ralph Glasgal has
the right to vote pursuant to a voting agreement with DCI.
-4-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise specified, all Proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the next Annual Meeting of Stockholders of the Company and until their
successors shall be duly elected and qualified. Directors shall be elected by a
plurality of the votes cast, in person or by proxy, at the Annual Meeting.
The terms of the current directors expire at the Annual Meeting and
when their successors are duly elected and qualified. All nominees are currently
directors of the Company. Management has no reason to believe that any of the
nominees will be unable or unwilling to serve as a director. Should any of the
nominees not remain a candidate for election at the date of the Annual Meeting,
the Proxies will be voted in favor of those nominees who remain candidates and
may be voted for substitute nominees selected by the Board of Directors.
The names of the nominees and certain biographical information
concerning each of them are set forth below:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH THE COMPANY
- -------------------------------- -------- ----------------------------------------------------------------
<S> <C> <C>
Ralph Glasgal 64 Chairman of the Board and President
Isaac J. Gaon 48 Director and Chief Executive Officer
Christopher J. Carey 45 Director, President and Chief Executive Officer of Datatec
Industries Inc.
Thomas J. Berry 72 Director
Robert H. Friedman 44 Director
David M. Milch 42 Director
Joseph M. Salvani 40 Director
</TABLE>
RALPH GLASGAL, Director, Chairman of the Board and President, founded
the Company in 1975 as a distributor of data communications equipment and
services. Mr. Glasgal has announced that he will retire as Chairman of the Board
and President concurrently with the Annual Meeting.
ISAAC J. GAON, Chief Executive Officer and Director, joined the Company
in April 1992. Effective with Mr. Glasgal's resignation as Chairman of the Board
of the Company, the Board has elected Mr. Gaon to fill this position. He served
as Chief Financial Officer from April 1992 until October 1994. From September
1987 to December 1991, Mr. Gaon, a chartered accountant, served as President and
Chief Executive Officer of Toronto-based NRG, Inc., (a subsidiary of Gestetner
International) an office equipment supplier, and in several senior management
roles within Gestetner Canada and Gestetner USA.
CHRISTOPHER J. CAREY, Director since November 1, 1996, is Chief
Executive Officer, President and founder of Datatec Industries Inc. Mr. Carey
founded Datatec Industries Inc. in 1976 and has served as its President and
Chief Executive Officer since that time. Effective with Mr. Glasgal's
resignation as President of the Company, the Board has elected Mr. Carey to fill
this position.
-5-
<PAGE>
THOMAS J. BERRY, Director since July 1995, is currently retired. Mr.
Berry was an executive with the U.S. Postal Service from November 1986 to
December 1992, serving as executive assistant to the Postmaster General. Prior
to that time and until November 1986, Mr. Berry held various executive positions
at AT&T. Mr. Berry is a director of Computer Horizons Corp., a company which
provides information technology services, including professional staffing, and
other technology-based solutions to informational problems.
ROBERT H. FRIEDMAN, Director since August 1994, has been a partner with
Olshan Grundman Frome & Rosenzweig LLP, a New York City law firm, since August
1992. Prior to that time and since September 1983 he was associated with Cahill
Gordon & Reindel, also a New York City law firm. Mr. Friedman specializes in
corporate and securities law matters.
DR. DAVID M. MILCH, Director since October 3, 1996, has been a
principal of Bermil Industries Corporation, a closely held diversified company
involved in the manufacture, sale, financing, and distribution of capital
equipment, and in real estate development, which is owned by the Milch family,
since 1983.
JOSEPH M. SALVANI, Director since August 1994, has been the President
of Salvani Investments, Inc., an investment and consulting firm that is a
consultant to Brookehill Equities, Inc. since 1991. Mr. Salvani was a registered
broker with Brookehill Equities, Inc. from March 1991 to July 1992. From July
1989 through 1991, he was a founder, general partner and Hedge Fund Manager of
EGS Associates, LP, a private investment limited partnership. He served as a
general partner of Steinhardt Partners from October 1986 until April 1989 and as
a general partner of Institutional Partners, LP from January 1987 to April 1989.
Mr. Salvani is Chairman of the Board of Directors and Chief Executive Officer of
Direct Connect International Inc. ("DCI"), and a director of Medicis
Pharmaceutical, Inc., a pharmaceutical company.
REQUIRED VOTE
Directors are elected by a plurality of the votes cast, in person or by
proxy, at the Annual Meeting. Votes withheld and broker non-votes are not
counted toward a nominee's total.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended April 30, 1997 ("Fiscal 1997"), the
Company's Board of Directors formally met on seven occasions. Each of the
directors attended (or participated by telephone) more than 75% of such meetings
of the Board of Directors and Committees on which he served during Fiscal 1997.
During Fiscal 1997, the Board of Directors also acted by unanimous written
consent in lieu of a meeting on six occasions. The Board of Directors has no
committees other than the Compensation Committee, the Nominating Committee and
the Audit Committee.
The Company's Compensation Committee which is comprised of Thomas J.
Berry, Robert H. Friedman and Joseph Salvani reviews and approves the
compensation of the Company's executive officers and administers and interprets
the Company's stock option plans. The Compensation Committee met or took action
on one occasion during Fiscal 1997.
The Nominating Committee of the Company's Board of Directors is
comprised of Christopher Carey, Isaac Gaon and David M. Milch. The purpose of
this Committee is to select and nominate Directors for elections at the
-6-
<PAGE>
Company's annual meetings of stockholders. The Nominating Committee was
established on January 16, 1997 and did not meet or take action during Fiscal
1997.
The Company's Board of Directors established an Audit Committee on
September 29, 1997, which is comprised of Thomas J. Berry, Robert H. Friedman
and Joseph M. Salvani. The Audit Committee recommends the Company's independent
auditors, reviews the scope of their engagement, consults with the auditors,
reviews the results of their examination, acts as liaison between the Board of
Directors and the auditors and reviews various Company policies, including those
relating to accounting and internal controls.
The officers of the Company are elected annually by the Board of
Directors at its meeting following the Annual Meeting of Stockholders. There are
no family relationships between any directors and executive officers of the
Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Each of the following persons failed to file on a timely basis one
report for a single transaction required by Section 16(a) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), during Fiscal 1997: James Caci and Isaac Gaon.
Christopher Carey failed to file on a timely basis two reports covering five
transactions required by Section 16(a) of the Exchange Act during Fiscal 1997.
Ralph Glasgal failed to file on a timely basis four reports covering twenty-nine
transactions required by Section 16(a) of the Exchange Act during Fiscal 1997.
Each of the transactions for the above named individuals were subsequently
reported to the Commission on a Form 4.
-7-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended
April 30, 1995, 1996 and 1997 with respect to annual and long-term compensation
for services in all capacities to the Company of (i) the chief executive
officer, and (ii) the other four most highly compensated executive officers of
the Company at April 30, 1997 who received compensation of at least $100,000
during Fiscal 1997 (collectively, the "Named Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1) LONG-TERM COMPENSATION
----------------------- ----------------------
AWARDS PAYOUTS
------ -------
STOCK LONG-TERM
OPTIONS INCENTIVE
NAME AND POSITION YEAR SALARY BONUS (SHARES) PAYMENTS
----------------- ---- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Ralph Glasgal 1997 $250,000 -- -- --
Chairman of the Board and 1996 250,000 $74,800 -- --
President 1995(2) 26,700 -- -- --
Isaac J. Gaon 1997 $250,000 -- 350,000 --
Chief Executive Officer 1996 204,800 -- 108,821 --
1995 192,300 -- 90,000 --
Christopher J. Carey 1997 $345,000 $95,000 120,353 --
President and Chief Executive 1996 416,000 -- -- --
Officer - Datatec Industries Inc. 1995 416,000 -- -- --
Robert F. Gadd 1997 $155,000 -- -- --
Senior Vice President and 1996 136,433 $22,500 103,985 --
Chief Technology Officer 1995 113,900 -- 60,000 --
James M. Caci 1997 $128,100 -- 175,000 --
Vice President-Finance, Chief 1996 100,000 -- 43,528 --
Financial Officer, Treasurer, 1995(3) 40,000 -- 52,000 --
Secretary
</TABLE>
(1) The value of personal benefits for executive officers of the Company
during Fiscal 1997 that might be attributable to management as
executive fringe benefits such as automobiles and club dues cannot be
specifically or precisely determined; however, it would not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported
for any individual named above.
(2) During fiscal 1995 Mr. Glasgal spent the majority of his time pursuing
interests outside of the Company. Mr. Glasgal may also receive a bonus
at the discretion of, and to be determined by, the Board of Directors.
Mr. Glasgal has announced that he will retire as Chairman of the Board
and President of the Company concurrently with the Annual Meeting.
(3) Mr. Caci joined the Company on October 31, 1994, therefore, the salary
for fiscal 1995 represents six months.
-8-
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding stock
option grants made to each of the Named Officers during the fiscal year ended
April 30, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED RATES OF ANNUAL
----------------- RATES OF STOCK PRICE
APPRECIATION FOR OPTION (1)
---------------------------
SHARES OF
COMMON STOCK PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE
NAME GRANTED FISCAL YEAR(%) ($/SH) EXPIRATION DATE 5% 10%
---- ------- -------------- ------ --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ralph Glasgal -- -- -- -- -- --
Isaac J. Gaon 350,000 15.1% $5.25 10/31/06 $1,155,594 $2,928,502
Christopher Carey 120,353 5.2% 3.19 04/15/07 241,260 611,400
Robert F. Gadd -- -- -- -- -- --
James M. Caci 175,000 7.5% 5.25 10/31/06 577,797 1,464,251
</TABLE>
(1) The potential realizable portion of the foregoing table illustrates
value that might be realized upon exercise of options immediately prior
to the expiration of their term, assuming (for illustrative purposes
only) the specified compounded rates of appreciation on the Company's
Common Stock over the term of the option. These numbers do not take
into account provisions providing for termination of the option
following termination of employment, nontransferability or difference
in vesting periods.
-9-
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE
No stock options were exercised by the Named Officers during the fiscal
year ended April 30, 1997. None of the Named Officers has held or exercised
separate SARs. The following table sets forth certain information regarding
unexercised options held by each of the Named Officers at April 30, 1997.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options Held at Fiscal Value of Unexercised In-The-Money
Year-End(#) Options at Fiscal Year-End($)(1)
-------------------------------------------- ------------------------------------------
NAME Exercisable Unexercisable Exercisable UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ralph Glasgal -- -- -- --
Isaac J. Gaon 708,185 335,881 $1,744,300 $94,460
Christopher Carey -- 120,353 -- 7,221
Robert Gadd 371,809 89,323 1,060,706 72,929
James M. Caci 128,843 145,685 110,892 13,784
</TABLE>
(1) Represents the total gain that would be realized if all in-the-money
options held at April 30, 1997 were exercised, determined by
multiplying the number of shares underlying the options by the
difference between the per share option exercise price and the $3.25
per share, which was the closing bid price per share of the Company's
Common Stock on April 30, 1997. An option is in-the-money if the fair
market value of the underlying shares exceeds the exercise price of the
option.
DIRECTORS COMPENSATION
Each director who is not an employee of the Company receives a fee of
$1,000 per meeting attended. The members of the Board are also eligible for
reimbursement of their reasonable expenses incurred in connection with
attendance of Board meetings.
EMPLOYMENT AGREEMENTS
The Company entered into a Employment Agreement dated as of December
31, 1996 with Ralph Glasgal under which Mr. Glasgal serves as the Company's
Chairman of the Board and President for a term ending on October 31, 1997 or at
such earlier date upon 6 months written notice. The agreement provides for a
base salary of $250,000, which is reviewed annually by the Compensation
Committee. In the event of early termination by the Company without "Cause" (as
defined in the agreement), Mr. Glasgal will be entitled to an amount equal to
six months salary, together with bonuses earned as of the date of such
termination. Mr. Glasgal has announced that he will retire as Chairman of the
Board and President of the Company concurrently with the Annual Meeting.
Isaac Gaon is employed as the Chief Executive Officer of Glasgal
pursuant to an employment agreement dated as of October 31, 1996, for a term
ending on October 31, 1999. The agreement provides for an initial base salary of
$250,000 which is reviewed annually by the Compensation Committee and incentive
compensation based on the Company's Projected EBIT (as defined in the
agreement). In the event of his disability, Mr. Gaon is to receive the full
amount of his base salary for six months. Upon a Change of Control of the
Company (as defined in the agreement) that results in Mr. Gaon's removal from
the Company's Board of Directors, a significant change in the conditions of his
employment or other breach of the agreement, he is to receive liquidated damages
equal to 2.99 times the "base amount," as defined in the United States Internal
Revenue Code of 1986, as amended (the "Code"), of his compensation. Upon early
termination by the Company without Cause (as defined in the agreement),
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or by Mr. Gaon with "Good Reason" (as defined in the agreement), the Company is
required to pay Mr. Gaon the remainder of the salary owed him through October
31, 1999, but in no event shall such payment be less than $500,000.
Additionally, Mr. Gaon will be entitled to undistributed bonus payments, as well
as pro-rata unused vacation time payments. In addition, following a Change of
Control, termination by the Company without Cause, or termination by Mr. Gaon
for Good Reason, the Company is obligated to purchase all Mr. Gaon's stock
options, whether exercisable or not, for a price equal to the difference between
the fair market value of the Common Stock on the date of termination and the
exercise price of such options.
The Company entered into a Employment and Non-Competition Agreement
dated as of November 1, 1996 with Christopher J. Carey under which Mr. Carey
serves as the President and Chief Executive Officer of Datatec Industries Inc.
for a term ending on October 31, 1999. The agreement provides for an initial
base salary of $250,000, which is reviewed annually by the Compensation
Committee and non-discretionary incentive compensation based on the Company's
achievement of net income goals. The agreement contains covenants restricting
Mr. Carey's ability to engage in activities competitive with those of the
Company for a period ending three years after his termination. In addition, upon
termination without "Cause" (as defined in the agreement), Mr. Carey is entitled
to receive his salary as of the time of termination, plus bonuses as provided
for in the agreement, until October 31, 1999. If he is totally disabled, Mr.
Carey is entitled to receive a pro-rated bonus.
The Company entered into a Employment Agreement dated as of December
31, 1996, with Robert Gadd on terms substantially similar to those of Isaac
Gaon's employment agreement for a term ending on December 31, 1999. Mr. Gadd's
agreement provides for his employment by the Company as its Senior Vice
President at an initial base salary of $155,000 annually, and in the case of
early termination, his accelerated payment is in no case to be below $200,000.
Effective as of October 31, 1996, the Company entered into an
employment agreement with James Caci on terms substantially similar to those of
Isaac Gaon's employment agreement for a term ending on October 31, 1999. Mr.
Caci's agreement provides for his employment by the Company as its Chief
Financial Officer and Vice President--Finance and Secretary at an initial base
salary of $150,000 annually, and in case of early termination, his accelerated
salary payment is in no case to be below $300,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Salvani, a member of the Compensation Committee of the Board of
Directors, is the Chairman of the Board of Direct Connect International, Inc.
("DCI"), a stockholder of the Company. DCI has entered into certain arrangements
with the Company regarding equity investments by DCI in the Company. See
"Certain Transactions."
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GLASGAL COMMUNICATIONS, INC.
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Board of Directors created the Compensation Committee in 1994.
Since July 1995, the Compensation Committee has consisted of Robert H. Friedman,
Joseph M. Salvani and Thomas J. Berry.
The Compensation Committee's duties include: making recommendations
(for Board approval) on compensation actions involving the Company's President
and Chief Executive Officer, including but not limited to salary actions,
incentive bonus determinations and terms of employment; approving incentive
bonus determinations and terms of employment for executive officers other than
the President and Chief Executive Officer and for other key employees and
agents; reviewing salary actions (approved by the Chief Executive Officer)
regarding executive officers other than the President and Chief Executive
Officer and regarding other key employees and agents; making recommendations on
compensation and benefit plans requiring Board and/or stockholder approval; and
such other duties as the Board of Directors may assign to it from time to time.
The Compensation Committee also currently administers the Company's stock option
plans.
PHILOSOPHY OF EXECUTIVE COMPENSATION
In reaching its decisions regarding executive compensation, the
Compensation Committee was guided by the following philosophy.
o Total cash compensation levels (salary plus annual bonus)
should be set at levels consistent with competitive practice
at other open systems computer integration companies of
similar size.
o Performance objectives, used to determine incentive bonuses,
should be explained and confirmed in advance.
o Stock based incentives should be sufficient to promote
alignment of interests between executives and stockholders,
while ensuring that stockholders must benefit before
executives do.
o Employment security arrangements should provide competitive
benefits while encouraging executives to make decisions that
will maximize long-term stockholder value.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), places a limit of $1,000,000 on the amount of compensation that may be
deducted by the Company in any year with respect to certain of the Company's
highest paid executives. Certain performance based compensation that has been
approved by stockholders is not subject to the deduction limit. The Company
intends to qualify certain compensation paid to executive officers for
deductibility under the Code, including Section 162(m). However, the Company may
from time to time pay compensation to its executive officers that may not be
deductible.
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COMPENSATION PROGRAMS FOR EXECUTIVE OFFICERS
This section describes the compensation programs for executive officers
that were in effect in Fiscal 1997 and the programs approved by the Compensation
Committee for the 1998 fiscal year. It also details specific Compensation
Committee decisions involving Mr. Glasgal and Mr. Gaon.
BASE SALARY
Base salary levels are primarily a function of competitive practice at
other companies for positions of similar scope and responsibility. Other factors
that influence base salary levels include the incumbent's tenure with the
Company, individual performance, potential earnings from comparable outside
positions and the performance of the Company.
Mr. Glasgal's base salary during Fiscal 1997 was $250,000 and reflects
a competitive salary for his position for similarly sized companies. Mr. Glasgal
has indicated that he intends to resign as Chairman of the Board and President
of the Company following the Annual Meeting. Mr. Gaon's base salary for Fiscal
1997 was $250,000, which also reflects a competitive salary for his position for
similarly sized companies.
INCENTIVE BONUS PROGRAM
The Compensation Committee considers cash performance bonuses to its
executives in accordance with the following terms: competitive practice at other
companies for positions of similar scope and responsibility; overall performance
of the Company; individual performance of the executive; and transactions
effected for the benefit of the Company which are outside the ordinary business
and directly accomplished through the efforts of the executive. During Fiscal
1997, the Compensation Committee considered the above factors and awarded the
Named Executives aggregate bonuses of $95,000. Messrs. Gaon and Glasgal did not
receive any bonuses during Fiscal 1997.
STOCK OPTION PROGRAM
During Fiscal 1997, an aggregate of 525,000 shares were granted to
Named Executives under the Company's 1990 Stock Option Plan (the "1990 Option
Plan") and 1996 Senior Executive Officer Stock Option Plan (the "Executive
Option Plan"), which included 350,000 options granted to Mr. Gaon. Such grants
under the 1990 Option Plan and Executive Option Plan are made to provide
incentives to executive officers to contribute to corporate growth and
profitability and are based on the Compensation Committee's judgment of an
employee's contribution to the success of the Company's operations.
EMPLOYMENT AGREEMENTS
On December 31, 1996 and October 31, 1996, the Company entered into
employment agreements with Ralph Glasgal and Isaac Gaon, respectively. See
"Executive Compensation - Employment Agreements." The objective of these
agreements are two-fold:
o To ensure the Company of consistency of leadership and the
retention of a qualified President and Chief Executive
Officer.
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o To foster a spirit of employment security to Mr. Glasgal and
Mr. Gaon, thereby encouraging decisions that will benefit
long-term stockholders.
Compensation Committee: Robert H. Friedman; Joseph M. Salvani; Thomas
J. Berry.
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PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company with the cumulative total return on the Nasdaq
Market Index and an index of peer companies in the open systems computer
integration business selected by the Company over the same period (assuming the
investment of $100 in the Company's Common Stock, the Nasdaq Market Index and
the peer group on December 10, 1992, and reinvestment of all dividends). On May
2, 1994, Glasgal Communications, Inc., a New Jersey corporation, merged with and
into Sellectek Incorporated, a California corporation. The surviving entity,
Sellectek Incorporated, changed its name to Glasgal Communications, Inc.
Stockholders' returns set forth in the graph below for periods prior to May 3,
1994 reflect that of Sellectek, which had no ongoing business operations.
The Company has selected the following networking and system integrator
companies in its peer group, (i) Data Systems Network, (ii) Dataflex Corp. and
(iii) Micros-to-Mainframes Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
--------------------------------------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Glasgal Communications 100 79.13 28.13 10.63 37.51 16.25
Peer Group 100 80.77 107.69 130.74 73.53 117.13
Broad Market 100 113.21 127.07 138.75 193.68 206.45
</TABLE>
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1997, the Company borrowed $1,000,000 from Ralph Glasgal.
The loan amount available to the Company for borrowing was subject to the
availability of funds in Mr. Glasgal's stock margin account with an investment
banking firm. The promissory note representing such indebtedness accrued
interest at the rate equal to 9.5% which was payable monthly. The loan was
repaid in full in February 1997.
In January 1997, pursuant to a prior agreement between the Company,
Datatec Industries Inc's previous lender and Plan C LLC, an affiliated company
of Christopher Carey, Plan C LLC loaned the Company approximately $1,660,000.
The loan bears interest at 12.5% per annum with interest payable monthly. The
principal balance of the loan is due in January 1999. In consideration for
subordinating this loan to the Company's credit facility, the affiliated company
was granted options to purchase 30,000 shares of Common Stock at an exercise
price of $4.00 per share, which was the fair market value of the Common Stock at
that time.
During the year ended April 30, 1997, the Company loaned $125,000 to
Ralph Glasgal, which bears interest at 6% per annum. This loan matures on
December 31, 1999.
During the year ended April 30, 1997, the Company loaned $160,000 to
Robert Gadd and $50,000 to James Caci. These loans bear interest at 8% per
annum. The loans may be repaid with the proceeds from the future exercise of
stock options of these officers. In addition, the Company's sole recourse upon
any default of these loans is limited to its security interest in certain
options currently held by such officers. All of these loans mature on December
31, 1999.
In June 1997, Ralph Glasgal purchased 160,000 shares of the Company's
Common Stock from the Company, in a private placement offering, for $620,000, a
per share purchase price of $3.875. See "Proposal 5 -- Sale of Stock to Ralph
Glasgal."
In July 1997, Direct Connect International, Inc. ("DCI") purchased
480,000 shares of the Company's Common Stock in private placement offerings, for
an aggregate purchase price of $1,856,250. In addition, the Company terminated a
prior obligation of DCI to transfer to the Company, at a price of $3.00 per
share, 200,000 shares of the Company's Common Stock and increased a conditional
right of DCI to purchase shares of the Company's Common Stock at approximately
$6.54 per share from 668,620 shares to 1,207,239 shares. The conditional right
to purchase shares of the Company's Common Stock was originally granted to DCI
pursuant to a stock purchase agreement that was entered into in January 1994
(the "1994 Agreement"). DCI's ability to exercise this right has been suspended
until the Company amends its charter to increase its authorized Common Stock,
and such right is subject to the terms and conditions in the 1994 Agreement,
including the receipt by DCI of proceeds from the exercise of outstanding DCI
warrants. Joseph Salvani, a director of the Company, is also Chairman of the
Board of DCI.
Mr. Robert H. Friedman, a Director of the Company, is a member of the
law firm of Olshan Grundman Frome & Rosenzweig LLP, which law firm has been
retained by the Company during the last fiscal year. Fees received from the
Company by such firm during the last fiscal year did not exceed 5% of such
firm's or the Company's revenues.
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PROPOSAL 2
CHANGING THE NAME OF THE COMPANY
The Board of Directors recommends an amendment to the Company's
Certificate of Incorporation to change the Company's name from Glasgal
Communications, Inc. to [" " ]. If approved by the stockholders, Article One of
the Company's Certificate of Incorporation would be amended to provide as
follows:
"First: The name of the corporation is: [ ]."
In the judgment of the Board of Directors, the change of corporate name
is desirable in view of the significant change in the character and strategic
focus of the business of the Company resulting from the October 1996 acquisition
of Datatec Industries Inc., a provider of configuration, integration, and
deployment services. In addition, the Company discontinued its data
communications equipment distribution business in June 1997. These transactions
were part of a strategic corporate program to refocus the Company's business
operations into areas with higher growth potential.
If this amendment is adopted, stockholders will not be required to
exchange outstanding stock certificates for new certificates.
DISSENTERS' RIGHTS
Pursuant to the Delaware General Corporation Law, the Company's
stockholders are not entitled to dissenters' rights of appraisal with respect to
the proposed amendment.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock is required for approval of the proposal to amend the Company's
Certificate of Incorporation. Abstentions and broker non-votes are not
affirmative votes and, therefore, will have the same effect as a vote against
the proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE ITS NAME.
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PROPOSAL 3
INCREASE AUTHORIZED CAPITAL STOCK
On September 29, 1997, the Board of Directors authorized an amendment
to the Company's Certificate of Incorporation to increase the number of
authorized shares of the Company's capital stock from thirty-eight million
(38,000,000) shares to seventy-nine million (79,000,000) shares, of which
seventy-five million (75,000,000) shares would be designated as Common Stock and
four million (4,000,000) shares would be designated as Preferred Stock. The
stockholders are being asked to approve this proposed amendment. The shares of
the Company's Common Stock, including the additional shares proposed for
authorization do not have preemptive or similar rights. If approved by the
stockholders, the first sentence of Article Five of the Company's Certificate of
Incorporation would be amended to provide as follows:
"Fifth: The corporation is authorized to issue 79,000,000
shares, 75,000,000 of which are designated "Common Stock,"
$.001 par value, and 4,000,000 of which are designated
"Preferred Stock," $.001 par value."
The Company is currently authorized to issue thirty-eight million
(38,000,000) shares of capital stock, of which thirty-four million (34,000,000)
shares are designated as Common Stock and four million (4,000,000) shares are
designated as Preferred Stock. As of September 26, 1997, 25,156,700 shares of
Common Stock were issued and outstanding, and approximately 8,831,207 additional
shares of Common Stock were reserved for issuance upon exercise of outstanding
stock options, warrants and convertible notes. As of September 26, 1997, no
shares of Preferred Stock were issued and outstanding and the proposed amendment
would not change the authorized number of shares of Preferred Stock.
The Board of Directors of the Company believes that it is advisable and
in the best interests of the Company to have available additional authorized but
unissued shares of Common Stock in an amount adequate to provide for the future
needs of the Company. The increase in authorized Common Stock will not have any
immediate effect on the rights of existing stockholders. However, the additional
shares will be available for issuance from time to time by the Company in the
discretion of the Board of Directors without further stockholder action, except
as may be required under applicable law or exchange regulations. These shares
may be issued for any proper corporate purpose including, without limitation:
acquiring other businesses in exchange for shares of the Company's Common Stock;
entering into collaborative arrangements with other companies in which Common
Stock or the right to acquire Common Stock are part of the consideration;
facilitation of broader ownership of the Company's Common Stock by effecting a
stock split or issuing a stock dividend; raising capital through the sale of
Common Stock; and attracting and retaining valuable employees by the issuance of
additional stock options.
In July 1997, Direct Connect International Inc. ("DCI") authorized the
Company to release certain shares of its reserved but unissued shares of Common
Stock which were issuable upon DCI's exercise of a conditional right to purchase
up to 1,207,239 shares of the Company's Common Stock. The Company's obligation
to issue such shares to DCI has been temporarily suspended until its charter is
amended to increase its authorized Common Stock. The Company has agreed to
submit the proposal to its Stockholders for approval at the Annual Meeting.
Other than shares which may be issued to DCI, the Company has no
commitments, undertakings or agreements for the issuance or use of the proposed
additional shares of Common Stock, although it will continue to monitor market
conditions in order to determine the advisability of such action. The Board of
Directors believes that if an increase in the authorized number of shares of
Common Stock were to be postponed until specific needs
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for such shares arose, the delay and expense incident to obtaining the approval
of the Company's stockholders at that time could significantly impair the
Company's ability to meet financing requirements or other objectives.
The issuance of the additional shares of Common Stock could have the
effect of diluting earnings per share and book value per share, which could
adversely affect the Company's existing stockholders. Issuing additional shares
of Common Stock may also have the effect of delaying or preventing a change of
control of the Company. The Company's authorized but unissued Common Stock could
be issued in one or more transactions that would make more difficult or costly,
and less likely, a takeover of the Company. The proposed amendment to the
Company's Certificate of Incorporation is not being recommended in response to
any specific effort of which the Company is aware to obtain control of the
Company and the Board of Directors has no current intention to use the
additional shares of Common Stock in order to impede a takeover attempt. The
Company has previously adopted certain measures that may have the effect of
helping to resist an unsolicited takeover attempt.
DISSENTERS' RIGHTS
Pursuant to the Delaware General Corporation Law, the Company's
stockholders are not entitled to dissenters' rights of appraisal with respect to
the proposed amendment.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock is required for approval of the proposal to amend the Company's
Certificate of Incorporation. Abstentions and broker non-votes are not
affirmative votes and, therefore, will have the same effect as a vote against
the proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE ITS AUTHORIZED CAPITAL STOCK.
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PROPOSAL 4
APPROVAL OF THE 1996 SENIOR EXECUTIVE OFFICER OPTION PLAN
The Board of Directors has approved for submission to a vote of
stockholders a proposal to approve the 1996 Senior Executive Officer Option Plan
(the "1996 Plan") set forth in Appendix A to this proxy statement. The following
discussion of the 1996 Plan is qualified in its entirety by reference to
Appendix A.
The purpose of the 1996 Plan is to provide additional incentive to the
senior officers of the Company who are primarily responsible for the management
and growth of the Company, in order to strengthen their desire to remain in the
employ or retention of the Company and to stimulate their efforts on behalf of
the Company, and to retain and attract to the employ of the Company persons of
competence. The 1996 Plan provides for the grant of "nonqualified stock options"
to any senior officer of the Company or its subsidiaries.
ADMINISTRATION
The Stock Option Committee (the "Committee"), composed of two or more
non-management directors that are "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and "outside directors" under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), administers the granting
of stock options to senior officers of the Company under the 1996 Plan.
COMMON STOCK SUBJECT TO THE 1996 PLAN
The 1996 Plan currently authorizes the issuance of a maximum of 560,000
shares of Common Stock. The maximum number of shares that may be subject to
options granted under the 1996 Plan to any individual in any calendar year may
not exceed 350,000 and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162(m)
of the Code. It is intended that compensation realized upon the exercise of an
option granted under the 1996 Plan will therefore be regarded as
"performance-based" under Section 162(m) of the Code and that such compensation
may be deductible without regard to the limits of Section 162(m) of the Code.
See "-- Performance Based Compensation." If any option under the 1996 Plan shall
expire or terminate for any reason, without having been exercised in full, the
unpurchased shares subject thereto shall again be available for the purposes of
the 1996 Plan.
Options to purchase 535,000 shares were previously granted under the
1996 Plan on May 30, 1997 are subject to approval of such plan by the
stockholders. The 1996 Plan will become effective upon such approval.
EXERCISE PRICE AND TERM
The option price per share applicable to options granted under the 1996
Plan shall be determined by the Committee, but shall not be less than 80% of the
fair market value on the date such option is granted. If an option granted to
the Company's Chief Executive Officer or to any of the Company's other four most
highly compensated officers is intended to qualify as "performance-based"
compensation under Section 162(m) of the Code, the exercise price of such option
shall not be less than 100% of the fair market value on the date such option is
granted. The Committee shall fix the term of each option, provided that the
maximum length of the term of each option granted under the 1996 Plan shall be
10 years.
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PERFORMANCE-BASED COMPENSATION
Section 162(m) of the Code, in general, disallows the Company a federal
income tax deduction for total remuneration in excess of $1 million paid to the
Company's Chief Executive Officer or to any of the Company's four most highly
compensated officers other than the Chief Executive Officer in any one year.
However, Section 162(m) exempts "performance-based" compensation, such as stock
option based compensation, if it is awarded under a stockholder-approved plan
that meets certain requirements. In accordance with Treasury regulations issued
under Section 162(m), compensation attributable to stock options will qualify as
"performance-based" compensation, provided that (i) the option plan contains a
per-employee limitation on the number of shares for which options may be granted
during a specified period, (ii) the per-employee limitation is approved by the
stockholders, (iii) the option is granted by a compensation committee comprised
solely of "outside directors," and (iv) the exercise price of the option is no
less than the fair market value of the stock on the date of grant. Accordingly,
the 1996 Plan provides that the maximum number of shares that may be subject to
options thereunder to any individual in any calendar year shall not exceed
350,000. It is intended that compensation realized upon the exercise of an
option granted under the 1996 Plan to the Company's Chief Executive Officer or
to any of the Company's other four most highly compensated officers will
therefore be regarded as "performance-based" under Section 162(m) of the Code
and that such compensation may be deductible without regard to the limits of
Section 162(m) of the Code.
CHANGE IN CONTROL
In the event of a change in control of the Company, new option rights
may be substituted for the option rights granted under the 1996 Plan, or the
Company's duties as to options outstanding under the 1996 Plan may be assumed,
by the successor to the Company. In the event that new option rights are not
substituted, or are not substantially equivalent to, the option rights granted
under the 1996 Plan, or are not assumed, the option rights granted under the
1996 Plan shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, in which the Company will not be a surviving entity or (iii) upon a
transfer of all or substantially all of the assets of the Company or more than
80% of the outstanding shares of Common Stock; PROVIDED, HOWEVER, that each
option holder shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition, sale of all
or substantially all assets, separation, reorganization or similar occurrence,
to exercise any unexpired option rights granted thereunder whether or not then
exercisable.
RESALE OF SHARES.
Generally, the 1996 Plan does not impose any restrictions on the resale
of shares of Common Stock purchased thereunder. Furthermore, the Company has a
Form S-8 Registration Statement on file with the SEC, which satisfies most
federal securities laws requirements with respect to the resale of such shares.
However, the shares may be subject to resale restrictions imposed by state
securities laws. In addition, participants who are affiliates of the Company may
not resell under the Form S-8 Registration Statement any shares purchased under
the 1996 Plan unless such resales are described in a separate prospectus (or, in
certain instances, registered in a separate registration statement) or be
effected in accordance with Rule 144 or another available exemption under the
1933 Act.
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FEDERAL INCOME TAX CONSEQUENCES
Upon exercise of a non-qualified stock option granted under the 1996
Plan, the optionee will recognize ordinary income in an amount equal to the
excess of the fair market value of the Common Stock received over the exercise
price of such Common Stock. That amount will increase the optionee's basis in
the Common Stock acquired pursuant to the exercise of the option. Upon a
subsequent sale of the Common Stock, the optionee will recognize short term or
long term gain or loss depending upon his holding period for the Common Stock
and upon the subsequent appreciation or depreciation in the market value of the
Common Stock. The Company will be allowed a federal income tax deduction for the
amount recognized as ordinary income by the optionee upon the optionee's
exercise of the option.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by Proxy, is required to approve the 1996
Plan. An abstention, withholding of authority to vote or broker non-vote,
therefore, will not have the same legal effect as an "against" vote and will not
be counted in determining whether the proposal has received the requisite
stockholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE 1996 SENIOR EXECUTIVE OFFICER PLAN.
PROPOSAL 5
SALE OF STOCK TO RALPH GLASGAL
On June 30, 1997, the Company sold to Ralph Glasgal, President and
Chairman of the Board of the Company, 160,000 shares of Common Stock (the
"Shares") at a cash purchase price of $3.875 per share or an aggregate purchase
price of $620,000. The closing bid price on that date as reported by the Nasdaq
Small-Cap market was $4.00. At the request of the Company, Mr. Glasgal agreed to
purchase the Shares in order to provide the Company with additional capital. The
proceeds from the sale of the Shares was used to repay borrowings under the
Company's line of credit. The issuance of the Shares to Mr. Glasgal was not
registered under the Securities Act of 1933, as amended, pursuant to a private
placement exemption from registration. In accordance with the agreement pursuant
to which the shares were sold, the Company has registered the resale of the
Shares by Mr. Glasgal to the public pursuant to a registration statement which
was declared effective by the Securities and Exchange Commission on September
17, 1997.
Whether or not the required ratification and approval of the Company's
stockholders is obtained hereby, the sale of the Shares to Mr. Glasgal will
remain intact. The ratification and approval of stockholders is being solicited
to satisfy a condition of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which provides an exemption from certain
provisions of Section 16(b) of the Exchange Act. Section 16(b) of the Exchange
Act provides, among other things, that any so-called "short-swing profits," that
is, a profit realized by an officer, director or owner of ten percent or more of
the outstanding securities of the issuer on a purchase and sale of stock within
a six-month period, are recoverable by the issuer. Therefore, any sale by Mr.
Glasgal within six months of his purchase of the Shares could be subject to
"short-swing" profit liability unless the purchase was exempted.
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Recently, the Securities and Exchange Commission revised the rules
relating to "short-swing" trading to exempt a purchase by an officer or director
directly from the Company if it is (i) approved in advance by the Board of
Directors or the stockholders or (ii) ratified afterwards by the stockholders.
This exemption recognizes that the strict liability provisions of Section 16 are
directed primarily at market transactions and not necessarily purchases directly
from the Company.
The Company's immediate need for additional capital did not allow for
advance approval of Mr. Glasgal's stock purchase. The Board of Directors of the
Company believes that Mr. Glasgal should be permitted to take advantage of the
recent amendment to Rule 16b-3 and that he should not be penalized for his
willingness to assist the Company at such a critical juncture. Therefore, the
Board believes that it is in the best interests of the Company that the
stockholders ratify Mr. Glasgal's purchase to provide him flexibility in his
future financial planning.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by Proxy, is required to approve and ratify
the sale of shares to Mr. Glasgal. An abstention, withholding of authority to
vote or broker non-vote, therefore, will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the requisite stockholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY (WITH RALPH GLASGAL ABSTAINING)
RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SALE OF SHARES OF COMMON STOCK
TO MR. GLASGAL.
PROPOSAL 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending April 30,
1998. Although the selection of auditors does not require ratification, the
Board of Directors has directed that the appointment of Arthur Andersen LLP be
submitted to stockholders for ratification due to the significance of their
appointment to the Company. A representative of Arthur Andersen LLP is expected
to be present at the Annual Meeting. Such representative will have an
opportunity to make a statement if he desires to do so and will be available to
respond to appropriate questions from stockholders.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present, in person or by proxy, is required for ratification of the appointment
of Arthur Andersen LLP as independent auditors of the Company. An abstention,
withholding of authority to vote or broker non-vote, therefore, will not have
the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the requisite stockholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING APRIL 30, 1998.
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STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual
Meeting must be received by the Company for inclusion in the 1998 Proxy
Statement no later than June 26, 1998.
ANNUAL REPORT
All stockholders of record as of Thursday, September 26, 1997, have
been sent, or are concurrently herewith being sent, a copy of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended April 30,
1997. Such report contains certified consolidated statements of the Company and
its subsidiaries for the fiscal year ended April 30, 1997.
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<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters
other than those set forth herein which will be presented for consideration at
the Annual Meeting. If any other matter or matters are properly brought before
the Annual Meeting or any adjournment thereof, the persons named in the
accompanying Proxy will have discretionary authority to vote, or otherwise act,
with respect to such matters in accordance with their judgment.
By Order of the Board of Directors,
JAMES M. CACI
Chief Financial Officer,
Secretary and Treasurer
October 24, 1997
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GLASGAL COMMUNICATIONS, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1997
The undersigned, a stockholder of Glasgal Communications, Inc., a
Delaware corporation (the "Company"), does hereby appoint Ralph Glasgal and
Isaac Gaon and each of them, the true and lawful attorneys and proxies with full
power of substitution, for and in the name, place and stead of the undersigned,
to vote all of the shares of Common Stock of the Company which the undersigned
would be entitled to vote if personally present at the 1997 Annual Meeting of
Stockholders of the Company to be held at 23 Madison Road, Fairfield, New Jersey
07512, on Wednesday, November 19, 1997 at 10:00 A.M., local time, or at any
adjournment or adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS:
The election of the following directors: Ralph Glasgal, Isaac
J. Gaon, Christopher J. Carey, Thomas J. Berry, Robert H.
Friedman, David M. Milch and Joseph M. Salvani to serve until
the next annual meeting of stockholders and until their
successors have been duly elected and qualified.
TO WITHHOLD AUTHORITY
TO VOTE FOR ANY
NOMINEE(S),
PRINT NAME(S) BELOW
FOR ___ WITHHELD ___
------------------------
2. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
CHANGING THE COMPANY'S NAME TO " ":
________ FOR _____ AGAINST _____ ABSTAIN
3. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
INCREASING THE AUTHORIZED STOCK OF THE COMPANY:
________ FOR _____ AGAINST _____ ABSTAIN
4. APPROVAL OF ADOPTION OF 1996 SENIOR EXECUTIVE OFFICER OPTION
PLAN:
________ FOR _____ AGAINST _____ ABSTAIN
5. RATIFICATION OF SALE OF STOCK TO RALPH GLASGAL:
________ FOR _____ AGAINST _____ ABSTAIN
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS:
________ FOR _____ AGAINST _____ ABSTAIN
7. DISCRETIONARY AUTHORITY.
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
DIRECTORS, TO APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION CHANGING THE COMPANY'S NAME, TO APPROVE THE AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION INCREASING THE AUTHORIZED STOCK OF THE
COMPANY, TO APPROVE THE ADOPTION OF THE 1996 SENIOR EXECUTIVE OFFICER OPTION
PLAN, TO APPROVE AND RATIFY THE SALE OF CERTAIN SHARES OF COMMON STOCK TO RALPH
GLASGAL, TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS AND IN ACCORDANCE WITH THE DISCRETION OF THE
PROXIES OR PROXY WITH RESPECT TO ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL
MEETING.
Dated _______________________, 1997
_____________________________ (L.S.)
_____________________________ (L.S.)
Signature(s)
NOTE: YOUR SIGNATURE SHOULD APPEAR THE SAME AS YOUR NAME APPEARS HEREON. IN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
INDICATE THE CAPACITY IN WHICH SIGNING. WHEN SIGNING AS JOINT TENANTS, ALL
PARTIES IN THE JOINT TENANCY MUST SIGN. WHEN A PROXY IS GIVEN BY A CORPORATION,
IT SHOULD BE SIGNED BY AN AUTHORIZED OFFICER AND THE CORPORATE SEAL AFFIXED. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
APPENDIX A
GLASGAL COMMUNICATIONS, INC.
1996 SENIOR EXECUTIVE OFFICER OPTION PLAN
Dated October 31, 1996
1. PURPOSE. This 1996 Senior Executive Officer Stock Option
Plan (the "Plan") is established as a compensatory plan to attract, retain and
provide equity incentives to senior executive officers of Glasgal
Communications, Inc. (the "Company") or any Subsidiary or Affiliate of the
Company to promote the financial success of the Company. Capitalized terms not
previously defined herein are defined in Section 16 of the Plan.
The Plan is intended to provide participants with stock-based
incentive compensation which is not subject to the deduction limitation rules
prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and should be construed to the extent possible as providing for
remuneration which is "performance-based compensation" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder.
2. SHARES. The shares of stock that may be purchased upon
exercise of Options granted under the Plan (the "Shares") are shares of the
common stock, $.001 par value (the "Common Stock") of the Company.
3. NUMBER OF SHARES. The maximum number of Shares that may be
issued pursuant to Options granted under the Plan shall not exceed 560,000 in
total subject to adjustment as provided in the Plan. The maximum number of
Shares which may be subject to Options granted under the Plan to any individual
in any calendar year shall not exceed 350,000, and the method of counting such
Shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code. If any Option is terminated for
any reason without being exercised in whole or in part, the Shares thereby
released from such Option shall be available for purchase under other Options
subsequently granted under the Plan. At all times during the term of the Plan,
the Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under the Plan.
4. ELIGIBILITY. Options may be granted to senior executive
officers of the Company or any Subsidiary or Affiliate of the Company. The
Company's Board of Directors (the "Board of Directors") or any committee thereof
designated by the Board of Directors shall administer the Plan (the "Plan
Committee") in its sole discretion and shall select the recipients of Options
("Optionees"). An Optionee may be granted more than one Option
<PAGE>
under the Plan. Each member of the Plan Committee shall be a "non-employee
director" within the meaning of Rule 16b-3 (or any successor rule or regulation)
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as it may
from time to time be amended, and the rules and regulations promulgated
thereunder (the "Exchange Act") and shall also be an "outside director" under
Section 162(m) of the Code.
5. TERMS AND CONDITIONS OF OPTIONS. The Plan Committee shall
determine the number of Shares subject to the Option, the exercise price of the
Option, the period during which the Option may be exercised, and all other terms
and conditions of the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted
under the Plan shall be evidenced by a written Stock Option Grant (the "Grant")
in such form (which need not be the same for each Optionee) as the Plan
Committee shall from time to time approve.
5.2 DATE OF GRANT. The date of grant of an
Option shall be the date on which the Plan Committee makes the determination to
grant such Option unless otherwise specified by the Plan Committee. The Grant
representing the Option will be delivered to the Optionee with a copy of the
Plan within a reasonable time after the date of grant.
5.3 EXERCISE PRICE. The exercise price of an
Option shall be determined by the Plan Committee at the time of grant.
5.4 EXERCISE PERIOD. Options shall be
exercisable within the times or upon the events determined by the Plan Committee
as set forth in the Grant.
5.5 OPTIONS TRANSFERABLE. Options granted under
the Plan may be freely transferred or assigned by the Optionee as determined by
the Plan Committee.
6. EXERCISE OF OPTIONS.
6.1 NOTICE. Options may be exercised only by
delivery to the Company of a written exercise agreement in a form approved by
the Plan Committee (which need not be the same for each Optionee), stating the
number of Shares being purchased, the restrictions imposed on the Shares, if
any, and such representations and agreements regarding the Optionee's investment
intent and access to information, if any, as may be required by the Company to
comply with applicable securities laws, together with payment in full of the
exercise price for the number of Shares being purchased.
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6.2 PAYMENT. Payment for the Shares may be made
in cash (by check) or, where approved by the Plan Committee in its sole
discretion at the time of grant and where permitted by law: (a) by cancellation
of indebtedness of the Company to the Optionee; (b) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which have been paid for within the meaning of SEC Rule 144
and, if such Shares were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such shares) or were obtained by
the Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by instructing the Company to withhold Shares
otherwise issuable pursuant to an exercise of the Option having a Fair Market
Value equal to the exercise price of the Option (including the withheld Shares);
(d) by waiver of compensation due or accrued to Optionee for services rendered;
(e) provided that a public market for the Company's stock exists, through a
"same day sale" commitment from the Optionee and a broker-dealer that is a
member of the National Association of Securities Dealers (an "NASD Dealer")
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (f) provided that a public market for
the Company's stock exists, through a "margin" commitment from the Optionee and
an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (g) by any combination of
the foregoing.
6.3 TAXES. The Company may make such provisions
as it may deem appropriate, consistent with applicable law, in connection with
any Options granted under the Plan with respect to the withholding of any taxes
or any other tax matters.
6.4 LIMITATIONS ON EXERCISE. Notwithstanding the
exercise periods set forth in the Grant, exercise of an Option shall always be
subject to the following limitations:
(a) The Plan Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent the Optionee from
exercising the full number of Shares as to which the Option is then exercisable.
(b) An Option shall not be exercisable
unless such exercise is in compliance with the Securities Act of 1933, as
amended (the "1933 Act"), all applicable state securities laws and
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the requirements of any stock exchange or national market system upon which the
Shares may then be listed, as they are in effect on the date of exercise. The
Company shall be under no obligation to register the Shares with the Securities
and Exchange Commission ("SEC") or to effect compliance with the registration,
qualification or listing requirements of any state securities laws or stock
exchange, and the Company shall have no liability for any inability or failure
to do so.
6.5 INFORMATION TO OPTIONEES. The Company shall
provide to each Optionee a copy of the annual financial statements of the
Company prior to such Optionee's exercise of the Option, and to each Optionee
annually during the period such Optionee has Options outstanding, at such time
after the close of each fiscal year of the Company as such statements are
released by the Company to its shareholders; PROVIDED, HOWEVER, the Company
shall not be required to provide such financial statements to Optionees whose
services in connection with the Company assure them access to equivalent
information.
7. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Plan
Committee shall have the power to modify, extend or renew outstanding Options
and to authorize the grant of new Options in substitution therefor, provided
that any such action may not, without the written consent of the Optionee,
impair any rights under any Option previously granted. The Plan Committee shall
have the power to reduce the exercise price of outstanding options.
8. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any
of the rights of a shareholder with respect to any Shares subject to an Option
until such Option is properly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
such date, except as provided in the Plan.
9. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Option
granted under the Plan shall confer on any Optionee any right to continue in the
employ of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate the Optionee's
employment or other relationship at any time, with or without cause.
10. ADJUSTMENT OF OPTION SHARES. In the event that the number
of outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company
without consideration, or if a substantial portion of the assets of the Company
are distributed, without consideration in a spin-off or similar transaction, to
the shareholders of the Company, the number of
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Shares available under the Plan and the number of Shares subject to outstanding
Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Plan Committee
or shareholders of the Company and compliance with applicable securities laws;
provided, however, that a fractional share shall not be issued upon exercise of
any Option and any fractions of a Share that would have resulted shall either be
cashed out at Fair Market Value or the number of shares issuable under the
Option shall be rounded up to the nearest whole number, as determined by the
Plan Committee; and provided further that the exercise price may not be
decreased to below the par value, if any, for the Shares.
11. ASSUMPTION OF OPTIONS BY SUCCESSORS.
11.1 ASSUMPTION OR REPLACEMENT OF OPTIONS BY
SUCCESSOR. In the event of (a) a merger or consolidation in which the Company is
not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the shareholders of the Company and the Options granted under the Plan are
assumed or replaced by the successor corporation, which assumption shall be
binding on all Optionees), (b) a dissolution or liquidation of the Company, (c)
the sale of substantially all of the assets of the Company, or (d) any other
transaction which qualifies as a "corporate transaction" under Section 424(a) of
the Code wherein the shareholders of the Company give up all of their equity
interest in the Company (EXCEPT for the acquisition, sale or transfer of all or
substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed by the successor corporation, which
assumption shall be binding on all Optionees. In the alternative, the successor
corporation may substitute equivalent Options or provide substantially similar
consideration to Optionees as was provided to shareholders (after taking into
account the existing provisions of the Options). The successor corporation may
also issue, in place of outstanding Shares of the Company held by the Optionee,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Optionee.
11.2 EXPIRATION OF OPTIONS. In the event such
successor corporation, if any, refuses to assume or substitute the Options, as
provided above, pursuant to a transaction described in Subsection 11.1(a) above,
such Options shall expire on the consummation of such transaction at such time
and on such conditions as the Plan Committee shall determine. In the event such
successor corporation, if any, refuses to assume or substitute the Options as
provided above, pursuant to a transaction described in Subsections 11.1(a), (b),
(c) or (d) above, or there is no successor corporation, and if the Company
ceases to exist as a
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separate corporate entity, then, notwithstanding any contrary terms in the
Option Grant, the Options shall expire on a date at least twenty (20) days after
the Plan Committee gives written notice to Optionees specifying the terms and
conditions of such termination.
11.3 OTHER TREATMENT OF OPTIONS. Subject to any
greater rights granted to Optionees under the foregoing provisions of this
Section 11, in the event of the occurrence of any transaction described in
Section 11.1, any outstanding Options shall be treated as provided in the
applicable agreement or plan of merger, consolidation, dissolution, liquidation,
sale of assets or other "corporate transaction."
11.4 ASSUMPTION OF OPTIONS BY THE COMPANY. The
Company, from time to time, also may substitute or assume outstanding options
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either (a) granting an Option under the Plan in
substitution of such other company's option, or (b) assuming such option as if
it had been granted under the Plan if the terms of such assumed option could be
applied to an Option granted under the Plan. Such substitution or assumption
shall be permissible if the holder of the substituted or assumed option would
have been eligible to be granted an Option under the Plan if the other company
had applied the rules of the Plan to such grant. In the event the Company
assumes an option by another company, the terms and conditions of such option
shall remain unchanged (except that the exercise price and the number and nature
of Shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
12. ADOPTION. The Plan shall become effective on the date that
it is adopted by the Plan Committee (the "Effective Date"). Upon the Effective
Date, the Plan Committee may grant Options pursuant to the Plan.
13. ADMINISTRATION. The Plan may be administered by the Plan
Committee. The interpretation by the Plan Committee of any of the provisions of
the Plan or any Option granted under the Plan shall be final and binding upon
the Company and all persons having an interest in any Option or any Shares
purchased pursuant to an Option.
14. TERM OF PLAN. Options may be granted pursuant to the Plan
from time to time within a period of ten (10) years after the date on which the
Plan is adopted by the Plan Committee.
15. AMENDMENT OR TERMINATION OF PLAN. The Plan Committee may
at any time terminate or amend the Plan in any
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respect including (but not limited to) amendment of any form of Grant, exercise
agreement or instrument to be executed pursuant to the Plan.
16. CERTAIN DEFINITIONS. As used herein, the following terms
shall have the following meanings:
16.1 "PARENT" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the Option, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
16.2 "SUBSIDIARY" means any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
16.3 "AFFILIATE" means any corporation that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another corporation, where
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the direction of
the management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
16.4 "FAIR MARKET VALUE" shall mean the fair
market value of the Shares as determined by the Plan Committee from time to time
in good faith. If a public market exists for the Shares, the Fair Market Value
shall be the last sale price on the Company's principal exchange or quotation
system on the last trading day prior to the date of determination.
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