SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DATATEC SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
94-291423
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(I.R.S. employer identification no.)
20C Commerce Way, Totowa, NJ 07512
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(Address of principal executive offices) (Zip Code)
1998 EMPLOYEE STOCK PURCHASE PLAN
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(Full title of the plan)
Isaac J. Gaon
Chief Executive Officer
Datatec Systems, Inc.
20C Commerce Way
Totowa, New Jersey 07512
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(Name and address of agent for service)
(973) 890-4800
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(Telephone number, including area code, of agent for service)
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share price fee
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Common Stock,
$.001 par value
<S> <C> <C> <C> <C>
per share 750,000 Shares(1)(2) $4.88(2) $3,660,000 $1,109.09
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(1) Represents an aggregate of 750,000 shares of Common Stock issuable by
the Registrant pursuant to the 1998 Employee Stock Purchase Plan.
Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended (the "Act"), this Registration Statement also registers such
number of additional shares of Common Stock that may be offered or
issued pursuant to the Stock Purchase Plan to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) and Rule 457(h) under the Securities Act of
1933, based on $4.88, the per share average of high and low sale prices
of the Registrant's Common Stock as reported by the Nasdaq SmallCap
Market ("Nasdaq") on March 25, 1998.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
EXPLANATORY NOTE
The information called for by Part I of this Registration Statement on
Form S-8 (the "Registration Statement") is included in the description of the
Datatec Systems, Inc. 1998 Employee Stock Purchase Plan (the "Stock Purchase
Plan") to be delivered to persons eligible to participate in the Plan. Pursuant
to the Note to Part I of Form S-8, this information is not being filed with or
included in this Registration Statement. However, included herein is a
Prospectus to be used in connection with certain reoffers and resales of shares
of common stock, par value $.001 per share, of Datatec Systems, Inc. acquired
pursuant to the Stock Purchase Plan. Such Prospectus has been prepared in
accordance with the requirements of Form S-3 pursuant to General Instruction C
of Form S-8.
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PROSPECTUS
750,000 SHARES
DATATEC SYSTEMS, INC.
Common Stock ($.001 par value)
This Prospectus relates to the reoffer and resale by certain selling
stockholders (the "Selling Stockholders") of Datatec Systems, Inc. (the
"Company") of up to 750,000 shares (the "Shares") of Common Stock, par value
$.001 per share, of the Company (the "Common Stock") pursuant to the Datatec
Systems, Inc. 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan").
The offer and sale of the Shares to the Selling Stockholders were
previously registered under the Securities Act of 1933, as amended (the
"Securities Act"). The Shares are being reoffered and resold for the accounts of
the Selling Stockholders and the Company will not receive any of the proceeds
from the resale of the Shares.
Sales by the Selling Stockholders 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. See "Plan of Distribution." The Company will
bear all expenses in connection with the preparation of this Prospectus, but all
selling and other expenses incurred by the Selling Stockholders will be borne by
such Selling Stockholders.
The Common Stock of the Company is traded on the Nasdaq Small- Cap
Market ("Nasdaq") under the symbol "DATC." On March 25, 1998, the closing price
for the Common Stock, as reported by Nasdaq was $5.06. Prospective acquirors of
Shares are urged to obtain a current price quotation.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE 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 March 27, 1998.
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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 Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; Northwest Atrium Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661; and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports,
proxy statements and other information concerning the Company (symbol: DATC) 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 Registration Statement
on Form S-8 (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 of the Commission. For further
information, reference is made to the Registration Statement.
TABLE OF CONTENTS
AVAILABLE INFORMATION........................................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................4
RISK FACTORS.................................................................5
THE COMPANY.................................................................14
USE OF PROCEEDS.............................................................15
SELLING STOCKHOLDERS........................................................15
PLAN OF DISTRIBUTION........................................................16
LEGAL MATTERS...............................................................17
EXPERTS ...................................................................17
ADDITIONAL INFORMATION......................................................17
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended April 30,
1997, Quarterly Report on Form 10-Q for the quarters ended July 31, 1997, as
amended, October 31, 1997, and January 31, 1998 and Current Reports dated
September 23, 1997, October 20, 1997, January 12, 1998, February 24, 1998, and
March 9, 1998 are incorporated by reference in this Prospectus and shall be
deemed to be a part hereof. All documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
termination of this offering, are deemed to be incorporated by reference in this
Prospectus and shall be deemed 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 on May 2, 1996 is incorporated by
reference in this Prospectus and shall be deemed to be a part hereof.
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this Prospectus will be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or any other subsequently filed document which also
is, or is deemed to be, incorporated by reference into this Prospectus modifies
or supersedes that statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents. Written requests for such copies should
be directed to 20C Commerce Way, Totowa, New Jersey 07512, Attention: James M.
Caci. Oral requests should be directed to such officer (telephone number (973)
890-4800).
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Selling Stockholders. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, the securities offered
hereby to any person in any state or other jurisdiction in which such offer or
solicitation is unlawful. The delivery of this Prospectus at any time does not
imply that information contained herein is correct as of any time subsequent to
its date.
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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 EFFECTING 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 deployment 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 effected.
FLUCTUATIONS 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
effected 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 deployment 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 effected.
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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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 deployment 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 February 28, 1998 totaled
approximately $58.5 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
effecting 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 effect 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 deployment 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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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. While the Company had
working capital of $7.8 million as of January 31, 1998, it has a history of
limited working capital and had working capital deficiencies of $585,000, $7.7
million, and $3.0 million at April 30, 1995, 1996, 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 January 31, 1998, the
Company was not in compliance with certain covenants and is in the process of
obtaining waivers. Outstanding borrowings under the term loan and revolving loan
as of January 31, 1998 were $1.7 million and $4.2 million, respectively.
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In addition, the Company has incurred net losses of $2.4 million, $13.4
million, $5.0 million and $688,000 for the fiscal years ended April 30, 1995,
1996, and 1997, and the nine months ended January 31, 1998, 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.
POSSIBLE NEED FOR ADDITIONAL FINANCING. As of January 31, 1998 the
Company had cash and cash equivalents of $120,000. The Company anticipates,
based on currently proposed plans and assumptions relating to its operations
that its existing capital resources will be sufficient to satisfy its
anticipated cash requirements for at least 12 months. In the event that the
Company's plans change, its assumptions change or prove to be inaccurate, the
Company will be required to seek additional financing to finance its working
capital requirements. There can be no assurance that any additional financing,
if required, will be available to the Company on acceptable terms, if at all.
The Company currently has availability of approximately $845,000 under its line
of credit. Any inability by the Company to obtain additional financing, if
required, will have a material adverse effect on the operations of the Company.
SUBSTANTIAL INDEBTEDNESS. As of January 31, 1998, the Company had
outstanding on a consolidated basis approximately $8.2 million of indebtedness.
The level of the Company's indebtedness could have important consequences to its
future prospects, including the following: (i) limiting the ability of the
Company to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes; (ii)
requiring that a substantial portion of the Company's cash flow from operations,
if any, be dedicated to the payment of principal of and interest on its
indebtedness and other obligations; (iii) limiting its flexibility in planning
for, or reacting to changes in, its business; (iv) the Company will be more
highly leveraged than some of its competitors, which may place it at a
competitive disadvantage; and (v) increasing its vulnerability in the event of a
downturn in its business.
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, Chairman of the Board and Chief Executive
Officer of the Company, or Christopher Carey, President of the Company, could
have a
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material adverse effect 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. 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
installation 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 and servicing
of computer networking technologies. The market for configuration, integration
and installation 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 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
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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 mainly
responsible for providing installation services. The Company's current contracts
with the IBEW expired on December 31, 1997. Accordingly, the Company's union
employees are currently working without a contract under the terms of the old
contracts. Negotiations have recently 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
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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 January 31,
1998, the Company's directors and executive officers owned and/or had the power
to vote approximately 24.6% of the Common Stock. In addition, as of January 31,
1998, Ralph Glasgal, a Director of the Company, through his direct ownership and
through a voting agreement with Direct Connect International Inc. ("DCI") had
the power to vote approximately 14.5% of the Common Stock and Mr. Carey,
President of the Company, had the power to vote approximately 12.0% 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,
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. 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. 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 effect
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 stock 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
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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 effected
by, the rights of the holders of any preferred stock that may be issued in the
future.
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 has also
adopted a stockholder rights plan and is subject to provisions of the Delaware
General Corporation Law which have certain anti-takeover effects.
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.
-13-
<PAGE>
THE COMPANY
Datatec Systems, Inc. (the "Company") provides rapid and accurate
configuration, integration and installation services for the deployment 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 installation force of approximately 285 persons operating out
of 19 offices, the Company conducts multiple simultaneous large scale
deployments for organizations across the United States and Canada.
In order to provide high quality, consistent, rapid and cost effective
results, the Company has developed a deployment 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 installation force. The Company believes its
deployment 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 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 Bell Atlantic Network
Integration, 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, the Company has completed three acquisitions which
have enabled it to focus its business exclusively on providing rapid deployment
services. The Company's objective is to be the premier provider of deployment
services for the implementation of complex computer networking solutions. Key
elements of the Company's strategy include: (i) focusing on deployment services;
(ii) targeting complex networking and connectivity implementations; (iii)
leveraging the Company's deployment model; (iv) leveraging existing customers;
(v) establishing strategic alliances; and (vi) pursuing strategic acquisitions.
-14-
<PAGE>
The Company's executive offices are located at 20C Commerce Way,
Totowa, New Jersey 07512. The telephone number of the Company is (973) 890-4800.
When used in this Prospectus, the term "Company" refers to Datatec Systems,
Inc., a Delaware corporation and its subsidiaries.
USE OF PROCEEDS
This Prospectus relates to the reoffer and resale of Shares issuable to
the Selling Stockholders pursuant to the Stock Purchase Plan. The Company will
not receive any of the proceeds from the sale of the Shares by the Selling
Stockholders.
SELLING STOCKHOLDERS
This Prospectus relates to the offer and sale by the Selling
Stockholders of up to 750,000 Shares issued under the Plan to the Selling
Stockholders. This Prospectus also relates to such indeterminate number of
additional shares of Common stock that may be acquired by the Selling
Stockholders as a result of the antidilution provisions of the Plan. Information
regarding the identity of the Selling Stockholders and certain other information
relating to the Selling Stockholders will be provided by supplement to this
Prospectus.
-15-
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the resale of up to 750,000 Shares of the
Company's Common Stock issuable under the Stock Purchase Plan. 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 and terms.
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.
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.
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.
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 and terms 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.
-16-
<PAGE>
In addition, any Shares covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 instead of under this
Prospectus.
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.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Shares
offered hereby have been passed upon for the Company by Messrs. 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 as of April 30, 1997 incorporated
by reference in this prospectus and elsewhere in the registration statement,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated on their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission three
Registration Statements on Form S-8 under the Securities Act with respect to the
Shares offered hereby. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statements.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statements, each such statement being qualified in all respects by
such reference.
-17-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by Datatec Systems, Inc. (the
"Company") with the Securities and Exchange Commission are incorporated herein
by reference:
1. The Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended July 31, 1997, as amended, October 31, 1997 and January 31, 1998.
3. The Company's Current Reports on Form 8-K dated September
23, 1997, October 20, 1997, January 12, 1998, February 24, 1998 and March 9,
1998.
4. The description of the Company's Common Stock, $.001 par
value (the "Common Stock"), in the Company's Registration Statement on Form 8-A
filed May 2, 1996.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, after
the effective date of this registration statement and prior to the filing of a
post-effective amendment which indicates that all securities offered hereunder
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference into this Prospectus will be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or any other subsequently filed document
which also is, or is deemed to be, incorporated by reference into this
Prospectus modifies or supersedes that statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
II-1
<PAGE>
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
Robert Friedman, a partner of Olshan Grundman Frome &
Rosenzweig LLP, is a director of the Company, holds shares of Common Stock and
has been granted options to purchase additional shares of Common Stock. Certain
other members of such firm hold shares of Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 6 of the Company's By-laws authorize indemnification of
directors and officers as follows:
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, as that Section may be amended and
supplemented from time to time, indemnify any director, officer or trustee which
it shall have power to indemnify under the Section against any expenses,
liabilities or other matters referred to in or covered by that Section. The
indemnification provided for in this Article (i) shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any by-law,
agreement or vote on stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office, (ii) shall continue as to a person who has ceased to
be a director, officer or trustee and (iii) shall inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Article shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
Expenses incurred by a director of the Corporation in defending a civil
or criminal action, suit or proceeding by reason of the fact that he is or was a
director of the Corporation (or was serving at the Corporation's request as a
director or officer of another corporation) shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized by relevant sections of the General Corporation Law of
Delaware.
To assure indemnification under this Article of all such persons who
are determined by the corporation or otherwise to be or to have been
"fiduciaries" of any employee benefit plan of the corporation which may exist
from time to time, such Section 145 shall, for the purposes of this Article, be
interpreted as follows: an "other enterprise" shall be deemed to include such an
employee benefit plan, including, without limitation, any plan of the
II-2
<PAGE>
corporation which is governed by the Act of Congress entitled "Employee
Retirement Income Security Act of 1974," as amended from time to time; the
corporation shall be deemed to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed "fines"; and action taken or omitted by a person
with respect to an employee benefit plan in the performance of such person's
duties for a purpose reasonably believed by such person to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
Section 145 of the Delaware General Corporation Law provides 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 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
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
II-3
<PAGE>
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 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 of 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 so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
II-4
<PAGE>
(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
bylaw, 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 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 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 of the corporation which imposes duties on,
or involves services by, such 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 he
reasonably believed to be in the interest of the participant and
beneficiaries of an 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.
II-5
<PAGE>
(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.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees)."
The Company maintains a directors and officers insurance and company
reimbursement policy. The policy insures directors and officers against
unindemnified loss arising from certain wrongful acts in their capacities and
reimburses the Company for such loss for which the Company has lawfully
indemnified the directors and officers. The policy contains various exclusions,
none of which relate to the offering hereunder.
The Company has entered into indemnity agreements with each officer and
director of the Company. The contracts provide for indemnification of such
persons against expenses, liabilities and losses.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
II-6
<PAGE>
ITEM 8. EXHIBITS
EXHIBIT INDEX
EXHIBIT
* 4.1 Specimen Certificate of the Company's Common Stock.
* 5.1 Opinion of Olshan Grundman Frome & Rosenzweig LLP.
* 10.1 Datatec Systems, Inc. 1998 Employee Stock Purchase
Plan.
* 23.1 Consent of Arthur Andersen LLP
* 23.2 Consent of Olshan Grundman Frome & Rosenzweig LLP
(included in Exhibit 5.1).
* 24.1 Power of Attorney (included on the signature page
of this Registration Statement).
- --------------------
* Filed herewith
II-7
<PAGE>
ITEM 9. UNDERTAKINGS
The undersigned registrant hereby undertakes:
a. To file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) 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;
provided, however, that paragraphs (i) and (ii) above
do not apply if the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement;
b. That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
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.
c. 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.
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 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of
II-8
<PAGE>
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.
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, therefore, unenforceable. In the event that a claim for
indemnification against each such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, 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.
II-9
<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-8 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 this 27th day of
March, 1998.
DATATEC SYSTEMS, INC.
(Registrant)
By: /S/ ISAAC 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 Christopher J. Carey and Isaac J. Gaon,
and each of them, his true and lawful attorney-in-fact and agent, 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 all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute may lawfully do or
cause to be done by virtue thereof.
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
--------- ----- ----
/S/ CHRISTOPHER CAREY
- -------------------------- President and Director March 27, 1998
Christopher Carey
/S/ ISAAC GAON
- -------------------------- Chairman of the Board and March 27, 1998
Isaac J. Gaon Chief Executive Officer
(principal executive
officer)
/S/ THOMAS BERRY Director March 27, 1998
- --------------------------
Thomas Berry
/S/ ROBERT FRIEDMAN Director March 27, 1998
- --------------------------
Robert H. Friedman
/S/ RALPH GLASGAL Director March 27, 1998
- --------------------------
Ralph Glasgal
___________________________ Director March 27, 1998
David Milch
___________________________ Director March 27, 1998
Joseph Salvani
/S/ JAMES CACI
- --------------------------- Chief Financial Officer March 27, 1998
James M. Caci (principal financial and
accounting officer)
II-10
EXHIBIT 4.1
NUMBER SHARES
DS CUSIP 238128 10 2
DATATEC SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
DATATEC SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/S/ISAAC GAON /S/JAMES M. CACI
- --------------------- -----------------------------
CHAIRMAN OF THE BOARD SECRETARY/TREASURER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY (JERSEY CITY, NJ)
TRANSFER AGENT AND REGISTRAR,
BY____________________________________
AUTHORIZED SIGNATURE
<PAGE>
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian ______
(Cust) (Minor)
under Uniform Gifts to Minors
Act__________________________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
_________________________________________________________________________ Shares
of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:______________________
_______________________________________________________
NOTICE: The signatures to this assignment and
correspond with the name as written upon the
face of this certificate in every particular,
without alteration or enlargement of any
change whatever.
SIGNATURE(S) GUARANTEED
By _____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO SEC RULE 17Ad-15.
-2-
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
March 27, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Datatec Systems, Inc.-
Registration Statement on Form S-8
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-8
dated the date hereof (the "Registration Statement"), filed with the Securities
and Exchange Commission by Datatec Systems, Inc., a Delaware corporation (the
"Company"). The Registration Statement relates to an aggregate of 750,000 (the
"Shares") of common stock, par value $.001 per share (the "Common Stock"). The
Shares will be issued and sold by the Company in accordance with the Company's
1998 Employee Stock Purchase Plan (the "Purchase Plan").
We advise you that we have examined 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 shareholders of the Company, the Purchase Plan 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
March 27, 1998
Page -2-
Based upon the foregoing, we are of the opinion that the
Shares, when issued and paid for in accordance with the terms and conditions set
forth in the Purchase Plan will be duly and validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement.
We advise you that Robert H. Friedman, a member of this firm,
is a director and stockholder of the Company. Other members of this firm are
also stockholders of the Company.
Very truly yours,
/s/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
------------------------------------------
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
DATATEC SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE FEBRUARY 1, 1998)
<PAGE>
DATATEC SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Datatec Systems, Inc. 1998 Employee Stock Purchase Plan
(the "Plan") is intended to provide an incentive for employees of Datatec
Systems, Inc. (the "Company") and its participating subsidiaries. The Plan
permits such employees to acquire or increase their proprietary interests in the
Company through the purchase of shares of Common Stock of the Company thereby
creating a greater community of interest between the Company's stockholders and
its employees. The Plan is intended to qualify as an "Employee Stock Purchase
Plan" under Sections 421 and 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan will be construed in a manner
consistent with the requirements of such sections of the Code and the
regulations issued thereunder.
2. DEFINITIONS. As used in this Plan,
(a) "Account" means each separate account maintained for a Participant
under the Plan, collectively or individually as the context requires, to which
the amount of the Participant's payroll deductions authorized under Section 6
and purchases of Common Stock under Section 8 shall be credited, and any
distributions of shares of Common Stock under Section 9 and withdrawals under
Section 10 shall be charged.
(b) "Base Pay" means the base salary paid to an employee, including
commissions, payments for overtime and shift differentials, vacation pay and
holiday pay. Base Pay shall exclude bonuses, incentive compensation, and other
special payments, fees, fringes, allowances or extraordinary compensation not
specifically listed in the preceding sentence.
(c) "Benefits Representative" means the employee benefits department of
the Company or any such other person, regardless of whether employed by an
Employer, who has been formally, or by operation or practice, designated by the
Committee to assist the Committee with the day-to-day administration of the
Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, or any successor
thereto, as amended and in effect from time to time. Reference in the Plan to
any Section of the Code shall be deemed to include any amendments or successor
provisions to any Section and any treasury regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board. The
Board shall have the power to fill vacancies on the
<PAGE>
Committee arising by resignation, death, removal or otherwise. The Board, in its
sole discretion, may bifurcate the powers and duties of the Committee among one
or more separate Committees, or retain all powers and duties of the Committee in
a single Committee. The members of the Committee shall serve at the discretion
of the Board.
(g) "Common Stock" or "Stock" means the common stock, $.001 par value
per share, of the Company.
(h) "Company" means Datatec Systems, Inc., a Delaware corporation, and
any successor thereto.
(i) "Disability" means any complete and permanent disability as defined
in Section 22(e)(3) of the Code.
(j) "Effective Date" means February 1, 1998, the inception date of the
Plan.
(k) "Employee" means any employee who is currently in Employment with
an Employer.
(l) "Employer" means the Company, its successors, any future parent (as
defined in Section 424(e) of the Code) and each current or future Subsidiary
which has been designated by the Board or the Committee as a participating
employer in the Plan.
(m) "Employment" means Employment as an employee or officer by the
Company or a Subsidiary as designated in such entity's payroll records, or by
any corporation issuing or assuming rights or obligations under the Plan in any
transaction described in Section 424(a) of the Code or by a parent corporation
or a subsidiary corporation of such corporation. In this regard, neither the
transfer of a Participant from Employment by the Company to Employment by a
Subsidiary, nor the transfer of a Participant from Employment by a Subsidiary to
Employment by the Company, shall be deemed to be a termination of Employment of
the Participant. Moreover, the Employment of a Participant shall not be deemed
to have been terminated because of absence from active Employment on account of
temporary illness or during authorized vacation, temporary leaves of absence
from active Employment granted by Company or a Subsidiary for reasons of
professional advancement, education, health, or government service, or during
military leave for any period if the Participant returns to active Employment
within 90 days after the termination of military leave, or during any period
required to be treated as a leave of absence which, by virtue of any valid law
or agreement, does not result in a termination of Employment.
Any worker treated as an independent contractor by the Employer who is
later re-classified as a common-law employee shall not be in Employment during
any period in which such worker
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<PAGE>
was treated by the Employer as an independent contractor. Any "leased employee,"
as described in Section 414(n) of the Code, shall not be deemed an Employee
hereunder.
(n) "Entry Date" means the first day of each Fiscal Quarter.
(o) "Fiscal Quarter" means a three-consecutive-month period beginning
on each August 1, November 1, February 1, and May 1, during the period beginning
on the Effective Date until the Plan is terminated.
(p) "Market Price" means, subject to the next paragraph, the market
value of a share of Stock on any date, which shall be determined as (i) the
closing sales price on the immediately preceding business day of a share of
Stock as reported on the New York Stock Exchange or other principal securities
exchange on which shares of Stock are then listed or admitted to trading or (ii)
if not so reported, the average of the highest and lowest sales prices for a
share of Stock on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or any successor system then in use, or (iii) if not quoted on NASDAQ, the
average of the closing bid and asked prices for a share of Stock as quoted by
the National Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If the price of a share of Stock
shall not be so reported pursuant to the previous sentence, the fair market
value of a share of Stock shall be determined by the Committee in its discretion
provided that such method is appropriate for purposes of an employee stock
purchase plan under Section 423 of the Code.
Notwithstanding the previous paragraph of this definition, the Market
Price of a share of Stock solely for purposes of determining the option price on
the first or last day of the Fiscal Quarter in accordance with Section 7(b)
shall be based on the Market Price on the first or last day of the Fiscal
Quarter, as applicable, and not on the immediately preceding business day. For
example, if the Stock is traded on the New York Stock Exchange, when determining
the option price under Section 7(b) at which shares of Stock are purchased, the
Market Price for determining this option price shall be based on the lower of
(i) the closing sales price of a share of Stock on the first business day of the
Fiscal Quarter or (ii) the closing sales price of a share of Stock on the last
business day of the Fiscal Quarter.
(q) "Participant" means any Employee who meets the eligibility
requirements of Section 3 and who has elected to and is participating in the
Plan.
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<PAGE>
(r) "Plan" means the Datatec Systems, Inc. 1998 Employee
Stock Purchase Plan, as set forth herein, and all amendments
hereto.
(s) "Stock" means the Common Stock (as defined above).
(t) "Subsidiary" means any domestic or foreign corporation (other than
the Company) (i) which, pursuant to Section 424(f) of the Code, is included in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of capital stock in one
of the other corporations in such chain and (ii) which has been designated by
the Board or the Committee as a corporation whose Employees are eligible to
participate in the Plan.
3. ELIGIBILITY.
(a) Eligibility Requirements. Participation in the Plan is voluntary.
Each Employee who has completed at least six (6) consecutive months of
continuous Employment with an Employer (calculated from his last date of hire to
the termination of his Employment for any reason) and has reached the age of
majority in the jurisdiction of his legal residency, shall be eligible to
participate in the Plan on the first day of the payroll period commencing on or
after the Effective Date or, if later, the Entry Date on which the Employee
satisfies the aforementioned eligibility requirements. Each Employee whose
Employment terminates and who is rehired by an Employer shall be treated as a
new Employee for eligibility purposes under the Plan, provided, however, that if
an Employee is rehired by Employer prior to the expiration of three months
following his or her termination, such employee shall not be a new Employee for
eligibility purposes under the Plan.
(b) Limitations on Eligibility. Any provision of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan:
(i) if, immediately after the grant, the Employee would own
stock, and/or hold outstanding options to purchase stock, possessing
five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Subsidiary;
(ii) which permits the Employee's rights to purchase stock
under this Plan and all other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company and its Subsidiaries
to accrue at a rate which exceeds $25,000 of the fair market value of
the stock
-4-
<PAGE>
(determined at the time such option is granted) for each fiscal year in
which such option is outstanding at any time, all as determined in
accordance with Section 423(b)(8) of the Code;
(iii) if the Employee's customary Employment is 20 hours or
less per week; or
(iv) if the Employee is employed for less than 5 months in a
calendar year.
For purposes of Section 3(b)(i) above, pursuant to Section 424(d) of the Code,
(i) the Employee with respect to whom such limitation is being determined shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants; and (ii) stock owned, directly or indirectly, by or for
a corporation, partnership, estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries. In
addition, for purposes of Section 3(b)(ii) above, pursuant to Section 423(b)(8)
of the Code, (i) the right to purchase stock under an option accrues when the
option (or any portion thereof) first becomes exercisable during the calendar
year, (ii) the right to purchase stock under an option accrues at the rate
provided in the option but in no case may such rate exceed $25,000 of fair
market value of such stock (determined at the time such option is granted) for
any one calendar year, and (iii) a right to purchase stock which has accrued
under one option granted pursuant to the Plan may not be carried over to any
other option.
4. SHARES SUBJECT TO THE PLAN. The total number of shares of Common
Stock that upon the exercise of options granted under the Plan will not exceed
seven hundred fifty thousand (750,000) shares (subject to adjustment as provided
in Section 17), and such shares may be originally issued shares, treasury
shares, reacquired shares, shares bought in the market, or any combination of
the foregoing. If any option which has been granted expires or terminates for
any reason without having been exercised in full, the unpurchased shares will
again become available for purposes of the Plan. Any shares which are not
subject to outstanding options upon the termination of the Plan shall cease to
be subject to the Plan.
5. PARTICIPATION.
(a) Payroll Deduction Authorization. An Employee shall be eligible to
participate in the Plan as of the first Entry Date following such Employee's
satisfaction of the eligibility requirements of Section 3, or, if later, the
first Entry Date following the date on which the Employee's Employer adopted the
Plan. At least 10 days (or such other period as may be prescribed
-5-
<PAGE>
by the Committee or a Benefits Representative) prior to the first Entry Date as
of which an Employee is eligible to participate in the Plan, the Employee shall
execute and deliver to the Benefits Representative, on the form prescribed for
such purpose, an authorization for payroll deductions which specifies his chosen
rate of payroll deduction contributions pursuant to Section 6, and such other
information as is required to be provided by the Employee on such enrollment
form. The enrollment form shall authorize the Employer to reduce the Employee's
Base Pay by the amount of such authorized contributions. To the extent provided
by the Committee or a Benefits Representative, each Participant shall also be
required to open a stock brokerage account with a brokerage firm which has been
engaged to administer the purchase, holding and sale of Common Stock for
Accounts under the Plan and, as a condition of participation hereunder, the
Participant shall be required to execute any form required by the brokerage firm
to open and maintain such brokerage account.
(b) Continuing Effect of Payroll Deduction Authorization. Payroll
deductions for a Participant will commence with the first payroll period
beginning after the Participant's authorization for payroll deductions becomes
effective, and will end with the payroll period that ends when terminated by the
Participant in accordance with Section 6(c) or due to his termination of
Employment in accordance with Section 11. Payroll deductions will also cease
when the Participant is suspended from participation due to a withdrawal of
payroll deductions in accordance with Section 10. When applicable with respect
to Employees who are paid on a hourly wage basis, the authorized payroll
deductions shall be withheld from wages when actually paid following the period
in which the compensatory services were rendered. Only payroll deductions that
are credited to the Participant's Account during the Fiscal Quarter shall be
used to purchase Common Stock pursuant to Section 8 regardless of when the work
was performed.
(c) Employment and Stockholders Rights. Nothing in the Plan will confer
on a Participant the right to continue in the employ of the Employer or will
limit or restrict the right of the Employer to terminate the Employment of a
Participant at any time with or without cause. A Participant will have no
interest in any Common Stock to be purchased under the Plan or any rights as a
stockholder with respect to such Stock until the Stock has been purchased and
credited to the Participant's Account.
6. PAYROLL DEDUCTIONS.
(a) Participant Contributions by Payroll Deductions. At the time a
Participant files his payroll deduction authorization form, the Participant will
elect to have deductions made from the Participant's Base Pay for each payroll
period such authorization is in effect in whole percentages at the rate of not
less than 1% nor more than 15% of the Participant's Base Pay.
-6-
<PAGE>
(b) No Other Participant Contributions Permitted. All payroll
deductions made for a Participant shall be credited to the Participant's Account
under the Plan. A Participant may not make any separate cash payment into such
Account.
(c) Changes in Participant Contributions. Subject to Sections 10 and
22, a Participant may increase, decrease, suspend, or resume payroll deductions
under the Plan by giving written notice to a designated Benefits Representative
at such time and in such form as the Committee or Benefits Representative may
prescribe from time to time. Such increase, decrease, suspension or resumption
shall be effective as of the first day of the payroll period as soon as
administratively practicable after receipt of the Participant's written notice,
but not earlier than the first day of the payroll period of the Fiscal Quarter
next following receipt and acceptance of such form. Notwithstanding the previous
sentence, a Participant may completely discontinue contributions at any time
during a Fiscal Quarter, effective as of the first day of the payroll period as
soon as administratively practicable following receipt of a written
discontinuance notice from the Participant on a form provided by a designated
Benefits Representative. Following a discontinuance of contributions, a
Participant cannot authorize any payroll contributions to his Account for the
remainder of the Fiscal Quarter in which the discontinuance was effective.
7. GRANTING OF OPTION TO PURCHASE STOCK.
(a) Quarterly Grant of Options. For each Fiscal Quarter, a Participant
shall be deemed to have been granted an option to purchase, on the first day of
the Fiscal Quarter, as many whole and fractional shares as may be purchased with
the payroll deductions (and any cash dividends as provided in Section 8)
credited to the Participant's Account during the Fiscal Quarter.
(b) Option Price. The option price of the Common Stock purchased with
the amount credited to the Participant's Account during each Fiscal Quarter
shall be the lower of:
(i) 85% of the Market Price of a share of Stock on the
first day of the Fiscal Quarter; or
(ii) 85% of the Market Price of a share of Stock on the last
day of the Fiscal Quarter.
Only the Market Price as of the first day of the Fiscal Quarter and the
last day of the Fiscal Quarter shall be considered for purposes of determining
the option purchase price; interim fluctuations during the Fiscal Quarter shall
not be considered.
-7-
<PAGE>
8. EXERCISE OF OPTION.
(a) Automatic Exercise of Options. Unless a Participant has elected to
withdraw payroll deductions in accordance with Section 10, the Participant's
option for the purchase of Common Stock shall be deemed to have been exercised
automatically as of the last day of the Fiscal Quarter for the purchase of the
number of whole and fractional shares of Common Stock which the accumulated
payroll deductions (and cash dividends on the Common Stock as provided in
Section 8(b)) in the Participant's Account at that time will purchase at the
applicable option price. Fractional shares may not be issued under the Plan. As
of the last day of each Fiscal Quarter, the balance of each Participant's
Account shall be applied to purchase the number of whole Stock as determined by
dividing the balance of such Participant's Account as of such date by the option
price determined pursuant to Section 7(b). The Participant's Account shall be
debited accordingly. Any balance in a Participant's stock purchase account which
was not applied to the purchase of Common Stock because it was less than the
purchase price of a full share shall remain in the Participant's stock purchase
account and be carried over to the succeeding Fiscal Quarter. The Committee or
its delegate shall make all determinations with respect to applicable currency
exchange rates when applicable.
(b) Dividends Generally. Cash dividends paid on shares of Common Stock
which have not been delivered to the Participant pending the Participant's
request for delivery pursuant to Section 9(c), shall be combined with the
Participant's payroll deductions and applied to the purchase of Common Stock at
the end of the Fiscal Quarter in which the cash dividends are received, subject
to the Participant's withdrawal rights set forth in Section 10. Dividends paid
in the form of shares of Common Stock or other securities with respect to shares
that have been purchased under the Plan, but which have not been delivered to
the Participant, shall be credited to the shares that are credited to the
Participant's Account.
(c) Pro-rata Allocation of Available Shares. If the total number of
shares to be purchased under option by all Participants exceeds the number of
shares authorized under Section 4, a pro-rata allocation of the available shares
shall be made among all Participants authorizing such payroll deductions based
on the amount of their respective payroll deductions through the last day of the
Fiscal Quarter.
9. OWNERSHIP AND DELIVERY OF SHARES.
(a) Beneficial Ownership. A Participant shall be the beneficial owner
of the shares of Common Stock purchased under the Plan on exercise of his option
and will have all rights of beneficial ownership in such shares. Any dividends
paid with
-8-
<PAGE>
respect to such shares shall be credited to the Participant's Account and
applied as provided in Section 8 until the shares are delivered to the
Participant.
(b) Registration of Stock. Stock to be delivered to a Participant under
the Plan shall be registered in the name of the Participant, or if the
Participant so directs by written notice to the designated Benefits
Representative or brokerage firm, if any, prior to the purchase of Stock
hereunder, in the names of the Participant and one such other person as may be
designated by the Participant, as joint tenants with rights of survivorship or
as tenants by the entireties, to the extent permitted by applicable law. Any
such designation shall not apply to shares purchased after a Participant's death
by the Participant's beneficiary or estate, as the case may be, pursuant to
Section 11(b). If a brokerage firm is engaged by the Company to administer
Accounts under the Plan, such firm shall provide such account registration forms
as are necessary for each Participant to open and maintain a brokerage account
with such firm.
(c) Delivery of Stock Certificates. The Company, or a brokerage firm or
other entity selected by the Company, shall deliver to each Participant a
certificate for the number of shares of Common Stock purchased by the
Participant hereunder as soon as practicable after the close of each Fiscal
Quarter. Alternatively, in the discretion of the Committee, the stock
certificate may be delivered to a designated stock brokerage account maintained
for the Participant and held in "street name" in order to facilitate the
subsequent sale of the purchased shares.
(d) Regulatory Approval. In the event the Company is required to obtain
from any commission or agency the authority to issue any stock certificate
hereunder, the Company shall seek to obtain such authority. The inability of the
Company to obtain from any such commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance of any such certificate
shall relieve the Company from liability to any Participant, except to return to
the Participant the amount of his Account balance used to exercise the option to
purchase the affected shares.
10. WITHDRAWAL OF PAYROLL DEDUCTIONS. At any time during a Fiscal
Quarter, but in no event later than 15 days (or such shorter prescribed by the
Committee or a Benefits Representative) prior to the last day of the Fiscal
Quarter, a Participant may elect to abandon his election to purchase Common
Stock under the Plan. By written notice to the designated Benefits
Representative on a form provided for such purpose, the Participant may thus
elect to withdraw all of the accumulated balance in his Account being held for
the purchase of Common Stock in accordance with Section 8(b). Partial
withdrawals will not be permitted. All such
-9-
<PAGE>
amounts shall be paid to the Participant as soon as administratively practical
after receipt of his notice of withdrawal. After receipt and acceptance of such
withdrawal notice, no further payroll deductions shall be made from the
Participant's Base Pay beginning as of the next payroll period during the Fiscal
Quarter in which the withdrawal notice is received. The Committee, in its
discretion, may determine that amounts otherwise withdrawable hereunder by
Participants shall be offset by an amount that the Committee, in its discretion,
determines to be reasonable to help defray the administrative costs of effecting
the withdrawal, including, without limitation, fees imposed by any brokerage
firm which administers such Participant's Account. After a withdrawal, an
otherwise eligible Participant may resume participation in the Plan as of the
first day of the Fiscal Quarter next following his delivery of a payroll
deduction authorization pursuant to the procedures prescribed in Section 5(a).
11. TERMINATION OF EMPLOYMENT.
(a) General Rule. Upon termination of a Participant's
Employment for any reason, his participation in the Plan will
immediately terminate.
(b) Termination Due to Retirement, Death or Disability. If the
Participant's termination of Employment is due to (i) retirement from Employment
on or after his attainment of age 65, (ii) death or (iii) Disability, the
Participant (or the Participant's personal representative or legal guardian in
the event of Disability, or the Participant's beneficiary (as defined in Section
14) or the administrator of his will or executor of his estate in the event of
death), will have the right to elect, either to:
(a) Withdraw all of the cash and shares of Common Stock
credited to the Participant's Account as of his termination date; or
(b) Exercise the Participant's option for the purchase of
Common Stock on the last day of the Fiscal Quarter (in which
termination of Employment occurs) for the purchase of the number of
shares of Common Stock which the cash balance credited to the
Participant's Account as of the date of the Participant's termination
of Employment will purchase at the applicable option price.
The Participant (or, if applicable, such other person designated in the
first paragraph of this Section 11(b)) must make such election by giving written
notice to the Benefits Representative at such time and in such manner as
prescribed from time to time by the Committee or Benefits Representative. In the
event that no such written notice of election is received by the
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<PAGE>
Benefits Representative within 30 days of the Participant's termination of
Employment date, the Participant (or such other designated person) will
automatically be deemed to have elected to withdraw the balance in the
Participant's Account as of his termination date. Thereafter, any accumulated
cash and shares of Common Stock credited to the Participant's Account as of his
termination of Employment date shall be delivered to or on behalf of the
Participant as soon as administratively practicable.
(c) Termination Other Than for Retirement, Death or Disability. Upon
termination of a Participant's Employment for any reason other than retirement,
death, or Disability pursuant to Section 11(b), the participation of the
Participant in the Plan will immediately terminate. Thereafter, any accumulated
cash and shares of Common Stock credited to the Participant's Account as of his
termination of Employment date shall be delivered to the Participant as soon as
administratively practicable.
(d) Rehired Employees. Any Employee whose Employment terminates and who
is subsequently rehired by an Employer shall be treated as a new Employee for
purposes of eligibility to participate in the Plan.
12. INTEREST. No interest shall be paid or allowed on any money paid
into the Plan or credited to the Account of any Participant.
13. ADMINISTRATION OF THE PLAN.
(a) No Participation in Plan by Committee Members. No options may be
granted under the Plan to any member of the Committee during the term of his
membership on the Committee.
(b) Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have the plenary authority to (a) interpret the Plan and all
options granted under the Plan, (b) make such rules as it deems necessary for
the proper administration of the Plan, (c) make all other determinations
necessary or advisable for the administration of the Plan, and (d) correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option granted under the Plan in the manner and to the extent that the
Committee deems advisable. Any action taken or determination made by the
Committee pursuant to this and the other provisions of the Plan shall be
conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee. By
express written direction, or by the day-to-day operation of Plan
administration, the Committee may delegate the authority and responsibility for
the day-to-day administrative or ministerial tasks of the Plan to a Benefits
Representative, including a brokerage firm or other third party engaged for such
purpose.
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<PAGE>
(c) Meetings. The Committee shall designate a chairman from among its
members to preside at its meetings, and may designate a secretary, without
regard to whether that person is a member of the Committee, who shall keep the
minutes of the proceedings. Meetings shall be held at such times and places as
shall be determined by the Committee, and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the Plan by
the affirmative vote of a majority of its members, taken at a meeting, or by the
affirmative vote of all of its members taken without a meeting. The Committee
may authorize any one or more of their members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
(d) Decisions Binding. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of the
Plan, and shall be final, conclusive and binding on all persons including the
Company, Participants, and their estates and beneficiaries.
(e) Expenses of Committee. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel regularly
employed by the Company, consultants and agents as the Committee may deem
appropriate for the administration of the Plan. The Committee may rely upon any
opinion or computation received from any such counsel, consultant or agent. All
expenses incurred by the Committee in interpreting and administering the Plan,
including, without limitation, meeting expenses and professional fees, shall be
paid by the Company.
(f) Indemnification. Each person who is or was a member of the
Committee shall be indemnified by the Company against and from any damage, loss,
liability, cost and expense that may be imposed upon or reasonably incurred by
him in connection with or resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be involved by reason of any
action taken or failure to act under the Plan, except for any such act or
omission constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
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14. DESIGNATION OF BENEFICIARY. At such time, in such manner, and using
such form as shall be prescribed from time to time by the Committee or a
Benefits Representative, a Participant may file a written designation of a
beneficiary who is to receive any Common Stock and/or cash credited to the
Participant's Account at the Participant's death. Such designation of
beneficiary may be changed by the Participant at any time by giving written
notice to the Benefits Representative at such time and in such form as
prescribed. Upon the death of a Participant, and receipt by the Benefits
Representative of proof of the identity at the Participant's death of a
beneficiary validly designated under the Plan, the Benefits Representative will
take appropriate action to ensure delivery of such Common Stock and/or cash to
such beneficiary. In the event of the death of a Participant and the absence of
a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Benefits Representative will take appropriate
action to ensure delivery of such Common Stock and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Benefits
Representative), the Committee, in its discretion, may direct delivery of such
Common Stock and/or cash to the spouse or to any one or more dependents of the
Participant as the Committee may designate in its discretion. No beneficiary
will, prior to the death of the Participant, acquire any interest in any Common
Stock or cash credited to the Participant's Account.
15. TRANSFERABILITY. No amounts credited to a Participant's Account,
whether cash or Common Stock, nor any rights with regard to the exercise of an
option or to receive Common Stock under the Plan, may be assigned, transferred,
pledged, or otherwise disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge, or other disposition shall be void and without effect.
Each option shall be exercisable, during the Participant's lifetime,
only by the Employee to whom the option was granted. The Company shall not
recognize, and shall be under no duty to recognize, any assignment or purported
assignment by an employee of his option or of any rights under his option.
16. NO RIGHTS OF STOCKHOLDER UNTIL CERTIFICATE ISSUED. With respect to
shares of Stock subject to an option, an optionee shall not be deemed to be a
stockholder, and the optionee shall not have any of the rights or privileges of
a stockholder. An optionee shall have the rights and privileges of a stockholder
when, but not until, a certificate for shares has been issued to the optionee
following exercise of his option.
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17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Board shall make or
provide for such adjustments in the maximum number of shares specified in
Section 4 and the number and option price of shares subject to options
outstanding under the Plan as the Board shall determine is appropriate to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, stock exchange, combination
of shares, recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off of assets, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, any
other corporate transaction or event having an effect similar to any of the
foregoing.
In the event of a merger of one or more corporations into the Company,
or a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Participant, at no additional
cost, shall be entitled, upon his payment for all or part of the Common Stock
purchasable by him under the Plan, to receive (subject to any required action by
shareholders) in lieu of the number of shares of Common Stock which he was
entitled to purchase, the number and class of shares of stock or other
securities to which such holder would have been entitled pursuant to the terms
of the agreement of merger or consolidation if, immediately prior to such merger
or consolidation, such holder had been the holder of record of the number of
shares of Common Stock equal to the number of shares purchasable by the
Participant hereunder.
If the Company shall not be the surviving corporation in any
reorganization, merger or consolidation (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), or if
the Company is to be dissolved or liquidated or sell substantially all of its
assets or stock to another corporation or other entity , then, unless a
surviving corporation assumes or substitutes new options (within the meaning of
Section 424(a) of the Code) for all options then outstanding, (i) the date of
exercise for all options then outstanding shall be accelerated to dates fixed by
the Committee prior to the effective date of such corporate event, (ii) a
Participant may, at his election by written notice to the Company, either (x)
withdraw from the Plan pursuant to Section 10 and receive a refund from the
Company in the amount of the accumulated cash and Stock balance in the
Participant's Account, (y) exercise a portion of his outstanding options as of
such exercise date to purchase shares of Stock, at the option price, to the
extent of the balance in the Participant's Account, or (z) exercise in full his
outstanding options as of such exercise date to purchase shares of Stock, at the
option price, which exercise shall require such Participant to pay the related
option price, and (iii) after such effective date any unexercised option shall
expire. The date the Committee selects for the exercise date
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under the preceding sentence shall be deemed to be the exercise date for
purposes of computing the option price per share of Stock. If the Participant
elects to exercise all or any portion of the options, the Company shall deliver
to such Participant a stock certificate issued pursuant to Section 9(d) for the
number of shares of Stock with respect to which such options were exercised and
for which such Participant has paid the option price. If the Participant fails
to provide the notice set forth above within three days after the exercise date
selected by the Committee under this Section 17, the Participant shall be
conclusively presumed to have requested to withdraw from the Plan and receive
payment of the accumulated balance of his Account. The Committee shall take such
steps in connection with such transactions as the Committee shall deem necessary
or appropriate to assure that the provisions of this Section 17 are effectuated
for the benefit of the Participants.
Except as expressly provided in this Section 17, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Stock then available for purchase under the Plan.
18. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID. The expenses of the
Plan shall be paid by the Company except as otherwise provided herein or under
the terms and conditions of any agreement entered into between the Participant
and any brokerage firm engaged to administer Accounts. All funds received or
held by the Company under the Plan shall be included in the general funds of the
Company free of any trust or other restriction, and may be used for any
corporate purpose. No interest shall be paid to any Participant or credited to
his Account under the Plan.
19. TERM OF THE PLAN. The Plan shall become effective as of February 1,
1998, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the Company's
stockholders held on or before 12 months from February 1, 1998.
Except with respect to options then outstanding, if not terminated
sooner under the provisions of Section 20, no further options shall be granted
under the Plan at the earlier of (i) January 31, 2008, or (ii) the point in time
when no shares of Stock reserved for issuance under Section 4 are available.
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20. AMENDMENT OR TERMINATION OF THE PLAN. The Board shall have the
plenary authority to terminate or amend the Plan; provided, however, that the
Board shall not, without the approval of the stockholders of the Company, (a)
increase the maximum number of shares which may be issued under the Plan
pursuant to Section 4, (b) amend the requirements as to the class of employees
eligible to purchase Stock under the Plan, or (c) permit the members of the
Committee to purchase Stock under the Plan. No termination, modification, or
amendment of the Plan shall adversely affect the rights of a Participant with
respect to an option previously granted to him under such option without his
written consent.
In addition, to the extent that the Committee determines that, in the
opinion of counsel, (a) the listing for qualification requirements of any
national securities exchange or quotation system on which the Company's Common
Stock is then listed or quoted, or (b) the Code or Treasury regulations issued
thereunder, require stockholder approval in order to maintain compliance with
such listing or qualification requirements or to maintain any favorable tax
advantages or qualifications, then the Plan shall not be amended by the Board in
such respect without first obtaining such required approval of the Company's
stockholders.
21. SECURITIES LAWS RESTRICTIONS ON EXERCISE. The Committee may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall have
been duly listed, upon official notice of issuance, upon a stock exchange, and
that either:
(a) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective; or
(b) the participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is
his intention to purchase the Stock for investment and not for resale
or distribution.
22. SECTION 16 COMPLIANCE. The Plan, and transactions hereunder by
persons subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are intended to comply with all applicable conditions of
Rule 16b-3 or any successor exemption provision promulgated under the Exchange
Act. To the extent that any provision of the Plan or any action by the Committee
or the Board fails, or is deemed to fail, to so comply, such provision or action
shall be null and void but only to the extent permitted by law and deemed
advisable by the Committee in its discretion.
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23. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION. Whenever shares of
Stock that were received upon the exercise of an option granted under the Plan
are disposed of within two years after the date of grant of such option or one
year from the date of exercise of such option (within the meaning of Section
423(a)(1)), the Company shall have the right to require the Participant to remit
to the Company in cash an amount sufficient to satisfy federal, state and local
withholding and payroll tax requirements, if any, attributable to such
disposition prior to authorizing such disposition or permitting the delivery of
any certificate or certificates with respect thereto.
24. NO RESTRICTION ON CORPORATE ACTION. Subject to Section 20, nothing
contained in the Plan shall be construed to prevent the Board or any Employer
from taking any corporate action which is deemed by the Employer to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No Employee,
beneficiary or other person shall have any claim against any Employer as a
result of any such action.
25. USE OF FUNDS. The Employers shall promptly transfer all amounts
withheld under Section 6 to the Company or to any brokerage firm engaged to
administer Accounts, as directed by the Company. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company will not be obligated to segregate such
payroll deductions.
26. MISCELLANEOUS.
(a) Options Carry Same Rights and Privileges. To the extent required to
comply with the requirements of Section 423 of the Code, all Employees granted
options under the Plan to purchase Common Stock shall have the same rights and
privileges hereunder.
(b) Headings. Any headings or subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in the construction or
interpretation of any provisions hereof.
(c) Gender and Tense. Any words herein used in the masculine shall be
read and construed in the feminine when appropriate. Words in the singular shall
be read and construed as though in the plural, and vice-versa, when appropriate.
(d) Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware to the extent not preempted by
federal law.
(e) Regulatory Approvals and Compliance. The Company's obligation to
sell and deliver Common Stock under the Plan is at all times subject to all
approvals of and compliance with the (i)
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regulations of any applicable stock exchanges and (ii) any governmental
authorities required in connection with the authorization, issuance, sale or
delivery of such Stock, as well as federal, state and foreign securities laws.
(f) Severability. In the event that any provision of this Plan shall be
held illegal, invalid, or unenforceable for any reason, such provision shall be
fully severable, but shall not affect the remaining provisions of the Plan, and
the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had not been included herein.
(g) Refund of Contributions on Noncompliance with Tax Law. In the event the
Company should receive notice that this Plan fails to qualify as an "employee
stock purchase plan" under Section 423 of the Code, all then-existing Account
balances shall be paid to the Participants and the Plan shall immediately
terminate.
(h) No Guarantee of Tax Consequences. The Board, Employer and the
Committee do not make any commitment or guarantee that any tax treatment will
apply or be available to any person participating or eligible to participate in
the Plan, including, without limitation, any tax imposed by the United States or
any state thereof, any estate tax, or any tax imposed by a foreign government.
(i) Company as Agent for the Employers. Each Employer, by adopting the
Plan, appoints the Company and the Board as its agents to exercise on its behalf
all of the powers and authorities hereby conferred upon the Company and the
Board by the terms of the Plan, including, but not by way of limitation, the
power to amend and terminate the Plan.
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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
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
March 24, 1998
