SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
DATATEC SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ /
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was
<PAGE>
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
-2-
<PAGE>
DATATEC SYSTEMS, INC.
September 8, 1998
Dear Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Datatec Systems, Inc., which will be held at 23 Madison Road,
Fairfield, New Jersey 07512, on Tuesday, October 6, 1998 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,
/s/ Isaac Gaon
ISAAC GAON
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE
OFFICER
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>
DATATEC SYSTEMS, 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
Datatec Systems, Inc., a Delaware corporation (the "Company") will be held at 23
Madison Road, Fairfield, New Jersey 07512, on Tuesday, October 6, 1998 at 10:00
A.M., local time for the following purposes:
1. To elect five (5) 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 ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal
year ending April 30, 1999; and
3. 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 August 25,
1998 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,
/s/ James M. Caci
JAMES M. CACI
VICE PRESIDENT-FINANCE, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
Dated: Totowa, New Jersey
September 8, 1998
<PAGE>
DATATEC SYSTEMS, INC.
20C COMMERCE WAY
TOTOWA, NEW JERSEY 07512
--------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 6, 1998
--------------------------
This Proxy Statement is being furnished to the stockholders of
Datatec Systems, 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 Tuesday, October 6,
1998 at 10:00 A.M., local time. At the Annual Meeting, the stockholders will be
asked to (i) elect five (5) directors; (ii) ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the fiscal year
ending April 30, 1999; and (iii) 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 September 8, 1998.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on Tuesday,
August 25, 1998 (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 29,134,342 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 ratification of the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the fiscal year ending April
30, 1999, and (iii) 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
<PAGE>
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, 29,134,342 shares outstanding at July 31, 1998, 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 PERCENTAGE OF CLASS
OWNER(1) BENEFICIALLY OWNED(2)
- -------------------------------------- ---------------------- -------------------------
<S> <C> <C> <C>
Ralph Glasgal(3) 3,959,906 13.6%
Isaac J. Gaon(4) 1,085,213 3.6%
Christopher J. Carey(5) 3,614,889 12.3%
Robert F. Gadd(6) 455,776 1.6%
James Caci(7) 187,650 *
Thomas J. Berry(8) 48,000 *
Robert H. Friedman(9) 63,146 *
David M. Milch(10) 402,505 1.4%
Joseph Salvani(11) 503,413 1.7%
Raymond R. Koch (12) 50,235 *
All directors and officers as a group 9,733,418 31.5%
(10 persons)(13)
</TABLE>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, all addresses are c/o Datatec Systems, 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 July 31, 1998.
(3) Mr. Glasgal's beneficial ownership includes (i) 146,752 shares of Common
Stock owned by Ralph Glasgal's wife and (ii) 431,413 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 July 31, 1998 to purchase 1,082,213 shares of Common Stock.
(5) Mr. Carey's beneficial ownership includes (i) options exercisable within
sixty (60) days from July 31, 1998 to purchase 195,353 shares of Common
Stock, (ii) 118,518 shares of Common Stock owned by Mary
3
<PAGE>
Carey, Mr. Carey's wife, (iii) 96,296 shares held by the Amy Carey GRAT, a
trust formed for the benefit of Mr. Carey's daughter, (iv) 96,296 shares
held by the Christopher Carey GRAT, a trust formed for the benefit of Mr.
Carey's son, and (v) 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 July 31, 1998 to purchase 260,706 shares of Common Stock.
(7) Mr. Caci's beneficial ownership includes options exercisable within sixty
(60) days from July 31, 1998 to purchase 187,650 shares of Common Stock.
(8) Mr. Berry's beneficial ownership includes options exercisable within sixty
(60) days of July 31, 1998 to purchase 48,000 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 July 31, 1998 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 July 31, 1998 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 July 31, 1998 to purchase 72,000 shares of Common
Stock. Mr. Salvani is also the Chairman of the Board of DCI and his
beneficial ownership includes 431,413 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) Mr. Koch's beneficial ownership includes options exercisable within sixty
(60) days from July 31, 1998 to purchase 50,235 shares of Common Stock.
(13) Includes (i) options exercisable within sixty (60) days of July 31, 1998
to purchase an aggregate of 1,746,315 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 205,902
shares of Common Stock, which have already been counted as being
beneficially owned by Mr. Glasgal) and (ii) 431,413 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 NOMINEES
The names of the nominees and certain biographical information
concerning each of them are set forth below:
NAME AGE CURRENT POSITION WITH THE COMPANY
Isaac J. Gaon 49 Chairman of the Board and Chief Executive Officer
Christopher J. Carey 46 Director and President
Thomas Berry 73 Director
Robert H. Friedman 45 Director
David M. Milch 44 Director
ISAAC J. GAON, Chairman of the Board since December 1997 and
Director since 1992, has served as the Chief Executive Officer since October
1994. He served as Chief Financial Officer from April 1992 until October 1994.
From September 1987 to December 1991, Mr. Gaon, a chartered accountant, served
as President and Chief Executive Officer of Toronto-based NRG, Inc., (a
subsidiary of Gestetner International) an office equipment supplier, and in
several senior management roles within Gestetner Canada and Gestetner USA.
CHRISTOPHER J. CAREY, Director of the Company since he joined the
Company in October 1996. Mr. Carey was elected as President in December 1997.
Mr. Carey founded Datatec Industries in 1976 and served as its President and
Chief Executive Officer since that time.
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.
5
<PAGE>
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.
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, 1998 ("Fiscal 1998"), the
Company's Board of Directors formally met on eight 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 1998.
During Fiscal 1998, 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 two occasions during Fiscal 1998.
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 met once
during Fiscal 1998. 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 Audit Committee of the Company's Board of Directors is comprised
of Thomas J. Berry, Robert H. Friedman and Joseph M. Salvani. The Audit
Committee recommends the Company's independent auditors, reviews the scope of
their engagement, consults with the auditors, reviews the results of their
examination, acts as liaison between the Board of Directors and the auditors and
reviews various Company policies, including those relating to accounting and
internal controls. The Audit Committee met or took action on one occasion during
Fiscal 1998.
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.
NAME AGE POSITION
Robert F. Gadd 37 Senior Vice President and Chief Technology Officer
James M. Caci 33 Chief Financial Officer, Vice President of Finance,
Secretary and Treasurer
Raymond R. Koch 53 Executive Vice President and Chief Operating Officer
6
<PAGE>
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.
RAYMOND R. KOCH, Executive Vice President and Chief Operating
Officer since July 1998, joined Datatec Industries in June 1989 as Executive
Vice President and served as President and Chief Operating Officer of Datatec
Industries until its acquisition by the Company. From March 1979 to June 1989
Mr. Koch held several key management roles within Lanier Business Systems, a
division of Harris Corporation, which included responsibility for sales and
marketing, hardware and software support, field services, and finance and
administration.
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 1998: Isaac Gaon and Robert Gadd.
In addition, during Fiscal 1998, Christopher Carey failed to file on a timely
basis four reports covering fourteen transactions, Ralph Glasgal failed to file
on a timely basis nine reports covering one hundred fifteen transactions, and
James Caci failed to file on a timely basis two reports covering eight
transactions. Each of the transactions for the above named individuals were
subsequently reported to the Commission on a Form 4. The Company has recently
implemented a policy which should have an effect of ensuring timely filings.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years
ended April 30, 1996, 1997 and 1998 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, 1998 who received compensation of at least
$100,000 during Fiscal 1998 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION($)(2)
<S> <C> <C> <C> <C> <C>
Isaac J. Gaon 1998 $257,000 -- 150,000 --
Chairman of the Board 1997 250,000 -- 350,000 --
and Chief Executive Officer 1996 194,800 $10,000 108,821 --
Christopher J. Carey 1998 $250,000 $190,000 150,000 --
President 1997 345,000 95,000 120,353 24,070
1996 423,800 -- -- 22,187
Robert F. Gadd 1998 $162,000 -- 30,000 --
Senior Vice President and 1997 155,000 -- -- --
Chief Technology Officer 1996 136,433 $22,500 103,985 --
James M. Caci 1998 $152,000 -- 20,000 --
Vice President of Finance, 1997 128,100 -- 175,000 --
Chief Financial Officer, 1996 90,000 $10,000 43,528 --
Treasurer, Secretary
Ralph Glasgal(3) 1998 $177,000 -- -- --
Former Chairman of the Board 1997 250,000 -- -- --
and President 1996 250,000 $74,800 -- --
Raymond R. Koch 1998 $250,000 $75,000 30,000 --
Chief Operating Officer, 1997 273,000 38,000 -- $23,550
1996 275,200 -- -- --
</TABLE>
(1) The value of personal benefits for executive officers of the Company
during Fiscal 1998 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
$50,000 or 10% of the total annual salary and bonus reported for any
individual named above.
(2) The amounts shown in this column reflect the dollar value of life
insurance premiums paid by the Company.
(3) Mr. Glasgal retired as Chairman of Board and President of the Company on
December 22, 1997.
8
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding stock
option grants made to each of the Named Officers during Fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED RATES OF ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION (1)
---------------------------
INDIVIDUAL GRANTS
-----------------
SHARES OF
COMMON STOCK PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED FISCAL YEAR(%) ($/SH) EXPIRATION DATE 5% 10%
---- ------- -------------- ------ --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ralph Glasgal -- -- -- -- -- --
Isaac J. Gaon 150,000 17% $3.75 2/11/08 $353,753 $896,480
Christopher J. Carey 150,000 17% $3.75 2/11/08 $353,753 $896,480
Robert F. Gadd 30,000 3% $3.75 2/11/08 $70,751 $179,296
James M. Caci 20,000 2% $3.75 2/11/08 $47,167 $119,531
Raymond R. Koch 30,000 3% $3.75 2/11/08 $70,751 $179,296
</TABLE>
(1) The potential realizable portion of the foregoing table illustrates value
that might be realized upon exercise of options immediately prior to the
expiration of their term, assuming (for illustrative purposes only) the
specified compounded rates of appreciation on the Company's Common Stock
over the term of the option. These numbers do not take into account
provisions providing for termination of the option following termination
of employment, nontransferability or difference in vesting periods.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE
The following table sets forth certain information concerning stock
options exercised during Fiscal 1998 and stock options which were unexercised at
the end of Fiscal 1998 with respect to the Named Executive Officers.
AGGREGATED OPTION EXERCISES
DURING THE MOST RECENTLY COMPLETED
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Value Number of Securities Underlying Value of Unexercised
Acquired on Realized ($) Unexercised Options Held at Fiscal In-The-Money Options at Fiscal
Exercise (#) Year-End(#) Year-End($)(1)
--------------- --------------- ---------------- ------------------- --------------- ----------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ralph Glasgal 0 0 0 0 0 0
Isaac J. Gaon 0 0 1,082,214 191,666 $1,893,874 $335,415
Christopher J. Carey 0 0 195,353 75,000 341,867 131,250
Robert Gadd 295,000 $1,688,310 260,766 15,000 456,340 26,250
James M. Caci 81,018 $533,001 187,650 68,333 328,387 119,583
Raymond R. Koch 84,100 $508,240 50,235 26,599 87,911 46,548
</TABLE>
(1) Represents the total gain that would be realized if all in-the-money
options held at April 30, 1998 were exercised, determined by multiplying
the number of shares underlying the options by the difference between the
per share option exercise price and $5.50 per share, which was the closing
bid price per share of the Company's Common Stock on April 30, 1998. An
option is in-the-money if the fair market value of the underlying shares
exceeds the exercise price of the option.
9
<PAGE>
OPTIONS REPRICING TABLE
As discussed in the Compensation Committee Report below, in May 1997
certain employees and director stock options, including options held by
executive officers, were repriced to $4.00 per share, with all other terms and
conditions remaining unchanged. The following table sets forth certain
information regarding the repricing of stock options for executive officers of
the Company in May 1997 and within the ten previous years.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original Term
Underlying of Stock at Price at Remaining at
Repricing Options Time of Time of New Exercise Date of
Name Date Repriced(#) Repricing ($) Repricing ($) Price ($) Repricing
- ------------------------ ---------- ------------- ------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Isaac Gaon, 5/30/97 350,000 $3.81 $5.25 $4.00 9 yrs. 5 mos.
Chief Executive Officer
James Caci, 5/30/97 175,000 $3.81 $5.25 $4.00 9 yrs. 5 mos.
Vice President,
CFO and Secretary
</TABLE>
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
Isaac Gaon is employed as the Company's Chairman of the Board and
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
$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 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
10
<PAGE>
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.
Effective as of October 31, 1996, the Company entered into an
employment agreement with Raymond Koch on terms substantially similar to those
of Christopher Carey's employment agreement for a term ending on October 31,
1999. Mr. Koch's agreement provides for his employment by the Company as its
Chief Operating Officer at 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.
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."
11
<PAGE>
DATATEC SYSTEMS, 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
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.
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.
Performance objectives, used to determine incentive
bonuses, should be explained and confirmed in advance.
Stock based incentives should be sufficient to promote
alignment of interests between executives and
stockholders, while ensuring that stockholders must
benefit before executives do.
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 1998 and the programs approved by the
Compensation Committee for the 1999 fiscal year.
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.
12
<PAGE>
Mr. Gaon's base salary for Fiscal 1998 was $257,000, which 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
STOCK OPTION PROGRAM
During Fiscal 1998, an aggregate of 380,000 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 150,000 options granted to Mr. Gaon and 150,000 to
Mr. Carey. 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.
OPTION REPRICING
In May 1997, the Board amended certain stock options previously
granted to certain employees and directors of the Company, including certain
options held by Mr. Gaon. The option repricings were approved by the
Compensation Committee in light of the decline in the market value of the Common
Stock that had occurred since the options were originally granted. The Committee
believed that drop in market price was due to factors unrelated to the
accomplishments and efforts of the employees and directors whose options were
repriced and that such repricing would afford these individuals with a
significant incentive that the options were originally intended to provide.
EMPLOYMENT AGREEMENTS
On October 31, 1996, the Company entered into employment agreements
with Isaac Gaon and Christopher Carey, respectively. See "Executive Compensation
- - Employment Agreements." The objective of these agreements are two-fold:
To ensure the Company of consistency of leadership and
the retention of a qualified Chief Executive Officer and
President and
To foster a spirit of employment security to Mr. Gaon
and Mr. Carey, thereby encouraging decisions that will
benefit long-term stockholders.
Compensation Committee: Robert H. Friedman; Joseph M. Salvani;
Thomas J. Berry.
13
<PAGE>
PERFORMANCE GRAPH
The "peer group" selected by the Company in the immediately
preceding fiscal year was comprised of data communications equipment
distributors. In June 1997, the Company discontinued its data communications
equipment distribution business in order to focus exclusively on deployment
services. Accordingly, the Company has elected to change its "peer group" in
order to include companies more representative of its current industry.
The Company knows of no other company whose entire focus is
information technology deployment services and has chosen peer group
participants with primary lines of business that most closely approximate the
business of the Company. The Company has selected the following companies in its
peer group, (i) Hewlett-Packard Corp., (ii) NCR Corp., (iii) Vanstar Corp., and
(iv) Wang Laboratories, Inc.
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 rapid deployment 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 May 4,
1994, and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG DATATEC SYSTEMS, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
--------------------------FISCAL YEAR ENDING----------------------
<S> <C> <C> <C> <C> <C>
Company/Index/Market 5/04/1994 4/28/1995 4/30/1996 4/30/1997 4/30/1998
Datatec Systems 100.00 50.00 176.47 76.47 129.41
Customer Selected Stock List 100.00 164.78 265.94 264.34 381.26
NASDAQ Market Index 100.00 109.19 152.42 162.47 241.31
</TABLE>
Note: Base price date is 5/04/1994
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: 1-(800) 446-7922
FAX: 1-(804) 649-6826
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.
In July 1997, Direct Connect International, Inc. ("DCI") purchased
an aggregate of 480,000 shares of the Company's Common Stock in two separate
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
entered into in January 1994 (the "1994 Agreement"). DCI's ability to exercise
this right is subject to the terms and conditions in the 1994 Agreement
including the receipt by DCI of proceeds from the exercise of outstanding DCI
warrants. Joseph Salvani, a director of the Company, is also Chairman of the
Board of DCI.
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.
15
<PAGE>
PROPOSAL 2
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,
1999. 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, 1999.
16
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual
Meeting must be received by the Company for inclusion in the 1999 Proxy
Statement no later than May 10, 1999. Such proposals should be addressed to the
Company's Secretary.
With respect to any stockholder proposals to be presented at the
1999 Annual Meeting which are not included in the 1999 proxy materials,
management proxies for the 1999 meeting will be entitled to exercise their
discretionary authority to vote on such proposals notwithstanding that they are
not discussed in the proxy materials unless the proponent notifies the Company
of such proposal by not later than July 26, 1999.
ANNUAL REPORT
All stockholders of record as of Tuesday, August 25, 1998 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, 1998. Such
report contains certified consolidated statements of the Company and its
subsidiaries for Fiscal 1998.
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,
/S/ James M. Caci
JAMES M. CACI
Chief Financial Officer,
Secretary and Treasurer
September 8, 1998
17
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DATATEC SYSTEMS, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 6, 1998
The undersigned, a stockholder of Datatec Systems, Inc., a Delaware
corporation (the "Company"), does hereby appoint Isaac Gaon, the true and lawful
attorney and proxy 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 1998 Annual Meeting of Stockholders of the Company to be held at 23 Madison
Road, Fairfield, New Jersey 07512, on Tuesday, October 6, 1998 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: Isaac J. Gaon,
Christopher J. Carey, Thomas J. Berry, Robert H.
Friedman, and David M. Milch 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. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS:
_______ FOR _______ AGAINST _______ ABSTAIN
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 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 W ITH RESPECT TO ANY OTHER BUSINESS
TRANSACTED AT THE ANNUAL MEETING.
Dated _______________________, 1998
_____________________________ (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.
18
