GLASGAL COMMUNICATIONS, INC.
November 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 Monday, December 22, 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 Monday, December 22,
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 "Datatec Systems Integration, Inc."
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 and ratify a modification of a conditional right of
Direct Connect International, Inc. to purchase shares of the
Company's Common Stock;
4. To ratify and approve the sale of certain shares of the
Company's Common Stock to Ralph Glasgal;
5. To approve the adoption of the Company's 1998 Employee Stock
Purchase Plan;
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 October 24,
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
November 24, 1997
<PAGE>
GLASGAL COMMUNICATIONS, INC.
20C COMMERCE WAY
TOTOWA, NEW JERSEY 07512
--------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 22, 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 Monday, December 22, 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 "Datatec Systems Integration, Inc."; (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 and ratify a
modification of a conditional right of Direct Connect International, Inc. to
purchase shares of the Company's Common Stock; (iv) ratify and approve the sale
of certain shares of the Company's Common Stock to Ralph Glasgal; (v) approve
the adoption of the Company's 1998 Employee Stock Purchase Plan; (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 November 24, 1997.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on Friday, October
24, 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 26,617,673 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 "Datatec Systems Integration, Inc.," (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 and the
ratification of the modified conditional right of Direct Connect International,
Inc. to purchase shares of the Company's Common Stock, (iv) for the approval and
ratification of the sale of certain shares of the Company's Common Stock to
Ralph Glasgal, (v) for the approval of the adoption of
<PAGE>
the Company's 1998 Employee Stock Purchase Plan, (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 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) 4,700,397 18.7%
Isaac Gaon(4) 947,336 3.6%
Christopher J. Carey(5) 3,553,036 14.1%
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) 1,051,706 4.2%
All directors and officers as a group
(9 persons)(12) 10,747,385 39.7%
</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) 523,706 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) 45,000 shares
beneficially owned by Plan C LLC, a limited liability company of which
Mr. Carey is a member. Mr. Carey disclaims beneficial ownership of the
shares owned by his family members and except to the extent of his
pecuniary interest therein, those shares owned by Plan C LLC.
(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 and
his beneficial ownership includes 1,003,706 shares owned by DCI, which
may be deemed to be owned by Mr. Salvani by virtue of his affiliation
with DCI. Except to the extent of his pecuniary interest therein, Mr.
Salvani disclaims beneficial ownership of the shares owned by DCI. 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 1,681,300 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 Mr. Glasgal) and (ii) 1,003,706
shares of Common Stock held by DCI, which may be deemed to be
beneficially owned by Messrs. Glasgal and Salvani.
-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.
INFORMATION CONCERNING 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 65 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 45 Director
David M. Milch 43 Director
Joseph M. Salvani 40 Director
</TABLE>
RALPH GLASGAL, Chairman of the Board and President of the Company since
he founded it 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. Mr. Glasgal will continue to
serve as a director of the Company.
ISAAC J. GAON, Director since 1992, has served as the Chief Executive
Officer of the Company since October 1994. Effective with Mr. Glasgal's
resignation, Mr. Gaon has been elected as Chairman of the Board of the Company.
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, President and Chief Executive Officer of Datatec
Industries, Inc. ("Datatec Industries"), and Director of the Company since he
joined the Company in October 1996. Mr. Carey founded Datatec Industries in 1976
and has served as its President and Chief Executive Officer since that time.
Effective with Mr. Glasgal's resignation, Mr. Carey has been elected as
President of the Company.
-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 a range of 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 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 1996, has been a director
and principal since 1983 of Bermil Industries Corporation, a closely held
diversified company owned by the Milch family involved in the manufacture, sale,
financing, and distribution of capital equipment, and in real estate development
. Dr. Milch is also the sole stockholder of Davco Consultants, Inc., a
corporation that he founded in 1979 for the purpose of identifying, advising,
and investing in emerging growth technologies.
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., a distributor of toys, 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.
-6-
<PAGE>
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
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. Stockholders wishing to recommend candidates for consideration by the
Nominating Committee may do so by writing to the Secretary of the Company and
providing the candidate's name, biographical data and qualifications.
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.
EXECUTIVE OFFICERS
The Company's executive officers, as well as additional information
with respect to such persons is set forth below. Information with respect to
executive officers of the Company who are also directors is set forth in
"Information Concerning Nominees" above.
<TABLE>
<CAPTION>
NAME Age POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Gadd..................... 36 Senior Vice President and Chief Technology Officer
James M. Caci...................... 33 Chief Financial Officer, Vice President of Finance, Secretary
and Treasurer
</TABLE>
ROBERT F. GADD, Senior Vice President and Chief Technology Officer,
joined the Company in April 1992. Mr. Gadd has been the Company's Chief
Technology Officer since October 1996. From August 1992 until October 1996 Mr.
Gadd held various management positions with the Company.
JAMES M. CACI, Chief Financial Officer, Vice President of Finance,
Secretary and Treasurer, joined the Company in October 1994. Mr. Caci has been
the Company's Chief Financial Officer since October 1994, Vice President of
Finance since January 1997, and the Company's Secretary and Treasurer since June
1995. From April 1994 to October 1994 Mr. Caci was a manager in the finance
department of Merck & Co., and from July 1986 to April 1994, Mr. Caci was with
the accounting firm of Arthur Andersen LLP, most recently as Manager.
The officers of the Company are elected annually by the Board of
Directors at its meeting following the Annual Meeting of Stockholders and hold
office at the discretion of the Board of Directors. 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 $100,000
during Fiscal 1997 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) --------------
-----------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION($)(2)
----------------- -------- ----------- ---------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Ralph Glasgal(3) 1997 $250,000 -- -- --
Chairman of the Board and 1996 250,000 $74,800 -- --
President 1995 26,700 -- -- --
Isaac J. Gaon 1997 $250,000 -- 350,000 --
Chief Executive Officer 1996 194,800 $10,000 108,821 --
1995 192,300 -- 90,000 --
Christopher J. Carey 1997 $345,000 $95,000 -- $24,070
President and Chief Executive 1996 416,000 -- -- 22,187
Officer of Datatec Industries 1995 416,000 -- -- 20,467
Inc.
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(4) 1997 $128,100 -- 175,000 --
Vice President of Finance, 1996 90,000 $10,000 43,528 --
Chief Financial Officer, 1995 40,000 -- 52,000 --
Treasurer, 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 $50,000 or 10% of the total annual salary and bonus reported
for any individual named above.
(2) The amounts shown in this column reflect the dollar value of life
insurance premiums paid by the Company.
(3) During Fiscal 1995 Mr. Glasgal spent the majority of his time pursuing
interests outside of the Company. Mr. Glasgal has announced that he
will retire as Chairman of the Board and President of the Company
concurrently with the Annual Meeting.
(4) Mr. Caci joined the Company on October 31, 1994, therefore, the salary
for Fiscal 1995 represents six months.
-8-
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding stock
option grants made to each of the Named Officers during Fiscal 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED RATES OF ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION (1)
SHARES OF
COMMON STOCK PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE
NAME GRANTED FISCAL YEAR(%) ($/SH) EXPIRATION DATE 5% 10%
---- ------- -------------- ------ --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ralph Glasgal -- -- -- -- -- --
Isaac J. Gaon 350,000 15.9% $5.25 10/31/06 $1,155,594 $2,928,502
Christopher J. -- -- -- -- -- --
Carey
Robert F. Gadd -- -- -- -- -- --
James M. Caci 175,000 8.0% 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.
(2) The options for Messrs. Gaon and Caci were cancelled on May 30, 1997.
On such date, the Company granted replacement options to purchase an
equal number of shares of Common Stock to such individuals, at an
exercise price of $4.00 per share.
-9-
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE
No stock options were exercised by the Named Officers during the fiscal
year ended April 30, 1997. None of the Named Officers has held or exercised
separate SARs. The following table sets forth certain information regarding
unexercised options held by each of the Named Officers at April 30, 1997.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options Held at Fiscal Value of Unexercised In-The-Money
Year-End(#) Options at Fiscal Year-End($)(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 J. Carey -- -- -- --
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 $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 an 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), 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
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$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 an 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 an 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 which is reviewed annually by
the Compensation Committee, 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 of Finance and Secretary at an initial base
salary of $150,000 which is reviewed annually by the Compensation Committee, 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.
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.
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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.
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 $750,000 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's previous lender and Plan C LLC, an affiliated company of
Christopher Carey, Plan C LLC loaned the Company approximately $1.7 million
($1.4 million outstanding as of October 31, 1997). 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. The loan to
Plan C LLC was negotiated prior to the Company's acquisition of Datatec
Industries and prior to Christopher Carey's affiliation with the Company. The
Company believes that the terms of the loan from Plan C LLC were comparable to
those that it could have obtained from other sources. The Company also pays Plan
C LLC a fee of $8,500 per month pursuant to a month to month consulting
arrangement. Christopher Carey and his wife are the sole members of Plan C LLC.
Mr. Carey is also a Director of the Company and President and Chief Executive
Officer of Datatec Industries.
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 8.0% per
annum. Mr. Caci's loan was repaid in full in October 1997. Mr. Gadd's loan
matures on December 31, 1999 and may be repaid with the proceeds from the future
exercise of stock options . In addition, the Company's sole recourse upon any
default of this loan is limited to a security interest in certain options to
purchase the Company's Common Stock held by Mr. Gadd. The Company believes that
these loans, the loan to Ralph Glasgal described above, and the loan to Isaac
Gaon described below, were made on terms that were more favorable to the
borrowers than could have been obtained in arms length bargaining with unrelated
third parties. The Company believes that these loans were an important element
in retaining and motivating these executives. The Company is not currently
considering making any additional loans to its executive officers in the future.
In April 1997, the Company granted options to purchase an aggregate of
120,353 shares of the Company's Common Stock at a per share exercise price equal
to $3.13, which was the fair market value of the Common Stock at such time. The
options were granted to Mr. Carey as payment for certain tax benefits assigned
to the Company as a result of the Company's acquisition of Datatec Industries.
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, a small discount to the market price. The
proceeds from such offering were used for working capital purposes. See
"Proposal 4 -- 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 $1.9 million. 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 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
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<PAGE>
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 rights 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. See "Proposal 3 -- Increase of
Authorized Shares of Capital Stock and Approval of Modification of DCI Purchase
Right."
In October 1997, the Company entered into a letter agreement with Davco
Consultants, Inc. ("Davco") pursuant to which it is obligated to pay Davco a
finders fee upon the closing of an underwritten public offering of the Company's
Common Stock, through Volpe Brown Whelan & Company, LLC, of a cash payment equal
to $195,000. The Company also issued to Davco options to purchase 62,000 shares
of the Company's Common Stock at a per share exercise price equal to $7.00,
which options vest upon the completion of such underwritten public offering.
David Milch, a Director of the Company, is the sole shareholder of Davco.
In October and November 1997, the Company loaned an aggregate of
$200,000 to Isaac Gaon. The loan matures on December 31, 1999 and bears interest
at a rate of 8.0% per annum. The Company's sole recourse upon any default of
this loan is limited to a security interest in certain options to purchase
Common Stock held by Mr. Gaon. Under certain circumstances, the Company may
elect to cancel certain options as repayment for the loan. The number of options
which would be cancelled shall equal the repayment amount divided by the lesser
of (i) the fair market value of the company's Common Stock less the exercise
price of such options or (ii) $10.00 less the exercise price of such options.
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 "Datatec Systems Integration, Inc.". 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: Datatec Systems
Integration, Inc."
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 , 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 AND
RATIFICATION OF THE MODIFIED OF DCI PURCHASE RIGHT
INCREASE OF AUTHORIZED SHARES OF 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 October 31, 1997, 28,211,134 shares of
Common Stock were issued and outstanding, and approximately 5,768,584 additional
shares of Common Stock were reserved for issuance upon exercise of outstanding
stock options, warrants and convertible notes. As of October 31, 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.
On November 12, 1997, the Company filed a registration statement for
the public offering of 4,000,000 shares of its Common Stock. The Company and
certain selling stockholders of the Company have also granted the underwriters
an option to purchase up to 600,000 additional shares of Common Stock solely to
cover over-allotments, if any. Other than shares which may be issued pursuant to
the public offering and shares that may be issued to DCI as described below, 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 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.
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<PAGE>
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.
RATIFICATION OF THE MODIFIED DCI PURCHASE RIGHT
In July 1997, Direct Connect International, Inc. ("DCI"), authorized
the Company to release certain shares of its reserved but unissued shares of
Common Stock that were issuable upon DCI's exercise of a conditional right to
purchase certain shares of the Company's Common Stock. Accordingly, 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.
Shareholders are advised that approval of the proposal to increase the Company's
Capital Stock will constitute a ratification of the modification to DCI's
conditional right to purchase shares of the Company's Common Stock. Stockholders
are further advised that Joseph Salvani, a director of the Company, is also
Chairman of the Board of DCI.
In January 1994, the Company entered into a common stock purchase
agreement (the "1994 Agreement") with DCI, governing investments by DCI in the
Company's Common Stock. Pursuant to the 1994 Agreement, DCI converted $1.9
million of outstanding indebtedness of the Company owed to DCI into equity of
the Company (the "DCI Conversion"). In addition, the 1994 Agreement gave the
Company the right to require DCI to purchase an additional 1,337,239 shares of
Common Stock (the "Additional Shares") for an aggregate of $8.75 million, a per
share price of $6.54, less certain warrant solicitation fees. In July 1997, DCI
purchased an additional 130,000 shares of Common Stock and pursuant to the
purchase agreement, the number of Additional Shares was reduced to 1,207,239
shares. The Company may require this purchase if, and then only to the extent,
that DCI receives proceeds from the exercise of certain existing DCI warrants.
DCI has the right to retain the first $500,000 of warrant proceeds; however,
such amount must be used by DCI to purchase shares of Common Stock if the
aggregate amount of warrant proceeds applied to the purchase of Common Stock,
after the earlier of the expiration or exercise of all warrants or 24 months
after the effectiveness of the registration statement covering the DCI common
stock underlying the warrants, is less than $8.4 million.
The 1994 Agreement provided that, if the Company does not require DCI
to purchase the Additional Shares, DCI may still purchase, on the same terms, up
to one-half of the Additional Shares. In July 1997, the Company's Board of
Directors agreed to increase DCI's conditional right to purchase shares of the
Company's Common Stock to 1,207,239 shares, an amount equal to the number of
shares that the Company is authorized to sell to DCI. DCI's right to purchase
such shares is subject to the same terms and conditions as the Company's right
to require it to purchase such shares, including the receipt of warrant proceeds
by DCI.
If DCI exercises the purchase right, the Company would be required to
issue up to 1,207,239 additional shares of Common Stock. This could have the
effect of diluting earnings per share and book value per share, which could
adversely affect the Company's existing stockholders.
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.
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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 AND RATIFICATION OF THE MODIFIED DCI
PURCHASE RIGHT.
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PROPOSAL 4
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 were 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, and were sold 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. The selling price of the Shares sold to Mr. Glasgal,
which was determined by the Company's Chief Executive Officer and ratified by
the Company's Board of Directors, represented a slight discount to the closing
market price of the Company's Common Stock at the time of the sale due to
fluctuating market prices and the transfer restrictions imposed on such shares.
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 executive 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.
Recently, the Securities and Exchange Commission revised the rules
relating to "short-swing" trading to exempt a purchase by an executive 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 interest 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.
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PROPOSAL 5
APPROVAL OF THE 1998 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved for submission to a vote of
stockholders, a proposal to approve the 1998 Employee Stock Purchase Plan (the
"Stock Purchase Plan") set forth in Appendix B to this proxy statement. The
Stock Purchase Plan will not become effective unless it is so approved by the
Company's stockholders. The following summary of the Stock Purchase Plan is
qualified in its entirety by reference to Appendix A.
The Board of Directors believes that the continued growth and
profitability of the Company depends, in large part, upon the ability of the
Company to maintain a competitive position in attracting and retaining key
personnel. The purpose of the Stock Purchase Plan is to encourage eligible
employees to acquire or increase their proprietary interests in the Company
through the purchase of shares of Common Stock thereby creating a greater
community of interest between the Company's stockholders and its employees. Up
to 750,000 shares of Common Stock will be reserved (subject to adjustment in the
event of stock splits and other similar events) and may be issued pursuant to
awards granted under the Stock Purchase Plan. The closing bid price of the
Company's Common Stock on the Nasdaq SmallCap Market on November 17, 1997 was
$5.13 per share.
ADMINISTRATION
The Stock Purchase Plan is administered by the Board of Directors.
Pursuant to the terms of the Stock Purchase Plan, the Board of Directors has
appointed the Compensation Committee to administer certain aspects of the Stock
Purchase Plan. The Compensation Committee has the authority to make rules and
regulations for the administration of the Stock Purchase Plan.
ELIGIBILITY OF EMPLOYEES.
All employees of the Company and its participating subsidiaries,
including, with certain limitations, officers or directors who are also
employees, are eligible to participate in the Stock Purchase Plan, provided he
or she (i) is employed by the Company or any participating subsidiary on the
applicable offering commencement date, (ii) is regularly employed by the Company
or any participating subsidiary for 20 or more hours per week and for more than
five months in a calendar year and (iii) has been employed by the Company or any
participating subsidiary for at least six (6) months on the applicable offering
commencement date. As of October 31, 1997, approximately 587 employees were
eligible to participate in the Stock Purchase Plan.
PURCHASE OF COMMON STOCK
The Stock Purchase Plan permits eligible employees to purchase shares
of the Company's Common Stock at a discounted price during each offering period.
The Stock Purchase Plan provides for four (4) offerings yearly, on February 1st,
May 1st, August 1st and November 1st, commencing on February 1, 1998.
An employee may elect to have a whole number percentage from 1% to up
to 15% withheld from his or her base pay for purposes of purchasing shares under
the Stock Purchase Plan, subject to certain limitations on the maximum number of
shares that may be purchased. The price at which shares may be purchased during
each offering will be the lower of (i) 85% of the average of the high and low
sales prices of the Common Stock as reported on NASDAQ on the date that the
offering commences or (ii) 85% of the average of the high and low sales prices
of the Common Stock as reported on NASDAQ on the date that the offering
terminates.
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<PAGE>
AMENDMENT AND TERMINATION
The Compensation Committee or the Board of Directors may at any time
terminate or amend the Stock Purchase Plan without stockholder approval,
provided that no such amendment may (a) increase the maximum number of shares
which may be issued under the Stock Purchase Plan, (b) amend the requirements as
to the class of employees eligible to purchase Stock under the Stock Purchase
Plan, or (c) permit the members of the Compensation Committee to purchase Stock
under the Stock Purchase Plan. No termination, modification, or amendment of the
Stock Purchase Plan shall adversely affect the rights of a Participant with
respect to an option previously granted to him under such option without his
written consent.
Unless previously terminated by the Board of Directors, the Stock
Purchase Plan will terminate on January 31, 2008.
UNITED STATES INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the U.S. income tax
consequences of certain transactions under the Stock Purchase Plan based on
federal income tax laws in effect on October 31, 1997, as required by U.S.
federal securities laws. This summary applies to the Stock Purchase Plan as
normally operated and is not intended to provide or supplement tax advice to
eligible employees. The summary contains general statements based on current
federal income tax statutes, regulations and current available interpretations
thereof and thus cannot encompass all factors which may affect the tax
consequences to an individual participant. Each participant is advised to
address specific inquiries to his personal tax advisor or the Company's local
Stock Purchase Plan representative with respect to any tax questions that may
arise in connection with the purchase of shares under the Stock Purchase Plan,
including any state or foreign tax consequences and the effect, if any, of gift,
estate, and inheritance taxes. The Stock Purchase Plan is not qualified under
Section 401 of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The Stock Purchase Plan is intended to be a qualified employee stock
purchase plan under Section 423 of the Code. The discussion below applies only
to participants who are U.S. employees subject to U.S.
income tax laws. Section references are to the Code unless otherwise noted.
Recognition of Taxable Income. A participant's payroll deductions to
purchase Common Stock under the Stock Purchase Plan are made on an after-tax
basis. Upon receipt of an option to purchase Common Stock under the Stock
Purchase Plan, the participant does not report any income, even though the
option price is less than the market price of the Common Stock at the time; nor
will the participant recognize income on the exercise of the option and
acquisition of the Common Stock at a subsequent date. Only on the sale or other
disposition of the Common Stock will the participant recognize taxable income.
Sale or Disposition of Common Stock Two Years After Option Grant. Under
Sections 421(a) and 423(a), as long as the disposition occurs two years or more
after the date the option is granted to the participant, and the participant has
held the Common Stock at least 12 months after exercising the option (the "Full
Holding Period"), a portion of any profit may be capital gain (see discussion of
Section 423(c) below). Further, the participant must be an employee continuously
during the period from the granting of the option until three months before the
option is exercised. Under Section 421(c)(1)(A), upon the death of the
participant, the option may be exercised by the estate of the participant or the
person to whom it passes under the laws of descent and distribution to the same
extent that it was exercisable by the participant.
Sale or Disposition of Common Stock Within Two Years After Option
Grant. Under Section 421(b), a disposition of Common Stock acquired under the
Stock Purchase Plan during the two years following the option grant or the one
year following exercise of the option removes the tax-favored status of the
purchase. As a result of such a "disqualifying disposition," the participant
recognizes ordinary compensation income in the year of the disposition equal to
the difference between the market price of the Common Stock on the date the
option was exercised and the option price.
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Option Price Discount -- Ordinary Compensation Income. Under Section
423(c), because options will be granted under the Stock Purchase Plan at an
option price discounted from the market price, once the participant has held the
stock for the Full Holding Period such participant must include in his or her
taxable income as ordinary compensation income at time of the sale or other
taxable disposition of the Common Stock acquired under the Stock Purchase Plan,
or upon the participant's death while still holding the Common Stock, the lesser
of:
1. the amount, if any, by which the market price of the
Common Stock when the option was granted exceeds the
option price; or
2. the amount, if any, by which the Common Stock's
market price at the time of such disposition or death
exceeds the option price.
The tax basis of the Common Stock will be increased by the amount of
the ordinary compensation income recognized in this respect. This applies
regardless of whether the participant has held the stock for the Full Holding
Period.
Employer's Tax Deduction. The Company may not deduct the difference
between the market price of the Common Stock and the option price unless there
is a disqualifying disposition. If the participant disposes of Common Stock
acquired under the Stock Purchase Plan in a disqualifying disposition, i.e., a
failure to meet the Full Holding Period requirement, the Company is entitled to
a deduction in the year of the disposition equal to the ordinary compensation
income recognized by the participant.
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 Stock
Purchase 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 1998 EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE>
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.
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 July 26, 1998.
ANNUAL REPORT
All stockholders of record as of Friday, October 24, 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 Fiscal 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
November 24, 1997
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<PAGE>
ANNEX A
GLASGAL COMMUNICATIONS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE FEBRUARY 1, 1998)
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. PURPOSE...........................................................1
2. DEFINITIONS.................................................1
(a) "Account"..........................................1
(b) "Base Pay".........................................1
(c) "Benefits Representative"..........................1
(d) "Board"............................................1
(e) "Code".............................................1
(f) "Committee"........................................1
(g) "Common Stock".....................................2
(h) "Company"..........................................2
(i) "Disability".......................................2
(j) "Effective Date"...................................2
(k) "Employee".........................................2
(l) "Employer".........................................2
(m) "Employment".......................................2
(n) "Entry Date".......................................3
(o) "Fiscal Quarter"...................................3
(p) "Market Price".....................................3
(r) "Plan".............................................3
(s) "Stock"............................................3
(t) "Subsidiary".......................................4
3. ELIGIBILITY.................................................4
(a) Eligibility Requirements...........................4
(b) Limitations on Eligibility.........................4
4. SHARES SUBJECT TO THE PLAN..................................5
5. PARTICIPATION...............................................5
(a) Payroll Deduction Authorization....................5
(b) Continuing Effect of Payroll Deduction
Authorization...............................................6
(c) Employment and Stockholders Rights.................6
6. PAYROLL DEDUCTIONS..........................................6
(a) Participant Contributions by Payroll Deductions....6
(b) No Other Participant Contributions Permitted.......6
(c) Changes in Participant Contributions...............6
7. GRANTING OF OPTION TO PURCHASE STOCK........................7
(a) Quarterly Grant of Options.........................7
(b) Option Price.......................................7
8. EXERCISE OF OPTION..........................................7
(a) Automatic Exercise of Options......................7
(b) Dividends Generally................................8
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(c) Prorata Allocation of Available Shares.............8
9. OWNERSHIP AND DELIVERY OF SHARES............................8
(a) Beneficial Ownership. .............................8
(b) Registration of Stock..............................8
(c) Delivery of Stock Certificates.....................9
(d) Regulatory Approval................................9
10. WITHDRAWAL OF PAYROLL DEDUCTIONS............................9
11. TERMINATION OF EMPLOYMENT..................................10
(a) General Rule......................................10
(b) Termination Due to Retirement, Death or
Disability........................................10
(c) Termination Other Than for Retirement, Death or
Disability........................................11
(d) Rehired Employees.................................11
12. INTEREST...................................................11
13. ADMINISTRATION OF THE PLAN.................................11
(a) No Participation in Plan by Committee Members.....11
(b) Authority of the Committee........................11
(c) Meetings..........................................11
(d) Decisions Binding.................................12
(e) Expenses of Committee.............................12
(f) Indemnification...................................12
14. DESIGNATION OF BENEFICIARY.................................12
15. TRANSFERABILITY............................................13
16. NO RIGHTS OF STOCKHOLDER UNTIL CERTIFICATE ISSUED..........13
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.................13
18. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID..............15
19. TERM OF THE PLAN...........................................15
20. AMENDMENT OR TERMINATION OF THE PLAN.......................15
21. SECURITIES LAWS RESTRICTIONS ON EXERCISE...................16
22. SECTION 16 COMPLIANCE......................................16
23. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION............16
24. NO RESTRICTION ON CORPORATE ACTION.........................17
25. USE OF FUNDS...............................................17
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26. MISCELLANEOUS..............................................17
(a) Options Carry Same Rights and Privileges..........17
(b) Headings..........................................17
(c) Gender and Tense..................................17
(d) Governing Law.....................................17
(e) Regulatory Approvals and Compliance...............17
(f) Severability......................................17
(g) Refund of Contributions on Noncompliance with Tax
Law...............................................18
(h) No Guarantee of Tax Consequences..................18
(i) Company as Agent for the Employers................18
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<PAGE>
GLASGAL COMMUNICATIONS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Glasgal Communications, Inc. 1998 Employee Stock
Purchase Plan (the "Plan") is intended to provide an incentive for employees of
Glasgal Communications, Inc. (the "Company") and its participating subsidiaries.
The Plan permits such employees to acquire or increase their proprietary
interests in the Company through the purchase of shares of Common Stock of the
Company thereby creating a greater community of interest between the Company's
stockholders and its employees. The Plan is intended to qualify as an "Employee
Stock Purchase Plan" under Sections 421 and 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan will be construed in a
manner consistent with the requirements of such sections of the Code and the
regulations issued thereunder.
2. DEFINITIONS. As used in this Plan,
(a) "Account" means each separate account maintained for a Participant
under the Plan, collectively or individually as the context requires, to which
the amount of the Participant's payroll deductions authorized under Section 6
and purchases of Common Stock under Section 8 shall be credited, and any
distributions of shares of Common Stock under Section 9 and withdrawals under
Section 10 shall be charged.
(b) "Base Pay" means the base salary paid to an employee, including
commissions, payments for overtime and shift differentials, vacation pay and
holiday pay. Base Pay shall exclude bonuses, incentive compensation, and other
special payments, fees, fringes, allowances or extraordinary compensation not
specifically listed in the preceding sentence.
(c) "Benefits Representative" means the employee benefits department of
the Company or any such other person, regardless of whether employed by an
Employer, who has been formally, or by operation or practice, designated by the
Committee to assist the Committee with the day-to-day administration of the
Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, or any successor
thereto, as amended and in effect from time to time. Reference in the Plan to
any Section of the Code shall be deemed to include any amendments or successor
provisions to any Section and any treasury regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board. The
Board shall have the power to fill vacancies on the
<PAGE>
Committee arising by resignation, death, removal or otherwise. The Board, in its
sole discretion, may bifurcate the powers and duties of the Committee among one
or more separate Committees, or retain all powers and duties of the Committee in
a single Committee. The members of the Committee shall serve at the discretion
of the Board.
(g) "Common Stock" or "Stock" means the common stock, $.001 par value
per share, of the Company.
(h) "Company" means Glasgal Communications, Inc., a Delaware
corporation, and any successor thereto.
(i) "Disability" means any complete and permanent disability as defined
in Section 22(e)(3) of the Code.
(j) "Effective Date" means February 1, 1998, the inception date of the
Plan.
(k) "Employee" means any employee who is currently in Employment with
an Employer.
(l) "Employer" means the Company, its successors, any future parent (as
defined in Section 424(e) of the Code) and each current or future Subsidiary
which has been designated by the Board or the Committee as a participating
employer in the Plan.
(m) "Employment" means Employment as an employee or officer by the
Company or a Subsidiary as designated in such entity's payroll records, or by
any corporation issuing or assuming rights or obligations under the Plan in any
transaction described in Section 424(a) of the Code or by a parent corporation
or a subsidiary corporation of such corporation. In this regard, neither the
transfer of a Participant from Employment by the Company to Employment by a
Subsidiary, nor the transfer of a Participant from Employment by a Subsidiary to
Employment by the Company, shall be deemed to be a termination of Employment of
the Participant. Moreover, the Employment of a Participant shall not be deemed
to have been terminated because of absence from active Employment on account of
temporary illness or during authorized vacation, temporary leaves of absence
from active Employment granted by Company or a Subsidiary for reasons of
professional advancement, education, health, or government service, or during
military leave for any period if the Participant returns to active Employment
within 90 days after the termination of military leave, or during any period
required to be treated as a leave of absence which, by virtue of any valid law
or agreement, does not result in a termination of Employment.
Any worker treated as an independent contractor by the Employer who is
later re-classified as a common-law employee shall not be in Employment during
any period in which such worker
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<PAGE>
was treated by the Employer as an independent contractor. Any "leased employee,"
as described in Section 414(n) of the Code, shall not be deemed an Employee
hereunder.
(n) "Entry Date" means the first day of each Fiscal Quarter.
(o) "Fiscal Quarter" means a three-consecutive-month period beginning
on each August 1, November 1, February 1, and May 1, during the period beginning
on the Effective Date until the Plan is terminated.
(p) "Market Price" means, subject to the next paragraph, the market
value of a share of Stock on any date, which shall be determined as (i) the
closing sales price on the immediately preceding business day of a share of
Stock as reported on the New York Stock Exchange or other principal securities
exchange on which shares of Stock are then listed or admitted to trading or (ii)
if not so reported, the average of the highest and lowest sales prices for a
share of Stock on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or any successor system then in use, or (iii) if not quoted on NASDAQ, the
average of the closing bid and asked prices for a share of Stock as quoted by
the National Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If the price of a share of Stock
shall not be so reported pursuant to the previous sentence, the fair market
value of a share of Stock shall be determined by the Committee in its discretion
provided that such method is appropriate for purposes of an employee stock
purchase plan under Section 423 of the Code.
Notwithstanding the previous paragraph of this definition, the Market
Price of a share of Stock solely for purposes of determining the option price on
the first or last day of the Fiscal Quarter in accordance with Section 7(b)
shall be based on the Market Price on the first or last day of the Fiscal
Quarter, as applicable, and not on the immediately preceding business day. For
example, if the Stock is traded on the New York Stock Exchange, when determining
the option price under Section 7(b) at which shares of Stock are purchased, the
Market Price for determining this option price shall be based on the lower of
(i) the closing sales price of a share of Stock on the first business day of the
Fiscal Quarter or (ii) the closing sales price of a share of Stock on the last
business day of the Fiscal Quarter.
(q) "Participant" means any Employee who meets the eligibility
requirements of Section 3 and who has elected to and is participating in the
Plan.
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<PAGE>
(r) "Plan" means the Glasgal Communications, Inc. 1998 Employee Stock
Purchase Plan, as set forth herein, and all amendments hereto.
(s) "Stock" means the Common Stock (as defined above).
(t) "Subsidiary" means any domestic or foreign corporation (other than
the Company) (i) which, pursuant to Section 424(f) of the Code, is included in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of capital stock in one
of the other corporations in such chain and (ii) which has been designated by
the Board or the Committee as a corporation whose Employees are eligible to
participate in the Plan.
3. ELIGIBILITY.
(a) Eligibility Requirements. Participation in the Plan is voluntary.
Each Employee who has completed at least six (6) consecutive months of
continuous Employment with an Employer (calculated from his last date of hire to
the termination of his Employment for any reason) and has reached the age of
majority in the jurisdiction of his legal residency, shall be eligible to
participate in the Plan on the first day of the payroll period commencing on or
after the Effective Date or, if later, the Entry Date on which the Employee
satisfies the aforementioned eligibility requirements. Each Employee whose
Employment terminates and who is rehired by an Employer shall be treated as a
new Employee for eligibility purposes under the Plan, provided, however, that if
an Employee is rehired by Employer prior to the expiration of three months
following his or her termination, such employee shall not be a new Employee for
eligibility purposes under the Plan.
(b) Limitations on Eligibility. Any provision of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan:
(i) if, immediately after the grant, the Employee would own
stock, and/or hold outstanding options to purchase stock, possessing
five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Subsidiary;
(ii) which permits the Employee's rights to purchase stock
under this Plan and all other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company and its Subsidiaries
to accrue at a rate which exceeds $25,000 of the fair market value of
the stock
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<PAGE>
(determined at the time such option is granted) for each Fiscal year in
which such option is outstanding at any time, all as determined in
accordance with Section 423(b)(8) of the Code;
(iii) if the Employee's customary Employment is 20 hours or
less per week; or
(iv) if the Employee is employed for less than 5 months in a
calendar year.
For purposes of Section 3(b)(i) above, pursuant to Section 424(d) of the Code,
(i) the Employee with respect to whom such limitation is being determined shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants; and (ii) stock owned, directly or indirectly, by or for
a corporation, partnership, estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries. In
addition, for purposes of Section 3(b)(ii) above, pursuant to Section 423(b)(8)
of the Code, (i) the right to purchase stock under an option accrues when the
option (or any portion thereof) first becomes exercisable during the calendar
year, (ii) the right to purchase stock under an option accrues at the rate
provided in the option but in no case may such rate exceed $25,000 of fair
market value of such stock (determined at the time such option is granted) for
any one calendar year, and (iii) a right to purchase stock which has accrued
under one option granted pursuant to the Plan may not be carried over to any
other option.
4. SHARES SUBJECT TO THE PLAN. The total number of shares of Common
Stock that upon the exercise of options granted under the Plan will not exceed
seven hundred fifty thousand (750,000) shares (subject to adjustment as provided
in Section 17), and such shares may be originally issued shares, treasury
shares, reacquired shares, shares bought in the market, or any combination of
the foregoing. If any option which has been granted expires or terminates for
any reason without having been exercised in full, the unpurchased shares will
again become available for purposes of the Plan. Any shares which are not
subject to outstanding options upon the termination of the Plan shall cease to
be subject to the Plan.
5. PARTICIPATION.
(a) Payroll Deduction Authorization. An Employee shall be eligible to
participate in the Plan as of the first Entry Date following such Employee's
satisfaction of the eligibility requirements of Section 3, or, if later, the
first Entry Date following the date on which the Employee's Employer adopted the
Plan. At least 10 days (or such other period as may be prescribed
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<PAGE>
by the Committee or a Benefits Representative) prior to the first Entry Date as
of which an Employee is eligible to participate in the Plan, the Employee shall
execute and deliver to the Benefits Representative, on the form prescribed for
such purpose, an authorization for payroll deductions which specifies his chosen
rate of payroll deduction contributions pursuant to Section 6, and such other
information as is required to be provided by the Employee on such enrollment
form. The enrollment form shall authorize the Employer to reduce the Employee's
Base Pay by the amount of such authorized contributions. To the extent provided
by the Committee or a Benefits Representative, each Participant shall also be
required to open a stock brokerage account with a brokerage firm which has been
engaged to administer the purchase, holding and sale of Common Stock for
Accounts under the Plan and, as a condition of participation hereunder, the
Participant shall be required to execute any form required by the brokerage firm
to open and maintain such brokerage account.
(b) Continuing Effect of Payroll Deduction Authorization. Payroll
deductions for a Participant will commence with the first payroll period
beginning after the Participant's authorization for payroll deductions becomes
effective, and will end with the payroll period that ends when terminated by the
Participant in accordance with Section 6(c) or due to his termination of
Employment in accordance with Section 11. Payroll deductions will also cease
when the Participant is suspended from participation due to a withdrawal of
payroll deductions in accordance with Section 10. When applicable with respect
to Employees who are paid on a hourly wage basis, the authorized payroll
deductions shall be withheld from wages when actually paid following the period
in which the compensatory services were rendered. Only payroll deductions that
are credited to the Participant's Account during the Fiscal Quarter shall be
used to purchase Common Stock pursuant to Section 8 regardless of when the work
was performed.
(c) Employment and Stockholders Rights. Nothing in the Plan will confer
on a Participant the right to continue in the employ of the Employer or will
limit or restrict the right of the Employer to terminate the Employment of a
Participant at any time with or without cause. A Participant will have no
interest in any Common Stock to be purchased under the Plan or any rights as a
stockholder with respect to such Stock until the Stock has been purchased and
credited to the Participant's Account.
6. PAYROLL DEDUCTIONS.
(a) Participant Contributions by Payroll Deductions. At the time a
Participant files his payroll deduction authorization form, the Participant will
elect to have deductions made from the Participant's Base Pay for each payroll
period such authorization is in effect in whole percentages at the rate of not
less than 1% nor more than 15% of the Participant's Base Pay.
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<PAGE>
(b) No Other Participant Contributions Permitted. All payroll
deductions made for a Participant shall be credited to the Participant's Account
under the Plan. A Participant may not make any separate cash payment into such
Account.
(c) Changes in Participant Contributions. Subject to Sections 10 and
22, a Participant may increase, decrease, suspend, or resume payroll deductions
under the Plan by giving written notice to a designated Benefits Representative
at such time and in such form as the Committee or Benefits Representative may
prescribe from time to time. Such increase, decrease, suspension or resumption
shall be effective as of the first day of the payroll period as soon as
administratively practicable after receipt of the Participant's written notice,
but not earlier than the first day of the payroll period of the Fiscal Quarter
next following receipt and acceptance of such form. Notwithstanding the previous
sentence, a Participant may completely discontinue contributions at any time
during a Fiscal Quarter, effective as of the first day of the payroll period as
soon as administratively practicable following receipt of a written
discontinuance notice from the Participant on a form provided by a designated
Benefits Representative. Following a discontinuance of contributions, a
Participant cannot authorize any payroll contributions to his Account for the
remainder of the Fiscal Quarter in which the discontinuance was effective.
7. GRANTING OF OPTION TO PURCHASE STOCK.
(a) Quarterly Grant of Options. For each Fiscal Quarter, a Participant
shall be deemed to have been granted an option to purchase, on the first day of
the Fiscal Quarter, as many whole and fractional shares as may be purchased with
the payroll deductions (and any cash dividends as provided in Section 8)
credited to the Participant's Account during the Fiscal Quarter.
(b) Option Price. The option price of the Common Stock purchased with
the amount credited to the Participant's Account during each Fiscal Quarter
shall be the lower of:
(i) 85% of the Market Price of a share of Stock on the first
day of the Fiscal Quarter; or
(ii) 85% of the Market Price of a share of Stock on the last
day of the Fiscal Quarter.
Only the Market Price as of the first day of the Fiscal Quarter and the
last day of the Fiscal Quarter shall be considered for purposes of determining
the option purchase price; interim fluctuations during the Fiscal Quarter shall
not be considered.
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8. EXERCISE OF OPTION.
(a) Automatic Exercise of Options. Unless a Participant has elected to
withdraw payroll deductions in accordance with Section 10, the Participant's
option for the purchase of Common Stock shall be deemed to have been exercised
automatically as of the last day of the Fiscal Quarter for the purchase of the
number of whole and fractional shares of Common Stock which the accumulated
payroll deductions (and cash dividends on the Common Stock as provided in
Section 8(b)) in the Participant's Account at that time will purchase at the
applicable option price. Fractional shares may not be issued under the Plan. As
of the last day of each Fiscal Quarter, the balance of each Participant's
Account shall be applied to purchase the number of whole Stock as determined by
dividing the balance of such Participant's Account as of such date by the option
price determined pursuant to Section 7(b). The Participant's Account shall be
debited accordingly. Any balance in a Participant's stock purchase account which
was not applied to the purchase of Common Stock because it was less than the
purchase price of a full share shall remain in the Participant's stock purchase
account and be carried over to the succeeding Fiscal Quarter. The Committee or
its delegate shall make all determinations with respect to applicable currency
exchange rates when applicable.
(b) Dividends Generally. Cash dividends paid on shares of Common Stock
which have not been delivered to the Participant pending the Participant's
request for delivery pursuant to Section 9(c), shall be combined with the
Participant's payroll deductions and applied to the purchase of Common Stock at
the end of the Fiscal Quarter in which the cash dividends are received, subject
to the Participant's withdrawal rights set forth in Section 10. Dividends paid
in the form of shares of Common Stock or other securities with respect to shares
that have been purchased under the Plan, but which have not been delivered to
the Participant, shall be credited to the shares that are credited to the
Participant's Account.
(c) Pro-rata Allocation of Available Shares. If the total number of
shares to be purchased under option by all Participants exceeds the number of
shares authorized under Section 4, a pro-rata allocation of the available shares
shall be made among all Participants authorizing such payroll deductions based
on the amount of their respective payroll deductions through the last day of the
Fiscal Quarter.
9. OWNERSHIP AND DELIVERY OF SHARES.
(a) Beneficial Ownership. A Participant shall be the beneficial owner
of the shares of Common Stock purchased under the Plan on exercise of his option
and will have all rights of beneficial ownership in such shares. Any dividends
paid with
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respect to such shares shall be credited to the Participant's Account and
applied as provided in Section 8 until the shares are delivered to the
Participant.
(b) Registration of Stock. Stock to be delivered to a Participant under
the Plan shall be registered in the name of the Participant, or if the
Participant so directs by written notice to the designated Benefits
Representative or brokerage firm, if any, prior to the purchase of Stock
hereunder, in the names of the Participant and one such other person as may be
designated by the Participant, as joint tenants with rights of survivorship or
as tenants by the entireties, to the extent permitted by applicable law. Any
such designation shall not apply to shares purchased after a Participant's death
by the Participant's beneficiary or estate, as the case may be, pursuant to
Section 11(b). If a brokerage firm is engaged by the Company to administer
Accounts under the Plan, such firm shall provide such account registration forms
as are necessary for each Participant to open and maintain a brokerage account
with such firm.
(c) Delivery of Stock Certificates. The Company, or a brokerage firm or
other entity selected by the Company, shall deliver to each Participant a
certificate for the number of shares of Common Stock purchased by the
Participant hereunder as soon as practicable after the close of each Fiscal
Quarter. Alternatively, in the discretion of the Committee, the stock
certificate may be delivered to a designated stock brokerage account maintained
for the Participant and held in "street name" in order to facilitate the
subsequent sale of the purchased shares.
(d) Regulatory Approval. In the event the Company is required to obtain
from any commission or agency the authority to issue any stock certificate
hereunder, the Company shall seek to obtain such authority. The inability of the
Company to obtain from any such commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance of any such certificate
shall relieve the Company from liability to any Participant, except to return to
the Participant the amount of his Account balance used to exercise the option to
purchase the affected shares.
10. WITHDRAWAL OF PAYROLL DEDUCTIONS. At any time during a Fiscal
Quarter, but in no event later than 15 days (or such shorter prescribed by the
Committee or a Benefits Representative) prior to the last day of the Fiscal
Quarter, a Participant may elect to abandon his election to purchase Common
Stock under the Plan. By written notice to the designated Benefits
Representative on a form provided for such purpose, the Participant may thus
elect to withdraw all of the accumulated balance in his Account being held for
the purchase of Common Stock in accordance with Section 8(b). Partial
withdrawals will not be permitted. All such
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amounts shall be paid to the Participant as soon as administratively practical
after receipt of his notice of withdrawal. After receipt and acceptance of such
withdrawal notice, no further payroll deductions shall be made from the
Participant's Base Pay beginning as of the next payroll period during the Fiscal
Quarter in which the withdrawal notice is received. The Committee, in its
discretion, may determine that amounts otherwise withdrawable hereunder by
Participants shall be offset by an amount that the Committee, in its discretion,
determines to be reasonable to help defray the administrative costs of effecting
the withdrawal, including, without limitation, fees imposed by any brokerage
firm which administers such Participant's Account. After a withdrawal, an
otherwise eligible Participant may resume participation in the Plan as of the
first day of the Fiscal Quarter next following his delivery of a payroll
deduction authorization pursuant to the procedures prescribed in Section 5(a).
11. TERMINATION OF EMPLOYMENT.
(a) General Rule. Upon termination of a Participant's Employment for
any reason, his participation in the Plan will immediately terminate.
(b) Termination Due to Retirement, Death or Disability. If the
Participant's termination of Employment is due to (i) retirement from Employment
on or after his attainment of age 65, (ii) death or (iii) Disability, the
Participant (or the Participant's personal representative or legal guardian in
the event of Disability, or the Participant's beneficiary (as defined in Section
14) or the administrator of his will or executor of his estate in the event of
death), will have the right to elect, either to:
(a) Withdraw all of the cash and shares of Common Stock
credited to the Participant's Account as of his termination date; or
(b) Exercise the Participant's option for the purchase of
Common Stock on the last day of the Fiscal Quarter (in which
termination of Employment occurs) for the purchase of the number of
shares of Common Stock which the cash balance credited to the
Participant's Account as of the date of the Participant's termination
of Employment will purchase at the applicable option price.
The Participant (or, if applicable, such other person designated in the
first paragraph of this Section 11(b)) must make such election by giving written
notice to the Benefits Representative at such time and in such manner as
prescribed from time to time by the Committee or Benefits Representative. In the
event that no such written notice of election is received by the
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Benefits Representative within 30 days of the Participant's termination of
Employment date, the Participant (or such other designated person) will
automatically be deemed to have elected to withdraw the balance in the
Participant's Account as of his termination date. Thereafter, any accumulated
cash and shares of Common Stock credited to the Participant's Account as of his
termination of Employment date shall be delivered to or on behalf of the
Participant as soon as administratively practicable.
(c) Termination Other Than for Retirement, Death or Disability. Upon
termination of a Participant's Employment for any reason other than retirement,
death, or Disability pursuant to Section 11(b), the participation of the
Participant in the Plan will immediately terminate. Thereafter, any accumulated
cash and shares of Common Stock credited to the Participant's Account as of his
termination of Employment date shall be delivered to the Participant as soon as
administratively practicable.
(d) Rehired Employees. Any Employee whose Employment terminates and who
is subsequently rehired by an Employer shall be treated as a new Employee for
purposes of eligibility to participate in the Plan.
12. INTEREST. No interest shall be paid or allowed on any money paid
into the Plan or credited to the Account of any Participant.
13. ADMINISTRATION OF THE PLAN.
(a) No Participation in Plan by Committee Members. No options may be
granted under the Plan to any member of the Committee during the term of his
membership on the Committee.
(b) Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have the plenary authority to (a) interpret the Plan and all
options granted under the Plan, (b) make such rules as it deems necessary for
the proper administration of the Plan, (c) make all other determinations
necessary or advisable for the administration of the Plan, and (d) correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option granted under the Plan in the manner and to the extent that the
Committee deems advisable. Any action taken or determination made by the
Committee pursuant to this and the other provisions of the Plan shall be
conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee. By
express written direction, or by the day-to-day operation of Plan
administration, the Committee may delegate the authority and responsibility for
the day-to-day administrative or ministerial tasks of the Plan to a Benefits
Representative, including a brokerage firm or other third party engaged for such
purpose.
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(c) Meetings. The Committee shall designate a chairman from among its
members to preside at its meetings, and may designate a secretary, without
regard to whether that person is a member of the Committee, who shall keep the
minutes of the proceedings. Meetings shall be held at such times and places as
shall be determined by the Committee, and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the Plan by
the affirmative vote of a majority of its members, taken at a meeting, or by the
affirmative vote of all of its members taken without a meeting. The Committee
may authorize any one or more of their members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
(d) Decisions Binding. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of the
Plan, and shall be final, conclusive and binding on all persons including the
Company, Participants, and their estates and beneficiaries.
(e) Expenses of Committee. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel regularly
employed by the Company, consultants and agents as the Committee may deem
appropriate for the administration of the Plan. The Committee may rely upon any
opinion or computation received from any such counsel, consultant or agent. All
expenses incurred by the Committee in interpreting and administering the Plan,
including, without limitation, meeting expenses and professional fees, shall be
paid by the Company.
(f) Indemnification. Each person who is or was a member of the
Committee shall be indemnified by the Company against and from any damage, loss,
liability, cost and expense that may be imposed upon or reasonably incurred by
him in connection with or resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be involved by reason of any
action taken or failure to act under the Plan, except for any such act or
omission constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
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<PAGE>
14. DESIGNATION OF BENEFICIARY. At such time, in such manner, and using
such form as shall be prescribed from time to time by the Committee or a
Benefits Representative, a Participant may file a written designation of a
beneficiary who is to receive any Common Stock and/or cash credited to the
Participant's Account at the Participant's death. Such designation of
beneficiary may be changed by the Participant at any time by giving written
notice to the Benefits Representative at such time and in such form as
prescribed. Upon the death of a Participant, and receipt by the Benefits
Representative of proof of the identity at the Participant's death of a
beneficiary validly designated under the Plan, the Benefits Representative will
take appropriate action to ensure delivery of such Common Stock and/or cash to
such beneficiary. In the event of the death of a Participant and the absence of
a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Benefits Representative will take appropriate
action to ensure delivery of such Common Stock and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Benefits
Representative), the Committee, in its discretion, may direct delivery of such
Common Stock and/or cash to the spouse or to any one or more dependents of the
Participant as the Committee may designate in its discretion. No beneficiary
will, prior to the death of the Participant, acquire any interest in any Common
Stock or cash credited to the Participant's Account.
15. TRANSFERABILITY. No amounts credited to a Participant's Account,
whether cash or Common Stock, nor any rights with regard to the exercise of an
option or to receive Common Stock under the Plan, may be assigned, transferred,
pledged, or otherwise disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge, or other disposition shall be void and without effect.
Each option shall be exercisable, during the Participant's lifetime,
only by the Employee to whom the option was granted. The Company shall not
recognize, and shall be under no duty to recognize, any assignment or purported
assignment by an employee of his option or of any rights under his option.
16. NO RIGHTS OF STOCKHOLDER UNTIL CERTIFICATE ISSUED. With respect to
shares of Stock subject to an option, an optionee shall not be deemed to be a
stockholder, and the optionee shall not have any of the rights or privileges of
a stockholder. An optionee shall have the rights and privileges of a stockholder
when, but not until, a certificate for shares has been issued to the optionee
following exercise of his option.
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<PAGE>
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Board shall make or
provide for such adjustments in the maximum number of shares specified in
Section 4 and the number and option price of shares subject to options
outstanding under the Plan as the Board shall determine is appropriate to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, stock exchange, combination
of shares, recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off of assets, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, any
other corporate transaction or event having an effect similar to any of the
foregoing.
In the event of a merger of one or more corporations into the Company,
or a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Participant, at no additional
cost, shall be entitled, upon his payment for all or part of the Common Stock
purchasable by him under the Plan, to receive (subject to any required action by
shareholders) in lieu of the number of shares of Common Stock which he was
entitled to purchase, the number and class of shares of stock or other
securities to which such holder would have been entitled pursuant to the terms
of the agreement of merger or consolidation if, immediately prior to such merger
or consolidation, such holder had been the holder of record of the number of
shares of Common Stock equal to the number of shares purchasable by the
Participant hereunder.
If the Company shall not be the surviving corporation in any
reorganization, merger or consolidation (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), or if
the Company is to be dissolved or liquidated or sell substantially all of its
assets or stock to another corporation or other entity , then, unless a
surviving corporation assumes or substitutes new options (within the meaning of
Section 424(a) of the Code) for all options then outstanding, (i) the date of
exercise for all options then outstanding shall be accelerated to dates fixed by
the Committee prior to the effective date of such corporate event, (ii) a
Participant may, at his election by written notice to the Company, either (x)
withdraw from the Plan pursuant to Section 10 and receive a refund from the
Company in the amount of the accumulated cash and Stock balance in the
Participant's Account, (y) exercise a portion of his outstanding options as of
such exercise date to purchase shares of Stock, at the option price, to the
extent of the balance in the Participant's Account, or (z) exercise in full his
outstanding options as of such exercise date to purchase shares of Stock, at the
option price, which exercise shall require such Participant to pay the related
option price, and (iii) after such effective date any unexercised option shall
expire. The date the Committee selects for the exercise date
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under the preceding sentence shall be deemed to be the exercise date for
purposes of computing the option price per share of Stock. If the Participant
elects to exercise all or any portion of the options, the Company shall deliver
to such Participant a stock certificate issued pursuant to Section 9(d) for the
number of shares of Stock with respect to which such options were exercised and
for which such Participant has paid the option price. If the Participant fails
to provide the notice set forth above within three days after the exercise date
selected by the Committee under this Section 17, the Participant shall be
conclusively presumed to have requested to withdraw from the Plan and receive
payment of the accumulated balance of his Account. The Committee shall take such
steps in connection with such transactions as the Committee shall deem necessary
or appropriate to assure that the provisions of this Section 17 are effectuated
for the benefit of the Participants.
Except as expressly provided in this Section 17, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Stock then available for purchase under the Plan.
18. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID. The expenses of the
Plan shall be paid by the Company except as otherwise provided herein or under
the terms and conditions of any agreement entered into between the Participant
and any brokerage firm engaged to administer Accounts. All funds received or
held by the Company under the Plan shall be included in the general funds of the
Company free of any trust or other restriction, and may be used for any
corporate purpose. No interest shall be paid to any Participant or credited to
his Account under the Plan.
19. TERM OF THE PLAN. The Plan shall become effective as of February 1,
1998, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the Company's
stockholders held on or before 12 months from February 1, 1998.
Except with respect to options then outstanding, if not terminated
sooner under the provisions of Section 20, no further options shall be granted
under the Plan at the earlier of (i) January 31, 2008, or (ii) the point in time
when no shares of Stock reserved for issuance under Section 4 are available.
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20. AMENDMENT OR TERMINATION OF THE PLAN. The Board shall have the
plenary authority to terminate or amend the Plan; provided, however, that the
Board shall not, without the approval of the stockholders of the Company, (a)
increase the maximum number of shares which may be issued under the Plan
pursuant to Section 4, (b) amend the requirements as to the class of employees
eligible to purchase Stock under the Plan, or (c) permit the members of the
Committee to purchase Stock under the Plan. No termination, modification, or
amendment of the Plan shall adversely affect the rights of a Participant with
respect to an option previously granted to him under such option without his
written consent.
In addition, to the extent that the Committee determines that, in the
opinion of counsel, (a) the listing for qualification requirements of any
national securities exchange or quotation system on which the Company's Common
Stock is then listed or quoted, or (b) the Code or Treasury regulations issued
thereunder, require stockholder approval in order to maintain compliance with
such listing or qualification requirements or to maintain any favorable tax
advantages or qualifications, then the Plan shall not be amended by the Board in
such respect without first obtaining such required approval of the Company's
stockholders.
21. SECURITIES LAWS RESTRICTIONS ON EXERCISE. The Committee may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall have
been duly listed, upon official notice of issuance, upon a stock exchange, and
that either:
(a) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective; or
(b) the participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is
his intention to purchase the Stock for investment and not for resale
or distribution.
22. SECTION 16 COMPLIANCE. The Plan, and transactions hereunder by
persons subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are intended to comply with all applicable conditions of
Rule 16b-3 or any successor exemption provision promulgated under the Exchange
Act. To the extent that any provision of the Plan or any action by the Committee
or the Board fails, or is deemed to fail, to so comply, such provision or action
shall be null and void but only to the extent permitted by law and deemed
advisable by the Committee in its discretion.
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23. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION. Whenever shares of
Stock that were received upon the exercise of an option granted under the Plan
are disposed of within two years after the date of grant of such option or one
year from the date of exercise of such option (within the meaning of Section
423(a)(1)), the Company shall have the right to require the Participant to remit
to the Company in cash an amount sufficient to satisfy federal, state and local
withholding and payroll tax requirements, if any, attributable to such
disposition prior to authorizing such disposition or permitting the delivery of
any certificate or certificates with respect thereto.
24. NO RESTRICTION ON CORPORATE ACTION. Subject to Section 20, nothing
contained in the Plan shall be construed to prevent the Board or any Employer
from taking any corporate action which is deemed by the Employer to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No Employee,
beneficiary or other person shall have any claim against any Employer as a
result of any such action.
25. USE OF FUNDS. The Employers shall promptly transfer all amounts
withheld under Section 6 to the Company or to any brokerage firm engaged to
administer Accounts, as directed by the Company. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company will not be obligated to segregate such
payroll deductions.
26. MISCELLANEOUS.
(a) Options Carry Same Rights and Privileges. To the extent required to
comply with the requirements of Section 423 of the Code, all Employees granted
options under the Plan to purchase Common Stock shall have the same rights and
privileges hereunder.
(b) Headings. Any headings or subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in the construction or
interpretation of any provisions hereof.
(c) Gender and Tense. Any words herein used in the masculine shall be
read and construed in the feminine when appropriate. Words in the singular shall
be read and construed as though in the plural, and vice-versa, when appropriate.
(d) Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware to the extent not preempted by
federal law.
(e) Regulatory Approvals and Compliance. The Company's obligation to
sell and deliver Common Stock under the Plan is at all times subject to all
approvals of and compliance with the (i)
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regulations of any applicable stock exchanges and (ii) any governmental
authorities required in connection with the authorization, issuance, sale or
delivery of such Stock, as well as federal, state and foreign securities laws.
(f) Severability. In the event that any provision of this Plan shall
be held illegal, invalid, or unenforceable for any reason, such provision shall
be fully severable, but shall not affect the remaining provisions of the Plan,
and the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had not been included herein.
(g) Refund of Contributions on Noncompliance with Tax Law. In the
event the Company should receive notice that this Plan fails to qualify as an
"employee stock purchase plan" under Section 423 of the Code, all then-existing
Account balances shall be paid to the Participants and the Plan shall
immediately terminate.
(h) No Guarantee of Tax Consequences. The Board, Employer and the
Committee do not make any commitment or guarantee that any tax treatment will
apply or be available to any person participating or eligible to participate in
the Plan, including, without limitation, any tax imposed by the United States or
any state thereof, any estate tax, or any tax imposed by a foreign government.
(i) Company as Agent for the Employers. Each Employer, by adopting the
Plan, appoints the Company and the Board as its agents to exercise on its behalf
all of the powers and authorities hereby conferred upon the Company and the
Board by the terms of the Plan, including, but not by way of limitation, the
power to amend and terminate the Plan.
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GLASGAL COMMUNICATIONS, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 22, 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 Monday, December 22, 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 "DATATEC SYSTEMS INTEGRATION,
INC.":
_____ FOR _____ AGAINST _____ ABSTAIN
3. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
INCREASING THE AUTHORIZED STOCK OF THE COMPANY AND
RATIFICATION OF THE MODIFIED OF THE CONDITIONAL RIGHT OF
DIRECT CONNECT INTERNATIONAL, INC. TO PURCHASE SHARES OF THE
COMPANY'S COMMON STOCK:
_____ FOR _____ AGAINST _____ ABSTAIN
4. RATIFICATION OF SALE OF STOCK TO RALPH GLASGAL:
_____ FOR _____ AGAINST _____ ABSTAIN
5. APPROVAL OF ADOPTION OF 1998 EMPLOYEE STOCK PURCHASE PLAN:
_____ FOR _____ AGAINST _____ ABSTAIN
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS:
_____ FOR _____ AGAINST _____ ABSTAIN
<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 AND RATIFY THE MODIFIED DCI PURCHASE RIGHT, TO APPROVE AND RATIFY THE
SALE OF CERTAIN SHARES OF COMMON STOCK TO RALPH GLASGAL, TO APPROVE THE ADOPTION
OF THE COMPANY'S 1998 EMPLOYEE STOCK PURCHASE PLAN, 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.
