THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into this 10th day of July, 1997, by and between Glasgal Communications,
Inc., a Delaware corporation (the "Company") and Direct Connect International
Inc., a Delaware corporation having its principal place of business located at
000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxx Xxxx, Xxx Xxxxxx 00000 (the "Purchaser").
In consideration of the premises and of the mutual
representations, warranties and covenants hereinafter set forth, the Company and
the Purchaser hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 THE PURCHASE AND SALE. Subject to the terms and conditions
set forth herein, at the Closing described below, the Company will sell and the
Purchaser will purchase an aggregate of 130,000 shares (the "Shares") of the
Common Stock, $.001 par value per share, of the Company (the "Common Stock") for
an aggregate purchase price of $500,000 (the "Purchase Price"). The Purchase
Price shall be paid as provided in Section 1.3.
1.2 EFFECT ON PRIOR AGREEMENTS. Glasgal Communications, Inc.,
a New Jersey corporation, Xxxxx Xxxxxxx and the Purchaser have entered into a
certain Common Stock Purchase Agreement dated as of January 7, 1994 (the "1994
Agreement"). Pursuant to the 1994 Agreement, the Company has a right to sell to
the Purchaser up to 1,337,239 shares of its Common Stock at approximately $6.54
per share upon the receipt by the Purchaser of Warrant Proceeds (as defined in
the 1994 Agreement), subject to certain conditions set forth therein. The
parties hereby acknowledge that the Purchase of the Shares pursuant to this
Agreement shall reduce the Company's right to sell shares of its Common Stock to
the Purchaser under Section 3.2(b) of the 1994 Agreement by 130,000 shares.
The Company and the Purchaser have also entered into a letter
agreement dated as of October 13, 1995 pursuant to which the Purchaser has
agreed to transfer to the Company, at a price of $3.00 per share, 200,000 shares
of the Company's Common Stock in the event that the Company does not receive
$8.25 million from the Purchaser pursuant to the terms of the 1994 Agreement
prior to October 10, 1997. Following the Closing of this Agreement, the letter
agreement by and between the Company and the Purchaser dated as of October 13,
1995 shall immediately terminate with no further action of the parties.
1.3 THE CLOSING. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the principal offices of the Company
at 00 X Xxxxxxxx Xxx, Xxxxxx, Xxx
Xxxxxx 00000 on July 14, 1997 at 10:00 A.M. or at such other place or time as
the parties may agree (the "Closing Date"). At the Closing, the Purchase Price
shall be payable by delivery of immediately available funds by wire transfer to
an account of the Company that shall be specified in writing by the Company
prior to the Closing. Within five business days following the Closing, the
Company shall deliver to the Purchaser a certificate representing the Shares.
1.4 TERMINATION OF THIS AGREEMENT. Anything contained in this
Agreement to the contrary notwithstanding, in the event that the Purchaser fails
to deliver immediately available funds representing the Purchase Price by the
close of business on the Closing Date, this Agreement shall terminate and be of
no force and effect without the requirement of any notice from, or any action
by, the Company.
ARTICLE II
Representations and Warranties
Concerning the Company
----------------------
The Company hereby represents and warrants to the Purchaser as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized and existing under the laws of the State of Delaware and is in
good standing under such laws.
2.2 CORPORATE POWER. The Company has all requisite corporate
power and authority to enter into this Agreement and the Company will have at
the Closing Date all requisite corporate power to sell the Shares and to carry
out and perform its obligations under the terms of this Agreement.
2.3 CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 34,000,000 shares of Common Stock and (ii) 4,000,000
shares of preferred stock, par value $.001 per share. There are approximately
23,708,690 shares of the Company's Common Stock and no shares of Preferred Stock
currently issued and outstanding.
2.4 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to the Purchaser true and complete copies of all
forms, reports, schedules, statements and other documents required to be filed
by it under the Securities Act of 1933, as amended (the "Securities Act") and
the Securities and Exchange Act of 1934, as amended (the "Exchange Act") (as
such documents have been amended or supplemented since the time of their filing,
collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
have been prepared in conformity with
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Generally Accepted Accounting Principles consistently applied and as of the
dates indicated, and for the periods then ended, present fairly the financial
position and results of operations of the Company as of the dates and for the
periods indicated.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as described in
the SEC Reports, the Company has no material debts, liabilities or obligations
of any kind, whether accrued, absolute, contingent or other, whether due or to
become due, except as incurred in the ordinary course of business, that would
have a material adverse effect on the Company.
2.6 FULLY PAID SHARES. The Shares, when acquired by the
Purchaser will be fully paid and non-assessable, free of preemptive rights and
encumbrances, and will have the same rights under the Company's certificate of
incorporation and by-laws as all other shares of Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
3.1 INVESTMENT INTENT, ETC. The Purchaser has received,
examined and reviewed copies of the Company's most recent reports, as amended,
filed under the Exchange Act and other publicly available documents requested by
it and recognizes that the investment in the Shares involves a high degree of
risk. The Purchaser has been advised that it may not be possible to readily
liquidate this investment. The Purchaser's overall commitment to the Shares,
which are not readily marketable, is not disproportionate to its net worth, its
investment in the Company will not cause such overall commitment to become
excessive, and it can afford to bear the loss of its entire investment in the
Company. The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Common Stock of the Company. The Purchaser confirms that the
Company has made available to its representatives the opportunity to ask
questions of, and receive answers from, the Company concerning the Company and
the activities of the Company and otherwise to obtain any additional
information, to the extent that the Company possesses such information or could
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information conveyed to him. The Purchaser hereby acknowledges
that it has been advised that this offering of Shares has not been registered
with, or reviewed by, the Securities and Exchange Commission because this
offering is intended to be a non-public offering pursuant to Section 4(2) of the
Securities Act. The Purchaser
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represents that the Shares are being purchased for its own account, for
investment purposes only and not with a view towards distribution or resale to
others. The Purchaser agrees that it will not attempt to sell, transfer, assign,
pledge or otherwise dispose the Shares unless they are registered under the
Securities Act or unless in the opinion of counsel satisfactory to the Company
an exemption from such registration is available. The Purchaser understands that
no securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Shares. The execution, delivery and performance by the Purchaser
of this Agreement will not constitute or result in a breach or default under, or
conflict with, any order, ruling or regulation of any court or other tribunal or
of any governmental commission or agency, or any agreement or other undertaking,
to which the Purchaser is a party or by which it is bound. The Purchaser has
relied solely upon the advice of its own tax and legal advisors with respect to
the tax and other legal aspects of this investment. The Purchaser is purchasing
the Shares for its account, and not in any agency, fiduciary or similar
capacity. The source of the funds evidencing the Purchase Price are from legally
available funds of the Purchaser.
3.2 LEGENDS. The Purchaser understands that the
certificates evidencing the Shares will bear a legend substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE
ACT SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO AND THEY
SHALL HAVE BEEN REGISTERED OR QUALIFIED FOR SALE UNDER THE
APPROPRIATE STATE SECURITIES LAWS OR (II) IN THE OPINION OF
COUNSEL TO THE CORPORATION, REGISTRATION AND QUALIFICATION
UNDER THE ACT AND THE SECURITIES LAWS OF THE APPROPRIATE STATE
IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER."
The legend referred to above shall be removed by the Company
from any certificate at such time as the holder of the shares represented by the
certificate delivers an opinion of counsel reasonably satisfactory to the
Company to the effect that such legend is not required in order to establish
compliance with any provisions of the Securities Act, or at such time as the
holder of such shares satisfies the requirements of Rule 144(k) under the
Securities Act, as then in effect with respect to such shares.
3.3 RISK FACTORS. The Purchaser has conducted its own due
diligence with respect to all aspects of this transaction and is familiar with
the risk factors inherent in the purchase of the
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Shares, and has been fully apprised that all or a portion of the proceeds from
this investment will be used for working capital purposes which may include the
repayment of indebtedness.
ARTICLE IV
REGISTRATION OF SHARES
4.1 "PIGGYBACK REGISTRATION". (a) If the Company at any time
or from time to time during the three (3) year period commencing on the Closing
Date proposes to register any Common Stock under the Securities Act (other than
pursuant to a registration statement (including pre-effective amendments
thereto) (i) on Form S-8 or any successor form to such form, (ii) on Form S-4 or
any successor form to such form, (iii) filed in connection with an exchange
offer or an offering of Common Stock or of securities convertible or
exchangeable into Common Stock made solely to its existing shareholders in
connection with a rights offering or solely to employees of the Buyer, or a
post-effective amendment to any then effective registration statement), it will
give written notice to the Purchaser of its intention at least ten (10) days in
advance of the filing of any Registration Statement with respect thereto. Upon
the written request of the Purchaser given within five (5) days after receipt of
such notice, the Company, subject to Section 4.1(b) below, will cause the Shares
and/or the resale of the Shares requested by the Purchaser to be registered, to
be so registered.
(b) (i) In the case of an underwritten offering by the Company
of Common Stock, the Company shall, with respect to Shares that the Purchaser
then desires to sell, enter into an underwriting agreement with the same
underwriters engaged by the Company with respect to securities being offered by
the Company and cause such underwriters to include in any such underwriting all
of the Common Shares that the Purchaser then desires to sell; PROVIDED, HOWEVER,
that such underwriting agreement is in substantially the same form as the
underwriting agreement that the Buyer enters into in connection with the primary
offering it is making.
(ii) If the managing underwriter with respect to an
offering pursuant to this Section 4.1 requests in writing that the number of
Shares of the Purchaser that are entitled to be registered pursuant to this
Section 4.1 be reduced because in the judgment of the managing underwriter the
offering would be materially and adversely affected, then the Shares that the
Purchaser wishes to register pursuant to this Section 4.1 shall be reduced by
such amount as the managing underwriter may determine in writing so as to not
materially and adversely affect the proposed offering, which reduced number of
Shares shall be included in such offering.
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Notwithstanding the provisions of this Section 4.1, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 4.1 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
4.2 REGISTRATION PROCEDURES. Each Registration Statement filed
pursuant to this Article IV shall be pursuant to the procedures set forth below:
(a) The Company shall notify the Purchaser promptly after it
shall receive notice thereof, of the date and time when such Registration
Statement and each post-effective amendment thereto has become effective or a
supplement to any prospectus forming a part of such Registration Statement has
been filed;
(b) The Company shall furnish to the Purchaser such reasonable
number of copies of the Registration Statement and prospectus and such other
documents as Purchaser may reasonably request in order to facilitate the public
offering of the Shares;
(c) The Company shall use its best efforts to register or
qualify the Shares covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request, PROVIDED, HOWEVER, that the Company shall not be obligated
to file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to subject
itself to taxation in connection with any such registration or qualification of
such securities;
(d) The Company shall notify the Purchaser participating in
such registration promptly of any request by the SEC for the amending or
supplementing of such Registration Statement or prospectus or for additional
information. The Purchaser agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in this subsection
(d), the Purchaser will forthwith discontinue the offer and sale of Shares
pursuant to the Registration Statement covering such Shares until receipt by the
Purchaser and underwriters of the copies of such supplemented or amended
prospectus and, if so directed by the Company, the Purchaser will deliver to the
Company all copies, other than permanent file copies then in the Purchaser'
possession, of the most recent prospectus covering such Shares at the time of
receipt of such notice; and
(e) The Company shall advise the Purchaser participating in
such registration, promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or
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the initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4.3 EXPENSES OF REGISTRATION. All expenses of the Company
incident to the Company's performance of or compliance with the provisions of
this Article IV shall be borne by the Company including without limitation:
(a) All registration and filing fees;
(b) Fees and expenses of compliance with all securities or
blue sky laws (including fees and disbursements of counsel for the Company in
connection with blue sky qualifications of the Shares; PROVIDED, HOWEVER, that
the Company shall not be required to consent to general service of process in
any such state); and
(c) Fees and disbursements of the Company and its independent
auditors.
Nothing in this Section 4.3 shall be deemed to require the
Company to pay or bear any expenses of the Purchaser's attorneys or accountants
or any other personal expenses or any underwriting discounts relating to the
Shares, selling commissions or similar fees attributable pro rata to the Shares
if such registration results in an Underwritten Offering of all or any portion
of the Shares.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of Purchaser and the Company.
5.2 WAIVER. Any breach of any obligation, covenant, agreement
or condition contained herein shall be deemed waived by the non-breaching party,
only by a writing, setting forth with particularity the breach being waived and
the scope of the waiver, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other breach. No waiver shall be
implied from any conduct or action of the non-breaching party. No failure or
delay by any party in exercising any right, power or privilege hereunder or
under the Documents and no course of dealing by any party shall operate as a
waiver and any right, power or privilege hereunder or under any Document nor
shall any single or partial exercise thereof or the exercise of any other right,
power or privilege.
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5.3 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand:
(a) if to the Company, to:
Glasgal Communications, Inc.
00 X Xxxxxxxx Xxx
Xxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxx
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
(b) if to Purchaser, to:
Direct Connect International, Inc.
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 5.3.
5.4 BINDING NATURE AGREEMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without prior written consent of the other parties.
5.5 ACKNOWLEDGEMENT BY THE PURCHASER. The Purchaser has been
informed that the Company's Common Stock is publicly-traded on the Nasdaq
Small-Cap Market and that the Purchase Price for the Shares may bear no relation
to the future market value or book value of the Common Stock. The Purchaser
further acknowledges that it has reviewed such information as it deems
appropriate to evaluate whether to enter into this Agreement. The Purchaser
further acknowledges that he is not relying on any oral information or
representations from the Company or any other person, including representatives
of the Company in connection with its decision to enter into this Agreement,
including the Company's financial condition, prospects, present or future
results of operations, business plans or the potential for future appreciation
in the Company's Common Stock.
5.6 GOVERNING LAW. This Agreement and the legal relations
among the parties hereto shall be governed by and
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construed in accordance with the laws of the State of New Jersey applicable to
contracts made and performed therein.
5.7 EXPENSES. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
5.8 COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
5.9 FORM OF SIGNATURE. The parties hereto agree to accept a
facsimile transmission copy of their respective signatures as evidence of their
respective actual signatures to this Agreement; PROVIDED HOWEVER, that each
party who produces a facsimile signature agrees, by the express terms hereof, to
place, immediately after transmission of its signature by fax, a true and
correct original copy of its signature in overnight mail to the address of the
other party.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed the day and year first above written.
GLASGAL COMMUNICATIONS, INC.
By: /S/ XXXXX X. XXXX
--------------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
DIRECT CONNECT INTERNATIONAL INC.
By: /S/ XXXXXX XXXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
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