As filed with the Securities and Exchange Commission on November 19, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLASGAL COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-2914253
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
20C Commerce Way
Totowa, New Jersey 07512
(201) 890-4800
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(Address, including zip code, and telephone
number, including area code, of Registrant's
principal executive offices)
Isaac J. Gaon
Chief Executive Officer
Glasgal Communications, Inc.
20C Commerce Way
Totowa, New Jersey 07512
(201) 890-4800
(Name, address and telephone number of agent for service of process)
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Copies to:
Robert H. Friedman, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed
Maximum Proposed
Offering Maximum
Title of Each Class of Amount to be Price Aggregate Amount of
Securities to be Registered Registered Per Share Offering Price Registration Fee
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Common Stock, $.001 par value, issuable 517,500(1) $4.69(1) $2,427,075(1) $735.48
upon exercise of warrants
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Common Stock, $.001 par value, issuable 154,999(2) $3.30(2) $511,497(2) $155.00
upon exercise of options
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value 3,263,565 $5.16(3) $16,839,996(3) $5,103.03
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Total................................................................................................. $5,993.51
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(1) Represents 517,500 shares of Common Stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $4.69 per
share. Pursuant to Rule 416, there are also registered hereby an
indeterminate number of shares of Common Stock that may become issuable by
reason of anti-dilution provisions of these warrants.
(2) Represents 154,999 shares of Common Stock issuable upon the exercise of
outstanding options at a weighted average exercise price of $3.30 per
share. Pursuant to Rule 416, there are also registered hereby an
indeterminate number of shares of Common Stock that may become issuable by
reason of anti-dilution provisions of these options.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act"), based upon $5.16 the per share average of high and low
sales prices of the Common Stock on the Nasdaq SmallCap Market on November
17, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
GLASGAL COMMUNICATIONS, INC.
3,936,064 SHARES OF COMMON STOCK
This Prospectus relates to the reoffer and resale by certain selling
stockholders (the "Selling Stockholders") of shares (the "Shares") of the Common
Stock, $.001 par value (the "Common Stock"), of Glasgal Communications, Inc., a
Delaware corporation (the "Company") comprised of (i) an aggregate of 517,500
shares of Common Stock which will be issued by the Company to a Selling
Stockholder upon the exercise of certain warrants to purchase Common Stock, (ii)
an aggregate of 154,999 shares of Common Stock which will be issued by the
Company to certain Selling Stockholders upon the exercise of certain options to
purchase Common Stock and (iii) an aggregate of 3,263,565 shares of Common Stock
previously issued by the Company to certain Selling Stockholders. All but
792,651 of the Shares being registered hereby are subject to a lock-up agreement
with certain underwriters in connection with a proposed public offering of the
Company's Common Stock. See "Selling Stockholders" and "Plan of Distribution".
This Prospectus also relates, pursuant to Rule 416 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), to the offer and
resale by certain Selling Stockholders of an indeterminate number of shares of
Common Stock that may become issuable by reason of the anti-dilution provisions
of the aforementioned warrants and options.
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders, but will receive amounts upon the exercise of the
warrants and options, which amounts will be used for working capital and other
corporate purposes. The warrants may be exercised on a cashless basis. If the
warrants are exercised on a cashless basis, the Company will not receive any
cash proceeds upon the exercise of such warrants. The Company has agreed to bear
certain expenses (other than selling commissions and fees and expenses of
counsel and other advisors to the Selling Stockholders) in connection with the
registration and sale of the Shares being offered by the Selling Stockholders.
See "Use of Proceeds."
The Selling Stockholders have advised the Company that the resale of their
Shares may be effected from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions or otherwise at market
prices prevailing at the time of the sale or at prices otherwise negotiated. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agent or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions). Any broker-dealer acquiring the Shares
from the Selling Stockholders may sell such securities in its normal market
making activities, through other brokers on a principal or agency basis, in
negotiated transactions, to its customers or through a combination of such
methods. See "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq SmallCap Market
("Nasdaq") under the symbol ("GLAS"). On November 17, 1997, the closing bid
price for the Common Stock on Nasdaq was $5.13.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK AND SHOULD ONLY BE MADE BY INVESTORS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AT PAGE 4 HEREOF.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CERTAIN MATTERS DISCUSSED IN THIS REGISTRATION STATEMENT ARE FORWARD-LOOKING
STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
THE DATE OF THIS PROSPECTUS IS NOVEMBER [ ], 1997
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
Company's (i) Annual Report on Form 10-K for the fiscal year ended April 30,
1997, (ii) Quarterly Report on Form 10- Q for the quarter ended July 31, 1997,
as amended, and (iii) Current Reports on Form 8-K filed on September 25, 1997
and October 20, 1997, which have been filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934
(the "Exchange Act").
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents.
The Company's Application for registration of its Common Stock under
Section 12(b) of the Exchange Act filed with the Securities and Exchange
Commission on May 2, 1996, is incorporated by reference into this Prospectus and
shall be deemed to be a part hereof.
Any person receiving a copy of this Prospectus may obtain without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(unless such exhibits are specifically incorporated by reference in such
documents). Such requests should be directed to the Company, 20C Commerce Way,
Totowa, New Jersey 07004, Attention: James M. Caci, Chief Financial Officer,
telephone number (201) 890-4800.
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<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. EACH
PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN, AND AFFECTING THE BUSINESS OF, THE COMPANY BEFORE MAKING AN
INVESTMENT DECISION.
RECENT CHANGE OF BUSINESS FOCUS. In October 1996, the Company acquired
Datatec Industries Inc. ("Datatec Industries"), a provider of configuration,
integration and deployment services. In June 1997, the Company discontinued its
data communications equipment distribution business in order to focus
exclusively on implementation services. The Company's current business
represents a substantial change from the Company's historical line of business.
Consequently, the Company's historical results of operations do not reflect
combined operations relating to its current business for a significant period of
time and such results may not be indicative of the Company's future results of
operations. Management and other key personnel may not have the experience
required to manage such a substantial change in business focus. If the Company's
efforts are not successful, the Company's results of operations could be
adversely affected.
FLUCTUATION IN QUARTERLY RESULTS; EXTENDED LEAD TIMES FOR REALIZATION
OF REVENUE. The Company's quarterly operating results have varied in the past,
and may vary significantly in the future, depending on a number of factors such
as market acceptance of new or enhanced versions of the Company's services,
changes in the customer mix, changes in the level of operating expenses, the
gain or loss of significant customers, personnel changes and economic conditions
in general and in the Company's industry in particular. Any unfavorable change
in these or other factors could have a material adverse effect on the Company's
operating results for a particular quarter and makes the prediction of revenue
and results of operations on a quarterly basis difficult, and performance
forecasts derived from such predictions unreliable.
The Company has experienced large fluctuations in sales from
quarter-to-quarter due to substantial sales to customers in the retailing
industry. Typically, these customers delay improvements and enhancements during
the fourth quarter of the calendar year to avoid costly interruptions during the
holiday sales season. In addition, a substantial portion of the Company's
operating expenses is related to personnel, facilities, inventory, equipment and
marketing programs. The level of spending for such expenses cannot be adjusted
quickly and is therefore fixed in the short term. The level of these expenses is
based, in significant part, on the Company's expectations of future revenue on a
quarterly basis. If actual revenue levels on a quarterly basis are below
management's expectations, results of operations are likely to be adversely
affected because only a small amount of the Company's expenses varies with its
revenue in the short term.
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Due to the nature and size of implementation projects that the Company
is now pursuing, there is a longer lead time between the initiation of
prospective business and the consummation of a transaction, if any. As such,
there are likely to be substantial fluctuations in sales volume from
month-to-month and quarter-to- quarter. The fluctuations in the Company's
operating results increase the Company's risk of failure, especially given its
present level of working capital. As a result, if the Company experiences lower
than expected sales volume for an extended period of time, it may have a
material adverse effect on the business, financial condition and results of
operations of the Company.
MANAGEMENT OF GROWTH. Recently, the Company has expanded its operations
rapidly through several acquisitions, which has placed significant demands on
the Company's administrative, operational and financial personnel and systems.
Additional expansion by the Company may further strain the Company's management,
financial and other resources. There can be no assurance that the Company's
systems, procedures, controls and existing space will be adequate to support
expansion of the Company's operations. The Company's future operating results
will substantially depend on the ability of its officers and key employees to
manage changing business conditions and to implement and improve its
operational, financial control and reporting systems. If the Company is unable
to respond to and manage changing business conditions, the quality of the
Company's services, its ability to retain key personnel and its results of
operations could be materially adversely affected.
RELIANCE ON SIGNIFICANT CUSTOMERS; NO ASSURANCE OF BACKLOG. During each
of the past two fiscal years, sales of the Company's services to a limited
number of customers have accounted for a substantial percentage of the Company's
total net sales. For the years ended April 30, 1997 and 1996, the Company's 15
largest customers accounted for 61.5% and 63.0% of the Company's total net
sales, respectively. For the year ended April 30, 1997, Federated Department
Stores, Inc. and Lowe's Companies, Inc. accounted for 11.7% and 10.1%,
respectively, of the Company's total net sales. This concentration of customers
can cause the Company's net sales and earnings to fluctuate from
quarter-to-quarter, based on the requirements of its customers and the timing of
delivery of services. Although the Company believes it has good relationships
with its largest customers and has in the past received a substantial portion of
its revenues from repeat business with established customers, none of the
Company's major customers has any obligation to purchase additional services.
Therefore, there can be no assurance that any of the Company's major customers
will continue to purchase new services in amounts similar to previous years.
Although the particular customers are likely to change from period to period,
the Company believes that large orders from a limited number of customers will
continue to account for a substantial portion of its revenues in any fiscal
period. In any period, the unexpected loss of or decline in net sales from a
major
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<PAGE>
customer, or the failure to generate significant revenues from other customers,
could have a material adverse effect on the business, financial condition and
results of operations of the Company.
The Company's implementation services are generally provided at a fixed
contract price pursuant to purchase orders or other written agreements with its
customers. Although certain traditional customers of Datatec Industries continue
to order services through oral agreements, the Company is in the process of
changing its procedure to assure that in the future all services will be
provided under written agreements. There can be no assurance that the Company
will not be involved in litigation with respect to any oral agreements with
customers or that the outcome of any such litigation might not be unfavorable to
the Company as a result of the lack of a written agreement or purchase order.
Backlog for the Company's services as of October 1, 1997 totaled $40.6
million. Backlog consists of purchase orders, written agreements and other oral
agreements with customers for which a customer has scheduled the provision of
services within the next 12 months. Orders included in backlog may be canceled
or rescheduled by customers without penalty. A variety of conditions, both
specific to the individual customer and generally affecting the customer's
industry, may cause customers to cancel, reduce or delay orders that were
previously made or anticipated. The Company cannot assure the timely replacement
of canceled, delayed or reduced orders. Significant or numerous cancellations,
reductions or delays in orders by a customer or group of customers could
materially adversely affect the Company's business, financial condition and
results of operations. Backlog should not be relied upon as indicative of the
Company's revenues for any future period.
DEPENDENCE ON INDIRECT CUSTOMERS AND STRATEGIC ALLIANCES. The Company
markets its services in part through indirect customers and strategic alliances
with systems manufacturers, systems integrators, independent software
developers/distributors, and telecommunications carriers, that utilize the
Company's services to provide joint solutions to customers. The Company has
entered into a non-exclusive agreement with Cisco Systems, Inc. ("Cisco"),
pursuant to which the Company has agreed to provide implementation services to
customers of Cisco. Cisco may terminate its agreement with the Company at any
time, with or without cause. Termination of the Cisco agreement, or any similar
agreement that the Company enters into in the future, may have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's strategy is to enter into similar agreements with
other systems manufacturers, independent software vendors, systems integrators
and telecommunications carriers. Because the Company utilizes and will continue
to utilize indirect customers and strategic alliances as a significant
distribution channel, the Company is subject to the risk that its indirect
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<PAGE>
customers or strategic partners will discontinue or decrease their use of the
Company's services for reasons unrelated to the quality or price of, or demand
for, the Company's services, which could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
is subject to the risk that the demand for products and services sold by its
indirect customers or strategic partners will decline, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
ACQUISITIONS. A significant portion of the Company's revenue growth is
a result of its recent acquisition of Datatec Industries. The Company has
pursued, and will continue to pursue, opportunities through internal development
and acquisitions of complementary enterprises and products. The Company has not
entered into any agreements involving potential acquisitions at this time. The
Company competes for acquisition and expansion opportunities with many entities
that have substantially greater resources than the Company. In addition,
acquisitions may involve difficulties in the retention of personnel, diversion
of management's attention, unexpected legal liabilities, and tax and accounting
issues. There can be no assurance that the Company will be able to successfully
identify suitable acquisition candidates, complete acquisitions, integrate
acquired businesses or service offerings into its operations or expand into new
markets. Once integrated, acquisitions may not achieve comparable levels of
revenue, profitability or productivity as the existing business of the Company
or otherwise perform as expected. The occurrence of any of these events could
have a material adverse effect on the Company's business, financial condition
and results of operations.
WORKING CAPITAL DEFICIENCIES; HISTORY OF LOSSES. The Company has a
history of limited working capital and had working capital deficiencies of
$585,000, $7.7 million, $3.0 million and $2.9 million at April 30, 1995, 1996,
1997 and July 31, 1997, respectively. On March 19, 1997, the Company entered
into a credit facility with a financial institution that provides for maximum
borrowing of $17.0 million. The credit facility provides for a $15.0 million
revolving credit facility, with allowable borrowing under the facility based on
a formula of receivables and inventory. The credit facility also provides for a
term loan of $2.0 million with principal and interest due monthly. The revolving
credit facility bears interest at the prime rate plus 0.75% per annum an the
term loan bears interest at the prime rate plus 1.5% per annum. The credit
facility requires the Company to comply with certain financial and nonfinancial
covenants. As of July 31, 1997, the Company was not in compliance with certain
covenants and is in the process of obtaining waivers. As there can be no
assurance that such waivers will be obtained, certain long-term debt has been
classified as current in the Company's financial statements as of July 31, 1997.
Outstanding borrowings under the term loan and
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revolving loan as of July 31, 1997 were $1.9 million and $9.2 million,
respectively.
In addition, while the Company had net income of $25,000 for the three
months ended July 31, 1997, the Company has incurred net losses of $2.4 million,
$13.4 million and $5.0 million for the fiscal years ended April 30, 1995, 1996,
and 1997, respectively. There can be no assurance that the Company will generate
sufficient revenues to meet expenses or to operate profitably in the future. If
the Company is unable to generate sufficient cash flow from its operations it
would have to seek additional borrowings, effect debt or equity offerings or
otherwise raise capital. There can be no assurance that any such financing will
be available to the Company, or if available, that the terms will be acceptable
to the Company. In addition, the ability to raise other capital might be
restricted by financial covenants contained in the Company's currently existing
borrowing agreements.
DEPENDENCE ON KEY PERSONNEL. The Company's future success depends in
large part on the continued service of its key personnel. In particular, the
loss of the services of Isaac Gaon, Chief Executive Officer of the Company, or
Christopher Carey, President and Chief Executive Officer of Datatec Industries,
could have material adverse affect on the operations of the Company. The Company
has employment agreements with Messrs. Gaon and Carey each of which expire on
October 31, 1999. Each of these employment agreements may be terminated by the
Company for cause or by the employee for good reason. Mr. Glasgal, Chairman of
the Board and President of the Company, has announced that he will retire from
these positions concurrently with the Company's annual stockholders' meeting to
be held in December 1997. Messrs. Gaon and Carey have been elected as Chairman
of the Board and President of the Company, respectively, effective upon Mr.
Glasgal's retirement. The Company's future success and growth also depends on
its ability to continue to attract, motivate and retain highly qualified
employees, including those with the technical, managerial, sales and marketing
expertise necessary to operate the business of the Company. Competition for
personnel in the configuration, integration and deployment services industry is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. Departures and additions of key
personnel may be disruptive to the Company's business and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION. The Company competes with a number of other companies
involved in the design, configuration, installation, integration, deployment and
servicing of computer networking technologies. The market for configuration,
integration and deployment services is highly fragmented, intensely competitive
and rapidly changing and there can be no assurance that the Company will be able
to compete successfully in the future. The Company
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believes that its ability to compete successfully depends upon a number of
factors both within and beyond its control, including performance, price,
quality and breadth of services, and industry and general economic trends. In
addition to direct competition, the Company faces indirect competition from its
existing and potential future customers, many of which internally design,
integrate and deploy their own technologies for their particular needs, and
therefore may be reluctant to use services offered by independent providers such
as the Company. As a result, the Company must educate prospective customers as
to the advantages of the Company's services. There can be no assurance that the
Company will be able to compete effectively with its direct competitors or to
adequately educate potential customers to the benefits provided by the Company's
services.
Many of the Company's current and potential competitors have longer
operating histories and greater financial, technical, sales, marketing and other
resources, as well as greater name recognition, larger customer bases, and
greater market acceptance of their services, than the Company. As a result, they
may be able to respond more quickly to technological changes or market
opportunities, and to devote greater resources to the development, promotion and
sale of their services than the Company. Also, in the markets in which the
Company operates, there are relatively low barriers to entry and new competition
may arise either from expansion by established companies or from new emerging
companies. Increased competition may result in pressure for price reductions and
related reductions in gross margins and market share, any of which could have a
material adverse effect on the Company's ability to achieve its financial and
business goals. To achieve its goal of larger market share, the Company must
continue to enhance its existing services, introduce new service offerings,
recruit and train additional deployment and engineering staff, and recruit and
train sales and marketing professionals. There can be no assurance that the
Company will be able to successfully compete against current and future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on its business, financial condition and results of
operations.
The Company has licensed on a non-exclusive basis, including the right
to sublicense, its Integrator's Workbench Product Series ("Integrator's
Workbench") software tools to certain third parties. As a result of such
licenses, third parties may obtain the right to use Integrator's Workbench and
may compete with the Company in certain instances.
RELIANCE ON UNIONIZED LABOR. A substantial portion of the Company's
deployment force is employed under contracts with the International Brotherhood
of Electrical Workers and the International Brotherhood of Electrical Workers
Local 1430 (collectively, the "IBEW"). The Company's union employees are
responsible for the deployment of the Company's services. The
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Company's current contracts with the IBEW expire on December 31, 1997.
Negotiations have not commenced with respect to the new contracts and there can
be no assurance as to the results of the negotiations or whether such contracts
will be negotiated without any work stoppages. Any work stoppages or other labor
disturbances could have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED INTELLECTUAL PROPERTY. The Company relies on a combination of
contractual rights, copyright and trade secret laws to establish and protect its
software and other proprietary rights. Currently, the Company has no copyrights
or patents pending for its products and services. Existing trade secret laws
offer only limited protection. There can be no assurance that the steps taken by
the Company to protect these proprietary rights will be adequate to deter
misappropriation. Although the Company does not believe that it is infringing
the intellectual property rights of others, there can be no assurance that such
claims will not be asserted and, if asserted, would not have a material adverse
effect on the Company's business, financial condition and results of operations.
Any such litigation could be costly and divert management's attention, either of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. Adverse determinations in such litigation
could result in the loss of the Company's proprietary rights, subject the
Company to significant liabilities, require the Company to seek licenses from
third parties or prevent the Company from selling its services, any one of which
would have a material adverse effect on the Company's business, financial
conditions and results of operations.
INFLUENCE BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS. As of September 30,
1997, the Company's directors and executive officers owned and/or had the power
to vote approximately 39.7% of the Common Stock. In addition, as of september
30, 1997, Ralph Glasgal, the current Chairman of the Board and President of the
Company, through his direct ownership and through a voting agreement with Direct
Connect International Inc. ("DCI") had the power to vote approximately 18.7% of
the Common Stock and Mr. Carey, President and Chief Executive Officer of Datatec
Industries had the power to vote approximately 14.1% of the Common Stock.
Accordingly, management will be able to influence (in addition to their
influence as officers and/or directors) the affairs of the Company, including
the election of directors and other matters requiring stockholder approval.
VOLATILITY OF THE COMPANY'S COMMON STOCK. The market price of the
Company's Common Stock has experienced significant volatility. Announcements of
technological or other innovations for new commercial products or services of
the Company or its competitors, developments concerning propriety rights or
governmental regulations, changes in financial estimates by securities analysts,
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or general conditions in the economy or the market for the Company's services,
some of which may be unrelated to the Company's performance and beyond the
Company's control, may have a significant effect on the Company's business and
on the market price of the Company's securities. Sales of a substantial number
of shares by existing security holders could also have an adverse effect on the
market price of the Company's securities. In particular, the Company believes
that the increase in the number of outstanding shares of Common Stock as a
result of the recent exercise of an aggregate of 2,743,790 redeemable warrants
in October 1997, will cause increased volatility of its stock price in the
short-term. The stocks of many technology companies have experienced extreme
price and volume fluctuations unrelated to the operating performance of those
companies.
SHARES ELIGIBLE FOR FUTURE SALE. The shares of Common Stock issuable
upon exercise of the warrants or options or the Common Stock registered in the
Registration Statement of which this Prospectus is part will be freely tradeable
without restriction under the Securities Act upon resale by the Selling
Stockholders. The Selling Stockholders are not restricted as to the price or
prices at which they may sell their Shares. Sales of such Shares may have an
adverse effect on the market price of the Common Stock. Moreover, the Selling
Stockholders are not restricted as to the number of Shares that may be sold at
any time, and it is possible that a significant number of Shares could be sold
at the same time which may also have an adverse effect on the market price of
the Company's Common Stock.
No predictions can be made as to the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's ability to raise capital through an offering of its
equity securities in the future.
RIGHTS OF COMMON STOCK SUBORDINATE TO PREFERRED STOCK. The Certificate
of Incorporation of the Company authorizes the issuance of a maximum of
4,000,000 shares of preferred stock, par value $0.001 per share. There are no
shares of preferred shares currently issued and outstanding. However, if shares
of preferred stock are issued in the future, the terms of a series of preferred
stock may be set by the Company's Board of Directors without approval by the
holders of the Common Stock of the Company. Such terms could include, among
others, preferences as to dividends and distributions on liquidation as well as
separate class voting rights. The rights of the holders of the Company's Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future.
-11-
<PAGE>
CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS. The Company's Certificate of
Incorporation: (i) requires certain procedures to be followed and time periods
to be met for any stockholder to propose matters to be considered at annual
meetings of stockholders, including nominating directors for election at those
meetings; (ii) prohibits stockholders from calling special meetings of
stockholders; and (iii) authorizes the Board of Directors of the Company to
issue up to 4,000,000 shares of preferred stock without stockholder approval and
to set the rights, preferences and other designations, including voting rights,
of those shares as the Board of Directors may determine. These provisions, alone
or in combination with each other and with the matters described under
"--Influence by Management and Principal Stockholders," may discourage
transactions involving actual or potential changes of control of the Company,
including transactions that otherwise could involve payment of a premium over
prevailing market prices to holders of Common Stock. The Company is also subject
to provisions of the Delaware General Corporation Law that may make some
business combinations more difficult.
NO CASH DIVIDENDS. The Company has not paid cash dividends on its
Common Stock since its inception, other than certain distributions made to
stockholders in amounts sufficient to reimburse the Company's stockholders for
income tax liabilities arising from the Company's former status as a Subchapter
"S" corporation. The Company does not intend to pay cash dividends on its Common
Stock for the foreseeable future. The payment of cash dividends in the future
will be at the discretion of the Company's Board of Directors and will depend
upon such factors as earnings levels, capital requirements, the Company's
financial condition and other factors deemed relevant by the Company's Board of
Directors. In addition, the payment of cash dividends by the Company is
restricted by the Company's current bank credit facility, and future borrowings
may contain similar restrictions.
-12-
<PAGE>
THE COMPANY
Glasgal Communications, Inc. (the "Company") provides configuration,
integration and rapid deployment services for the implementation of complex
computer networking and connectivity systems. By combining its standardized
process methodology and its Integrator's Workbench Product Series software tools
with extensive project management, integration and implementation expertise, the
Company delivers high quality and cost effective technology deployment
solutions. Utilizing four regional staging and configuration centers and its own
field deployment force of approximately 285 persons operating out of 19 offices,
the Company conducts multiple simultaneous large scale implementations for
organizations throughout the United States and Canada.
In order to provide high quality, consistent, rapid and cost effective
results, the Company has developed an implementation model consisting of (i) a
standardized process methodology, (ii) project management expertise, (iii)
Integrator's Workbench software tools, (iv) regional staging and configuration
centers and (v) its own field deployment force. The Company believes its
implementation model enables its direct customers to accelerate the assimilation
of networking technologies into their organizations, and allows its indirect
customers to accelerate the adoption of their products and services.
The Company markets its services to Fortune 2,000 companies directly
through its sales force and indirectly through systems manufacturers, systems
integrators, independent software vendors and telecommunications carriers. The
Company's direct customers include Bell Atlantic Network Integration, Beneficial
Management Corporation, Blockbuster Entertainment Inc., Federated Department
Stores, Inc., Lowe's Companies, Inc., Ross Stores, Inc., Starbucks Corporation,
Toys "R" Us, Inc., and Walgreen Co. The Company's indirect customers include
Diebold Inc., Electronic Data Systems Incorporated, IBM Global Services, NCR
Corporation and Unisys Corporation. In June 1997, the Company was selected by
Cisco to participate in its new Advanced Installation Services ("AIS") program.
The AIS program is intended to enable faster deployment of Cisco's networking
technology to Fortune 1,000 corporations.
Since April 1996, Glasgal has completed three acquisitions which have
enabled the Company to focus its business exclusively on providing
implementation services. The Company's objective is to be the premier provider
of configuration, integration and rapid deployment services for the
implementation of complex computer networking solutions. Key elements of the
Company's strategy include: (i) focusing on implementation services; (ii)
targeting complex networking and connectivity implementations; (iii) leveraging
the Company's implementation model; (iv) leveraging existing customers; (v)
establishing strategic alliances; and (vi) pursuing strategic acquisitions.
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<PAGE>
The Company's executive offices are located at 20C Commerce Way,
Totowa, New Jersey 07512. The telephone number of the Company is (201) 890-4800.
When used in this Prospectus, the term "Company" refers to Glasgal
Communications, Inc., a Delaware
corporation and its subsidiaries.
USE OF PROCEEDS
No net proceeds will be realized by the Company from the offer and
resale of the Shares offered hereby by the Selling Stockholders. The Company
will receive a total of approximately $2,938,572 in the event that all shares of
Common Stock offered hereby that are issuable upon the exercise of warrants and
options have been issued, upon such exercise by certain Selling Stockholders
($511,497 if the warrants are exercised on a cashless basis). Such proceeds will
be used by the Company for working capital and other corporate purposes. The
warrants may be exercised on a cashless basis. If the warrants are exercised on
a cashless basis, the Company will not receive any cash proceeds upon the
exercise of such warrants.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth (i) the number of shares of Common Stock
beneficially owned by each Selling Stockholder as of October 31, 1997, (ii) the
number of Shares of Common Stock to be offered for resale by each Selling
Stockholder and (iii) the number and percentage of shares of Common Stock to be
beneficially owned by each Selling Stockholder after completion of the offering.
Except as set forth below, none of the Selling Stockholders has had a material
relationship with the Company during the past three years.
<TABLE>
<CAPTION>
No. of Shares of
Common Stock No. of Shares Shares Beneficially Owned
Name Beneficially Owned Offered After Offering(1)
- ---------------------------------------- ---------------------- ------------------ ------------------------------
NUMBER PERCENT
------ -------
<S> <C> <C> <C> <C>
Joseph Stevens & Company, Inc.(2)........ 617,500(3) 517,500(4) 100,000 *
Christopher J. Carey(5).................. 3,439,536(6) 3,060,876(7) 378,660 1.3
Raymond Koch............................. 118,518 3,717(8) 114,801 *
Ronald Frey.............................. 29,631 26,266(9) 3,365 *
Mary Carey............................... 118,518 101,344 17,174 *
Amy Carey GRAT........................... 96,296 82,349 13,947 *
Christopher Carey GRAT................... 96,296 82,349 13,947 *
Graeme Howard............................ 12,668 12,668 0 *
Plan C LLC(10)........................... 15,000 30,000(11) 0 *
</TABLE>
* Less than 1%.
- -----------------------------
(1) Assumes that all Common Stock offered by the Selling Stockholders is
sold and that no other shares beneficially owned by the Selling
Stockholders are sold.
(2) Joseph Stevens & Company, Inc. ("Joseph Stevens") acted as the
representative of the underwriters in connection with the Company's
public offering consummated in September 1995 and was also a financial
consultant to the Company from September 1995 until September 1997. In
addition, Joseph Stevens currently makes a market in the Company's
Common Stock. In connection with the 1995 public offering, Joseph
Stevens received a warrant to purchase the securities being offered by
it hereby.
(3) Includes 517,500 shares of Common Stock issuable upon the exercise of
warrants and 100,000 shares of Common Stock issuable upon the exercise
of options, to purchase Common Stock of the Company granted to Joseph
Stevens.
(4) Includes 517,500 shares of Common Stock issuable upon the exercise of
warrants to purchase Common Stock of the Company granted to Joseph
Stevens & Company Inc.
(5) Christopher Carey is the President and Chief Executive Officer of the
Company's subsidiary, Datatec Industries and is a director of the
Company.
(6) Includes (i) 96,296 shares held by the Amy Carey GRAT, a trust formed
for the benefit of Mr. Carey's daughter, (ii) 96,296 shares held by the
Christopher Carey GRAT, a trust formed for the benefit of Mr. Carey's
son, (iii) 118,518 shares held by Mr. Carey's wife, and (iv) 15,0000
shares beneficially owned by Plan C LLC, a limited liability company of
which Mr. Carey is a member.
(7) Includes 120,353 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock of the Company granted to Mr. Carey.
(8) Represents 3,717 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock of the Company granted to Mr. Koch.
(9) Includes 929 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock of the Company granted to Mr. Frey.
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<PAGE>
(10) Plan C LLC is owned by Christopher Carey and his wife. Mr. Carey is an
executive officer and a director of the Company.
(11) Represents 30,000 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock of the Company granted to Plan C LLC.
There is no assurance that the Selling Stockholders which hold options or
warrants to purchase Common Stock from the Company will exercise such warrants
or options or that such Selling Stockholder or any other Selling Stockholder
will otherwise opt to sell any of the Shares offered hereby. To the extent
required, the specific Shares to be sold, the names of the Selling Stockholders,
other additional shares of Common Stock beneficially owned by such Selling
Stockholders, the public offering price of the Shares to be sold, the names of
any agent, dealer or underwriter employed by such Selling Stockholders in
connection with such sale, and any applicable commission or discount with
respect to a particular offer will be set forth in an accompanying Prospectus
Supplement.
The Shares covered by this Prospectus may be sold from time to time so long as
this Prospectus remains in effect; provided, however, that the Selling
Stockholders are first required to contact the Company's Corporate Secretary to
confirm that this Prospectus is in effect. The Selling Stockholders expect to
sell the Shares at prices then attainable, less ordinary brokers' commissions
and dealers' discounts as applicable. Christopher Carey and Joseph Stevens, each
a Selling Stockholder, have agreed not to offer, sell, contract to sell, make
any short sale or otherwise dispose of certain of their shares of Common Stock
or securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock of the Company for a period of 90 days following the
effective date of the Company's registration statement on Form S-1 filed in
connection with the Company's proposed public offering, without the prior
written consent of the managing underwriter thereof. Such managing underwriter,
in its discretion, may waive the foregoing restrictions in whole or in part,
with or without a public announcement of such action. Mr. Carey has pledged
750,000 shares of Common Stock pursuant to margin loans with brokerage firms.
The managing underwriter of the Company's proposed public offering has agreed to
permit Mr. Carey to sell these shares from time to time to the extent necessary
to satisfy the requirements of these loans.
The Selling Stockholders and any broker or dealer to or through whom any of
the Shares are sold may be deemed to be underwriters within the meaning of the
Securities Act with respect to the Common Stock offered hereby, and any profits
realized by the Selling Stockholders or such brokers or dealers may be deemed to
be underwriting commissions. Brokers' commissions and dealers' discounts, taxes
and other selling expenses to be borne by the Selling Stockholders are not
expected to exceed normal selling expenses for sales over-the-counter or
otherwise, as the case may be. The registration of the Shares under the
Securities Act shall not be deemed an admission by the Selling Stockholders or
the Company that the Selling Stockholders are underwriters for purposes of the
Securities Act of any Shares offered under this Prospectus.
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<PAGE>
TRANSFER AGENT
The transfer agent, warrant agent and registrar for the Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.
PLAN OF DISTRIBUTION
This Prospectus covers 3,936,064 shares of the Company's Common Stock. All of
the Shares offered hereby may be sold from time to time by the Selling
Stockholders. The securities covered by this Prospectus may be sold under Rule
144 instead of under this Prospectus. The Company will realize no proceeds from
the sale of the Shares, but will receive amounts upon exercise of options and
warrants, which amounts will be used for working capital and general corporate
purposes.
The distribution of the Shares by the Selling Stockholders is not subject to
any underwriting agreement. The Selling Stockholders may sell the Shares offered
hereby from time to time in transactions on one or more exchanges, in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices relating to prevailing market prices
or at negotiated prices.
From time to time the Selling Stockholders may pledge their Shares pursuant to
the margin provisions of customer agreements with their respective brokers. Upon
a default by the Selling Stockholders, such brokers may offer and sell the
pledged Shares.
Such transactions may be effected by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of the customary commissions). The Selling
Stockholders and any broker-dealers that participate with the Selling
Stockholders in the distribution of the Shares may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the Shares may be deemed to be
underwriting commissions or discounts under the Securities Act. The Selling
Stockholders will pay any transaction costs associated with effecting any sales
that occur.
In order to comply with the securities laws of certain states, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Shares may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with by the Company and the Selling Stockholders.
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<PAGE>
Any broker-dealer acquiring Common Stock offered hereby may sell such
securities either directly, in its normal market-making activities, through or
to other brokers on a principal or agency basis or to its customers. Any such
sales may be at prices then prevailing on Nasdaq, at prices related to such
prevailing market prices or at negotiated prices to its customers or a
combination of such methods. In addition and without limiting the foregoing, the
Selling Stockholders will be subject to applicable provisions of Regulation M,
which may limit the timing of the purchases and sales of shares of Common Stock
by the Selling Stockholders.
The Selling Stockholders are not restricted as to the price or prices at which
it may sell their Shares. Sales of such Shares may have an adverse effect on the
market price of the Common Stock. Moreover, the Selling Stockholders are not
restricted as to the number of Shares that may be sold at any time, and it is
possible that a significant number of Shares could be sold at the same time
which may also have an adverse effect on the market price of the Company's
Common Stock; provided, however, that Christopher Carey and Joseph Stevens, each
a Selling Stockholder, have agreed not to offer, sell, contract to sell, make
any short sale or otherwise dispose of certain of their shares of Common Stock
or securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock of the Company for a period of 90 days following the
effective date of the Company's registration statement on Form S-1 filed in
connection with the Company's proposed public offering, without the prior
written consent of the managing underwriter thereof. Such managing underwriter,
in its discretion, may waive the foregoing restrictions in whole or in part,
with or without a public announcement of such action. Mr. Carey has pledged
750,000 shares of Common Stock pursuant to margin loans with brokerage firms.
The managing underwriter of the Company's proposed public offering has agreed to
permit Mr. Carey to sell these shares from time to time to the extent necessary
to satisfy the requirements of these loans.
The Company has agreed to pay all fees and expenses incident to the
registration of the Shares, except selling commissions and fees and expenses of
counsel or any other professionals or other advisors, if any, to the Selling
Stockholders.
This Prospectus also may be used, with the Company's consent, by donees or
other transferees of the Selling Stockholders, or by other persons acquiring the
Common Stock under circumstances requiring or making desirable the use of this
Prospectus for the offer and sale of such shares.
-18-
<PAGE>
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the Company
by Olshan Grundman Frome & Rosenzweig LLP, New York, New York. Robert Frome,
Robert Friedman and Jeffrey Spindler, members of Olshan Grundman Frome &
Rosenzweig LLP, hold shares of Common Stock. Mr. Friedman is also a director of
the Company and holds options to purchase additional shares of Common Stock.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference in this Registration Statement as of April 30, 1996
and 1997 and for each of the years in the three years period ended April 30,
1997 included in the Company's Form 10-K for the fiscal year ended April 30,
1997 have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
To the extent that a firm of independent public accountants audits and reports
on the financial statements of the Company issued at future dates, and consents
to the use of their report thereon, such financial statements also will be
incorporated by reference herein in reliance upon their report and said
authority.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
regional offices: 7 World Trade Center, Suite 1300, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 upon payment of
the fees prescribed by the Commission. In addition, reports, proxy statements
and other information concerning the Company (symbol: GLAS) can be inspected and
copied at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006, on which the Common Stock of the Company is listed. Such
material may also be accessed electronically by means of the Commission's home
page on the internet at http//www.sec.gov.
The Company has also filed with the Commission a Form S-3 Registration
Statement (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Shares offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations
-19-
<PAGE>
of the Commission. For further information, reference is made to the
Registration Statement.
-20-
<PAGE>
No dealer, salesman or any other person is authorized to give any information or
to make any representations in connection with this offering not contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any other person.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Securities offered by this Prospectus
or an offer by any person in any jurisdiction where such an offer or
solicitation is not authorized or is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information herein is correct as of any time subsequent to
its date.
TABLE OF CONTENTS
PAGE
Incorporation of Certain Documents
By Reference............................................................... 3
Risk Factors................................................................. 4
The Company.................................................................. 13
Use of Proceeds.............................................................. 14
Selling Stockholders......................................................... 15
Transfer Agent............................................................... 17
Plan of Distribution......................................................... 17
Legal Matters................................................................ 19
Experts...................................................................... 19
Available Information........................................................ 19
GLASGAL COMMUNICATIONS, INC.
3,936,064 SHARES OF COMMON STOCK
PROSPECTUS
November [ ], 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by the Company in connection with the securities being registered. With the
exception of the SEC registration fee, all amounts shown are estimates.
SEC registration fee.......................................... $5,993.51
Nasdaq listing expenses....................................... 2,000.00
Legal fees and expenses (including Blue Sky).................. 4,000.00
Accounting Fees and Expenses.................................. 2,000.00
Miscellaneous................................................. 1,006.49
---------
Total................................................$15,000.00
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and the By-laws of the Registrant
provides that the Registrant shall indemnify to the extent permitted by Delaware
law any person whom it may indemnify thereunder, including directors, officers,
employees and agents of the Registrant. Such indemnification (other than an
order by a court) shall be made by the Registrant only upon a determination that
indemnification is proper in the circumstances because the individual met the
applicable standard of conduct. Advances for such indemnification may be made
pending such determination. In addition, the Registrant's Certificate of
Incorporation eliminates, to the extent permitted by Delaware law, personal
liability of directors to the Registrant and its stockholders for monetary
damages for breach of fiduciary duty as directors.
The Registrant's authority to indemnify its directors and officers is
governed by the provisions of Section 145 of the Delaware General Corporation
Law, as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to
II-1
<PAGE>
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of
II-2
<PAGE>
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition or such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be paid upon such terms and conditions, if any, as the
board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to the "corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had the power
and authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person
II-3
<PAGE>
with respect to any employee benefit plan, and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee, or agent with respect to any employee benefit plan, its participants
or beneficiaries, and a person who acted in good faith and in a manner
reasonably believed to be in the interest of the participants and beneficiaries
of any employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The Registrant has entered into Indemnification Agreements with each of
its directors and officers whereby it has agreed to indemnify each director and
officer from and against any and all expenses, losses, claims, damages and
liability incurred by such director or officer for or as a result of action
taken or not taken while such director was acting in his capacity as a director,
officer, employee or agent of the Registrant.
ITEM 16. EXHIBITS
EXHIBIT NO.
*4 Specimen Certificate of the Company's Common Stock.
5 Opinion of Olshan Grundman Frome & Rosenzweig LLP
with respect to legality of the Common Stock.
23.1 Consent of Olshan Grundman Frome & Rosenzweig LLP,
included in Exhibit No. 5.
23.2 Consent of Arthur Andersen LLP, independent public
accountants.
24.1 Power of Attorney, included on the signature page to this
Registration Statement.
* Incorporated by reference to the Company's Registration
Statement on Form S-3, filed with the Commission on April
8, 1996 (Commission File No. 333-03414).
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is,
II-4
<PAGE>
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of an action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Totowa, State of New Jersey on the 18th day of
November, 1997.
GLASGAL COMMUNICATIONS, INC.
By: /S/ ISAAC J. GAON
---------------------------------
Isaac J. Gaon
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints RALPH GLASGAL and ISAAC J. GAON, his true
and lawful attorney-in-fact, each acting alone, with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this registration statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes, each acting along, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
- ----------------------- Chairman of the Board
Ralph Glasgal and President November 18, 1997
/S/ ISAAC J. GAON Chief Executive Officer
- ----------------------- and Director (principal November 18, 1997
Isaac J. Gaon executive officer)
- ----------------------- Director November 18, 1997
Joseph M. Salvani
/S/ ROBERT H. FRIEDMAN Director November 18, 1997
- -----------------------
Robert H. Friedman
/S/ THOMAS BERRY Director November 18, 1997
- -----------------------
Thomas Berry
/S/ DAVID MILCH Director November 18, 1997
- -----------------------
David Milch
- ----------------------- Director November 18, 1997
Christopher Carey
/S/ JAMES M. CACI Chief Financial Officer
- ----------------------- (principal financial and November 18, 1997
James M. Caci accounting officer)
II-6
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 753-7200
November 19, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Glasgal Communications, Inc.-
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
dated the date hereof (the "Registration Statement"), filed with the Securities
and Exchange Commission by Glasgal Communications, Inc., a Delaware corporation
(the "Company"). The Registration Statement relates to an aggregate of 3,936,064
shares (the "Shares") of common stock, par value $.001 per share (the "Common
Stock"). The Shares were (i) previously issued by the Company to the Selling
Shareholders named in the Registration Statement or (ii) will be issued by the
Company to the Selling Shareholders named in the Registration Statement upon the
exercise of outstanding warrants and options.
We advise you that we have examined, among other things,
originals or copies certified or otherwise identified to our satisfaction of the
Certificate of Incorporation and By-laws of the Company, minutes of meetings of
the Board of Directors and stockholders of the Company and such other documents,
instruments and certificates of officers and representatives of the Company and
public officials, and we have made such examination of the law, as we have
deemed appropriate as the basis for the opinion hereinafter expressed. In making
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of documents submitted to us as certified or photostatic
copies.
<PAGE>
Securities and Exchange Commission
November 19, 1997
Page -2-
Based upon the foregoing, we are of the opinion that the
Shares have been duly authorized and either (i) are validly issued, fully paid
and non-assessable or (ii) will be validly issued, fully paid and non-assessable
upon the exercise of the warrants and options, subject, however, to receipt by
the Company of the exercise price for the warrants and options in accordance
with their respective terms.
We hereby consent to use of this opinion in the Registration
Statement and Prospectus, and to the use of our name in the Prospectus under the
caption "Legal Matters".
We advise you that Robert Frome and Robert Friedman, members
of this firm hold shares of Common Stock. Mr. Friedman is also a director of the
Company and holds options to purchase additional shares of Common Stock.
Very truly yours,
/S/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
------------------------------------------
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
[DOCUMENT TO COME]
ARTHUR ANDERSEN LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glasgal Communications, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 9, 1997
(except with respect to matters discussed in Note 16, as to which date is
September 29, 1997),
included in Glasgal Communications, Inc. Form 10-K for the year ended April 30,
1997 and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Roseland, New Jersey
November 19, 1997
