As filed with the Securities and Exchange Commission on December 17, 1996
Registration No. 333-16423
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
THE NETPLEX GROUP, INC. (F/K/A COMPLINK, LTD.)
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 7372 11-2824578
- ----------------- --------------------------- ---------------------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
8260 GREENSBORO DRIVE, 5TH FLOOR
MCLEAN, VIRGINIA 22101
(703) 356-3001
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
GENE ZAINO
PRESIDENT & CHIEF EXECUTIVE OFFICER
THE NETPLEX GROUP, INC.
8260 GREENSBORO DRIVE, 5TH FLOOR
MCLEAN, VIRGINIA 22101
(703) 356-3001
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent of service)
------------------------------------
Copies to:
STEVEN WOLOSKY, ESQ.
KENNETH SCHLESINGER, ESQ.
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 753-7200
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
------------------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class Maximum Aggregate
of Securities Amount To Be Offering Price Offering Amount of
To Be Registered Registered Per Security Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 3,321,213 3.625(1) $12,039,397.12 $3,648.30
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon the
exercise of certain options (the "Options")(2) 170,000(2) $4.00(3) $680,000 $206.06
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon 220,000(2)
exercise of certain Warrants (the "1992 Warrants")(2) $3.00(3) $660,000 $200.00
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
exercise of certain Unit Purchase Options (the
"Purchase Options")(2) 100,000(2) $2.40(3) $240,000 $72.73
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
exercise of certain warrants (the "Purchase Option
Warrants"), which warrants are issuable upon
exercise of the Purchase Options(2) 100,000(2) $5.25(3) $525,000 $159.09
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchase Option Warrants 100,000 $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
conversion of certain shares of Class A Convertible
Preferred Stock (the "Convertible Preferred Stock")(2) 1,750,000 $3.625(1) $6,343,750 $1,922.35
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon 1,750,000
exercise of certain warrants (the "1996 Warrants")(2) $2.50(3) $4,375,000 $1,325.76
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
conversion of certain shares of
Convertible Preferred Stock, which shares
of Convertible Preferred Stock are
issuable upon exercise of certain Unit Purchase
Options (the "1996 Purchase Options")(2) 87,500 $3.625(1)(2) $317,187.5 $96.12
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
exercise of certain warrants, which
warrants are issuable upon exercise of the 1996
Purchase Options (the "1996 Purchase Option Warrants")(2) 87,500 $2.50(2)(3) $218,750 $66.29
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
exercise of certain warrants (the "Netplex
Warrants")(2) 150,000 $2.50(3) $375,000 $113.64
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, issuable upon
exercise of certain warrants (the "Kirlin Warrants")(2) 125,000 $3.50(3) $437,500 $132.58
- -----------------------------------------------------------------------------------------------------------------------------
Total...................................................................................................$7,942.92
=============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low price of the Common Stock on the OTC
Electronic Bulletin Board on November 18, 1996.
(2) Pursuant to Rule 416, additional securities are being registered as may be
required for issuance pursuant to the anti-dilution provisions of the
Options, the 1992 Warrants, the Purchase Options, the Purchase Option
Warrants, the Convertible Preferred Stock, the 1996 Warrants, the 1996
Purchase Options, the 1996 Purchase Option Warrants, the Purchase Option
Warrants, the Netplex Warrants and the Kirlin Warrants.
(3) Pursuant to Rule 457(g), the registration fee for the Common Stock
underlying such option or warrant is calculated on the basis of the
exercise price of such option or warrant.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a) may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1996
PRELIMINARY PROSPECTUS
7,861,213 SHARES OF COMMON STOCK
100,000 WARRANTS
THE NETPLEX GROUP, INC.
COMMON STOCK ($.001 PAR VALUE)
This Prospectus relates to the reoffer and resale by certain selling
shareholders (the "Selling Shareholders") of an aggregate of 7,861,213 shares
(the "Shares") of the Common Stock, $.001 par value per share (the "Common
Stock"), of The Netplex Group, Inc., a New York corporation (the "Company") of
which (i) 170,000 shares of Common Stock (the "Option Shares") are issuable upon
exercise of certain options (the "Options") which were granted by the Company in
connection with consulting services; (ii) 220,000 shares of Common Stock (the
"Warrant Shares") are issuable by the Company upon exercise of certain warrants
(the "Warrants") which were issued in exchange for warrants previously issued in
connection with the Company's March 1992 Private Placement (the "1992 Private
Placement"); (iii) 100,000 shares of Common Stock (the "Purchase Option Shares")
are issuable by the Company upon the exercise of certain Unit Purchase Options
(the "Purchase Options") previously issued by the Company to GKN Securities
Corp., or its designees, the underwriter of the Company's Initial Public
Offering (the "Underwriter"); (iv) 100,000 shares of Common Stock (the "Purchase
Option Warrant Shares") are issuable to the Underwriter upon exercise of the
Purchase Option Warrants (hereinafter defined), which Purchase Option Warrants
are issuable upon exercise of the Purchase Options; (v) 1,750,000 shares of
Common Stock (the "Conversion Shares") are issuable by the Company upon
conversion of certain shares of Class A Convertible Preferred Stock (the
"Convertible Preferred Stock") which were issued by the Company to holders (the
"Preferred Stockholders") in connection with the Company's August 1996 Private
Placement (the "1996 Private Placement"); (vi) 1,750,000 shares of Common Stock
(the "1996 Warrant Shares") are issuable by the Company upon exercise of certain
warrants (the "1996 Warrants") granted by the Company to the Preferred
Stockholders in connection with the 1996 Private Placement; (vii) 87,500 shares
of Common Stock (the "Purchase Option Conversion Shares") are issuable by the
Company upon conversion of certain shares of Convertible Preferred Stock (the
"Purchase Option Preferred Stock"), which shares of Convertible Preferred Stock
are issuable by the Company upon exercise of certain Unit Purchase Options (the
"1996 Purchase Options") previously granted by the Company to the Underwriter in
connection with the 1996 Private Placement; (viii) 87,500 shares of Common Stock
(the "1996 Purchase Option Warrant Shares") are issuable by the Company upon
exercise of certain warrants (the "1996 Purchase Option Warrants") which
warrants are issuable to the Underwriter upon exercise of the 1996 Purchase
Options; (ix) 150,000 shares of Common Stock (the "Netplex Shares") issuable to
the former stockholders of Netplex Virginia (as hereinafter defined) and AWE (as
hereinafter defined) upon the exercise of certain warrants (the "Netplex
Warrants") (x) 125,000 shares of Common Stock (the "Kirlin Shares") upon the
exercise of certain warrants (the "Kirlin Warrants") and (xi) 3,321,213 shares
of Common Stock (the "Merger Shares") which were previously issued by the
Company to certain of the Selling Shareholders in connection with the Mergers
(as hereinafter defined) or pursuant to an asset purchase agreement. This
Prospectus also relates to 100,000 warrants (the "Purchase Option Warrants")
which are issuable to the Underwriter by the Company upon exercise of the
Purchase Options. See "Principal and Selling Stockholders," "Plan of
Distribution" and "Description of Securities."
The Option Shares, the Warrant Shares, the Purchase Option Shares, the
Purchase Option Warrant Shares, the Conversion Shares, the 1996 Warrant Shares,
the 1996 Purchase Option Conversion Shares, the 1996 Purchase Option Warrant
Shares, the Netplex Shares and the Kirlin Shares will be issued if, as and when
<PAGE>
the Options, the Warrants, the Purchase Options, the Purchase Option Warrants,
the Convertible Preferred Stock, the 1996 Warrants, the Purchase Option
Preferred Stock, the 1996 Purchase Option Warrants, the Netplex Warrants, or the
Kirlin Warrants (which such Option Shares, Warrant Shares, Purchase Option
Shares, Purchase Option Warrant Shares, Conversion Shares, 1996 Warrant Shares,
Purchase Option Conversion Shares, 1996 Purchase Option Warrant Shares, Netplex
Shares or the Kirlin Shares underlie, respectively), are exercised or converted,
as the case may be, by the holders thereof. The Company will receive the
proceeds from the exercise of the Options, the Warrants, the Purchase Options,
the Purchase Option Warrants, the 1996 Warrants, the 1996 Purchase Option
Warrants, the Netplex Warrants, and the Kirlin Warrants, the net proceeds of
which will amount to $7,686,250 if all Warrants, Purchase Options, Purchase
Option Warrants, 1996 Warrants, 1996 Purchase Option Warrants, the Netplex
Warrants and Kirlin Warrants are exercised, after deducting the estimated
expenses of this offering. The Company will not receive any proceeds from the
resale of the Shares by the Selling Shareholders.
The Company's Common Stock is publicly traded on the OTC Electronic
Bulletin Board (the "Bulletin Board") under the symbol ("NTPL") and on the
Boston Stock exchange under the symbol ("NPL"). On November 18, 1996, the
average of the high and low price was $3.625 closing bid price for the Common
Stock on the Bulletin Board was $3.625.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK AND SHOULD ONLY BE
MADE BY INVESTORS WHO CAN AFFORD THE RISK OF LOSS OF
THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AND "DILUTION" ON PAGES 8 AND 13
OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
This offering is self-underwritten; neither the Company nor any Selling
Shareholder has employed an underwriter for the resale of any of the Shares or
the Purchase Option Warrants. The Company will bear all expenses of this
Offering other than discounts, concessions or commissions on the resale of the
Shares and the Purchase Option Warrants.
The Selling Shareholders have advised the Company that the resale of
their Shares may be effected from time to time in one or more transactions in
the over-the-counter market, the Boston Stock Exchange or any other similar
market that the Company may be listed on, in negotiated transactions or
otherwise at market prices prevailing at the time of the sale or at prices
otherwise negotiated. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker-dealers who may receive compensation in
the form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agent or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer may be in excess of customary commissions). Any
broker-dealer acquiring the Shares from the Selling Shareholders may sell such
securities in its normal market making activities, through other brokers on a
principal or agency basis, in negotiated transactions, to its customers or
through a combination of such methods. The Purchase Option Warrants will not be
publicly traded and may be acquired in negotiated transactions. See "Plan of
Distribution."
- --------------------------------------------------------------------------------
The date of this Prospectus is , 1996
-2-
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended July 31, 1995.
(b) The Company's Quarterly Reports on Form 10-QSB for the
fiscal quarters ended October 31, 1995, December 31, 1995, March 31,
1996, June 30, 1996 and September 30, 1996.
(c) The Company's Current Reports on Form 8-K filed on January
9, 1994, June 7, 1996, as amended, and December 4, 1996.
(d) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A filed with the
Commission on March 8, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this Offering of the Shares of Common Stock or the
Purchase Option Warrants offered hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such 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 will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
Matthew Jones, Chief Financial Officer, 8260 Greensboro Drive, 5th Floor,
McLean, Virginia 22101, telephone number (703) 356-3001.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited and reported upon by its independent
accounting firm, quarterly reports containing unaudited interim financial
information and such other periodic reports as the Company may determine to be
appropriate or as may be required by law.
This Prospectus includes references to trademarks of entities other
than the Company which have reserved all rights with respect to their respective
trademarks.
-3-
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. EACH
PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
The Netplex Group, Inc., a New York corporation (the "Company"),
headquartered in McLean, Virginia, is an information technology solutions
provider. Its address is 8260 Greensboro Drive, 5th Floor, McLean, Virginia
22101 and its telephone number is (703) 356-3001. Its Worldwide Web site address
is www.netplexgroup.com.
The Company's core business involves the offering of professional
technical services to large organizations (generally Fortune 2,000 type
companies) who require assistance integrating information technology into their
businesses. The Company's customers include large banks, pharmaceutical
companies and financial services institutions. The Company employs approximately
300 full-time professional technical employees and has access to a database of
an additional 15,000 technical consultants who may be contracted for hire on an
as needed basis. The Company's services focus on the design, implementation, and
management of large network-based systems. Occasionally, the Company may resell
certain technology products in order to deliver customers fully integrated
system-solutions. The Company's specific areas of expertise include Network and
System Management, Database Integration, Help Desk Automation, Disaster Recovery
Planning, Information Systems Security, Local Area Network Integration, Intranet
Deployment, Remote and Mobile Workforce Automation, and Law Firm Office
Automation.
The Company engages in project assignments throughout North America and
has offices in the New York City, Central New Jersey, Chicago and Washington
D.C. metropolitan markets.
CORPORATE HISTORY
The Company is a New York corporation incorporated in 1986 under the
name CompLink, Ltd. In March 1993 the Company consummated an initial public
offering and received net proceeds of approximately $4,700,000 and received an
additional approximately $6,000,000 in October 1993 through the exercise of
warrants issued in connection with the initial public offering. The Company's
initial public offering was underwritten by the Underwriter. In December 1993,
the Company consummated a merger with Technology Development Systems, Inc., an
Illinois corporation ("TDS") which became a wholly-owned subsidiary of the
Company. On June 7, 1996, a wholly-owned subsidiary of the Company merged with
and into The Netplex Group, Inc. ("Netplex Virginia"), a Virginia corporation,
and a second wholly-owned subsidiary of the Company merged with and into
America's Work Exchange, Inc. ("AWE"), a New York corporation. Upon consummation
of the mergers, Netplex Virginia and AWE became wholly-owned subsidiaries of the
Company (the "Mergers"). As consideration for the Mergers, the Company issued an
aggregate of 3,245,295 shares of Common Stock to the shareholders of Netplex and
AWE, including an aggregate of 1,263,930 shares to Gene Zaino, who was a
Director of the Company and is now the President and Chief Executive Officer of
the Company. Netplex Virginia changed its name to The Netplex System Integration
Group, Inc. and the Company changed its name to The Netplex Group, Inc.
As a result of the Mergers, there was a change of control of the
Company in that, as of the consummation of the Mergers, approximately 50.4% of
the outstanding shares of the Company are now held by the former shareholders of
-4-
<PAGE>
Netplex Virginia and AWE (60.7% of the outstanding shares of the Company's
Common Stock if all of the Company options issuable in exchange for Netplex
Virginia options and AWE options are exercised). The Mergers have been accounted
for under the purchase method of accounting as a reverse merger, since the
shareholders of the acquirees, which have common control, received the larger
percentage of the voting rights of the combined entity. The Mergers resulted in
a recapitalization of the accounting of CompLink, Ltd. so that the resulting
capitalization of the Company after the Mergers were that of CompLink, Ltd.'s
(the Company prior to Mergers) after giving effect to the new share issuance and
the elimination of CompLink, Ltd.'s accumulated deficit. The acquisition of the
assets and liabilities of CompLink, Ltd. have been accounted for at book value,
which approximates fair value. For a further discussion of the Mergers, see the
Company's (i) Proxy Statement for Special Meeting of Shareholders held on May
24, 1996, (ii) Form 10-QSB for the six-months ended June 30, 1996 and (iii) Form
8-K, dated June 7, 1996, as amended. Unless otherwise indicated herein,
references to the Company include its wholly-owned subsidiaries, Netplex
Virginia, AWE and TDS.
RECENT DEVELOPMENTS
In September 1996, the Company received approximately $3,000,000 in net
proceeds from the consummation of the 1996 Private Placement whereby the Company
issued the Convertible Preferred Stock and granted the 1996 Warrants.
On October 21, 1996 the Company filed an application for the relisting
of its Common Stock on the Nasdaq Small Cap Market ("Nasdaq"). While the Company
believes that it meets the requirements for listing its Common Stock on Nasdaq,
there can be no assurance that such listing will be approved by Nasdaq. If the
Company's listing is not approved by Nasdaq the Company will continue to have a
limited trading market for its securities.
On November 5, 1996 the Company reached an agreement for the sale of
its WorldLink(TM) Remote and Mobile Workforce automation software (the
"Product") developed and distributed by its wholly-owned subsidiary Technology
Development Systems, Inc. ("TDS"). The sale price is $3.5 million payable in
cash at closing, originally expected to be November 15, 1996. On November 19,
1996, the Company closed a portion of the sale with the buyer for a purchase
price of $2.0 million in cash. The Company and the buyer agreed to continue
negotiations for the remaining portion of the transaction. Finalization of the
sale of the Product is expected by year end, but, there can be no assurances
that the remaining portion of this transaction will be completed.
The Company will continue to support WorldLink's(TM) existing customers
and has formed a practice unit to provide Remote and Mobile Workforce Automation
services.
-5-
<PAGE>
THE OFFERING
Securities Offered by the Company...........100,000 Purchase Option Warrants
issuable upon exercise of the
Purchase Options. 170,000 Option
Shares; 220,000 Warrant Shares;
100,000 Purchase Option Shares;
100,000 Purchase Option Warrant
Shares; 1,750,000 Conversion Shares;
1,750,000 1996 Warrant Shares;
87,500 Purchase Option Conversion
Shares; 87,500 1996 Purchase Option
Shares; 150,000 Netplex Shares; and
125,000 Kirlin Shares.
Securities Offered for resale
by the Selling Shareholders.................3,321,213 Merger Shares.
Common Stock Outstanding....................6,442,903 1/ shares of Common Stock
before the exercise or conversion,
as the case may be, of the Options,
the Warrants, the Purchase Options,
the Purchase Option Warrants, the
Convertible Preferred Stock, the
1996 Warrants, the Purchase Option
Preferred Stock and the 1996
Purchase Option Warrants and
10,982,903 shares of Common Stock
assuming the exercise or conversion,
as the case may be, of the Options,
the Warrants, the Purchase Options,
the Purchase Option Warrants, the
Convertible Preferred Stock, the
1996 Warrants, the Purchase Option
Preferred Stock and the 1996
Purchase Option Warrants.
Bulletin Board Symbol.......................Common Stock: NTPL
Boston Stock Exchange Symbol................Common Stock: NPL
USE OF PROCEEDS
The Company will not receive any proceeds from the resale of the Common
Stock offered by the Selling Shareholders hereby. The Company will receive the
proceeds from the exercise of each of the Options, the Warrants, the Purchase
Options, the Purchase Option Warrants, the 1996 Warrants, the 1996 Purchase
Option Warrants, the Netplex Warrants or the Kirlin Warrants. The net proceeds
of which will amount to $7,686,250 if all such securities are exercised, after
deducting the estimated expenses of this offering. The Company intends to apply
any net proceeds from such exercises for product development, marketing and
working capital and other general corporate purposes.
- --------------
1/ UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES
NOT GIVE EFFECT TO (I) 220,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THE WARRANTS AT $3.00 PER SHARE; (II) 100,000 SHARES OF COMMON STOCK ISSUABLE TO
THE UNDERWRITER UPON EXERCISE OF THE PURCHASE OPTIONS, EACH PURCHASE OPTION
CONSISTS OF ONE SHARE OF COMMON STOCK AND ONE PURCHASE OPTION WARRANT; (III)
100,000 SHARES OF COMMON STOCK ISSUABLE TO THE UNDERWRITER UPON EXERCISE OF THE
PURCHASE OPTION WARRANTS; (V) 1,750,000 SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE CONVERTIBLE PREFERRED STOCK; (VI) 1,750,000 SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THE 1996 WARRANTS; (VII) 87,500 SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE PURCHASE OPTION PREFERRED STOCK; (VIII)
87,500 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE 1996 PURCHASE OPTION
WARRANTS (IX) 3,000,000 SHARES OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF
-6-
<PAGE>
STOCK OPTIONS WHICH MAY BE GRANTED UNDER THE COMPANY'S 1992 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN (THE "1992 PLAN"), OF WHICH OPTIONS TO PURCHASE
2,363,000 SHARES OF COMMON STOCK AT AN AVERAGE EXERCISE PRICE OF APPROXIMATELY
$2.85 PER SHARE HAVE BEEN ISSUED; (X) 100,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF STOCK OPTIONS WHICH MAY BE ISSUED UNDER THE COMPANY'S 1995
DIRECTORS' STOCK OPTION PLAN (THE "DIRECTORS' PLAN"), OF WHICH OPTIONS TO
PURCHASE 60,000 SHARES OF COMMON STOCK AT EXERCISE PRICES RANGING FROM $2.50 PER
SHARE TO $3.5625 PER SHARE HAVE BEEN GRANTED; (XI) 800,000 SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF STOCK OPTIONS WHICH MAY BE GRANTED UNDER THE
1995 CONSULTANT'S STOCK OPTION PLAN (THE "CONSULTANT'S PLAN"), OF WHICH NO STOCK
OPTIONS HAVE BEEN ISSUED; (XII) 170,000 SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTIONS AT AN EXERCISE PRICE OF $4.00 PER SHARE; AND (XIII)
150,000 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE NETPLEX
WARRANTS AND (IX) 125,000 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THE KIRLIN WARRANTS AT AN EXERCISE PRICE OF $3.50 PER SHARE.
-7-
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
OPERATING LOSSES. The Company had a net loss of $1,783,326 for the nine
months ended September 30, 1996. The Company anticipates that losses, on a
consolidated basis, will continue until such time, if ever, that it can generate
sufficient revenues from the sales of its products and services to cover
operating costs. There can be no assurance that the Company's operations, on a
consolidated basis, will become profitable or that the Company, on a
consolidated basis, will ever be able to generate cash flows sufficient to meet
its operating costs and sustain its operations.
LIMITED WORKING CAPITAL; POSSIBLE NEED FOR ADDITIONAL FINANCING;
UNCERTAINTY OF CAPITAL FUNDING. As of September 30, 1996, the Company had
working capital of $2,614,910. Management believes that its existing resources
will be adequate for the Company's cash needs through December 31, 1997. Beyond
such period, the Company may need to raise substantial additional capital to
fund its operations. There can be no assurance that additional financing will be
available on acceptable terms or available at all. If additional funds are
raised by issuing equity securities, further dilution to shareholders will
result. If adequate funds are not available, the Company may be required to
delay, curtail, reduce the scope of or eliminate (i) the expansion of its
operations and/or (ii) its marketing and sales efforts which could materially
adversely affect the financial and business operations of the Company.
CONTROL OF THE COMPANY BY FORMER NETPLEX VIRGINIA AND AWE SHAREHOLDERS.
The former shareholders of Netplex Virginia and AWE currently own a majority of
the outstanding shares of the Common Stock, with Gene Zaino, currently the
President and Chief Executive Officer of the Company, owning 19.6%, and Michael
O'Connor, John Thompson, Stanley Fischer and Scott Pogoda owning collectively
approximately 28.2%, and together with Mr. Zaino, approximately, 47.8%, of the
outstanding shares of the Common Stock. Accordingly, the former shareholders of
Netplex Virginia and AWE as a group, and Mr. Zaino and the other individuals
named above in particular, will be in a position to control the election of
directors and other corporate matters that require the vote of the Company's
shareholders.
RELIANCE ON MAJOR CUSTOMER. Two customers of Netplex Virginia accounted
for approximately 33% and 22% of Netplex Virginia's revenues for the year ended
December 31, 1995. The contract with one such customer is terminable at will and
the Company completed its obligations under the other contract. No customer
accounted for more than 10% of the Company's revenues for the nine-months ended
September 30, 1996.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. Variations in the
Company's revenues and operating results could occur from time to time as a
result of a number of factors, such as the number and dollar value of client
engagements commenced and completed during a quarter, the number of working days
in a quarter and employee hiring and utilization rates. The timing of revenues
is difficult to forecast because the Company's sales cycle is relatively long in
the case of new clients and may depend on factors such as the size and scope of
assignments and general economic conditions. Because a high percentage of the
Company's expenses are relatively fixed, a variation in the timing of the
initiation or the completion of client assignments, particularly at or near the
end of any quarter, can cause significant variations in operating results from
quarter to quarter and could result in reported losses for that quarter. The
Company's engagements generally are terminable at will and at the discretion of
the client. An unanticipated termination of a major project could require the
Company to maintain or terminate under-utilized employees, resulting in a higher
than expected number of unassigned persons or higher severance expenses. While
professional staff must be adjusted to reflect active projects, the Company must
-8-
<PAGE>
maintain a sufficient number of senior professionals to oversee existing client
projects and participate with its sales force in securing new client
assignments. Because some of the Company's engagements are performed on a
fixed-price basis, the Company also bears the risk of cost overruns and
inflation. The Company's operating results may also vary depending on factors
such as new product introductions by the Company and others, and market
acceptance of new and enhanced versions of the Company's products.
DEPENDENCE UPON KEY PERSONNEL. The Company's future success will depend
in large part on the continued services of Gene Zaino, the Company's President
and Chief Executive Officer, and of the Company's technical, marketing, sales
and management personnel, as well as on its ability to continue to attract,
motivate and retain highly qualified employees. The Company has applied for a
$1,000,000 key man insurance policy on the life of Mr. Zaino. The Company's
employees may voluntarily terminate their employment at any time. Competition
for such employees is intense, and the process of locating technical, marketing,
sales and management personnel with the combination of skills and attributes
required to execute the Company's strategy is often lengthy. The Company
believes that it will need to hire additional technical personnel in order to
enhance existing products and to develop new products and to hire new sales
personnel in order to sell their products. If the Company is unable to hire
additional technical personnel, the development of new products and enhancements
will likely be delayed. If the Company is unable to hire additional sales
personnel, the sale of existing and new products will likely be adversely
impacted. The inability to attract new personnel could have a material adverse
effect upon the Company's results of operations and research and development
efforts. In particular, the Company's success will depend in large part upon its
ability to attract and retain qualified project managers. While to date the
Company has had no difficulty in attracting and retaining qualified employees,
qualified project managers are in particularly great demand and are likely to
remain a limited resource for the foreseeable future and, accordingly, there can
be no assurance that the Company will be able to retain and attract qualified
project management.
COMPETITION. The Company provides information technology services. The
information technology services market comprises a large number of participants,
is subject to rapid changes, and is highly competitive. The market includes
participants from a variety of market segments, including systems consulting and
integration firms, contract programming companies, the professional service
groups of computer equipment companies such as Hewlett-Packard Company, IBM,
Unisys Corporation and Digital Equipment Corporation, facilities management and
MIS outsourcing companies, "Big Six" accounting firms, and general management
consulting firms. The Company's competitors in this area also include companies
such as Andersen Consulting, Technology Solutions Corporation, SHL Systemhouse,
Inc., Innovative Information Systems, Inc., Cap Gemini America, Business System
Group, Computer Sciences Corporation, Electronic Data Systems Corporation and
Keane, Inc. Many participants in the information technology services market have
significantly greater financial, technical and marketing resources and greater
name recognition than the Company and generate greater systems consulting and
integration revenues than does the Company. In addition, the information
technology services market is highly fragmented and served by numerous firms,
many of which serve only their respective local markets. The Company believes
that the principal competitive factors in the information technology services
industry include responsiveness to client needs, speed of project
implementation, quality of service, price, project management capability and
technical expertise. The Company believes that its ability to compete also
depends in part on a number of competitive factors outside its control,
including the ability of its competitors to hire, retain and motivate senior
project managers, the Company's products and services, the price at which others
offer comparable services, and the extent of their competitors' responsiveness
to customer needs.
LEGAL UNCERTAINTIES. There are many legal uncertainties concerning
technical services firms, including the extent of such a company's liability for
violations of employment and discrimination laws. Such liability can include
violations of employment and discrimination laws committed by consultants the
-9-
<PAGE>
Company provides to its customers. Accordingly, the Company may be subject to
liability for violations of these or other laws even if it does not participate
in the commission of such violations. The Company believes it is in compliance
in all material respects with all applicable rules, regulations and licensing
requirements.
PROJECT RISKS. Occasionally, the Company is required to guarantee to
its customers that the integrated system on which it is consulting will operate
properly when completed. Rapid changes in technology or other unforeseen
developments can make any such guarantee difficult to meet and can expose the
Company to loss of the costs incurred by it and revenue anticipated to be
derived, in connection with any such project.
NASDAQ LISTING. The Company's Common Stock currently is quoted or
traded on the OTC Bulletin Board and The Boston Stock Exchange, respectively.
The Company has applied to list its Common Stock on the Nasdaq SmallCap Market
("Nasdaq") which has several requirements for listing, including that the
Company have at least $4,000,000 in total assets and the Company have at least
$2,000,000 in shareholders' equity. While the Company believes that it is in
compliance with these requirements, there can be no assurance that Nasdaq will
be satisfied that the Company will be able to meet these requirements for an
extended period of time and, accordingly, Nasdaq may not approve the Company's
listing application. In addition, Nasdaq requires that the Company's Common
Stock have a trading price of at least $3.00 per share to be approved for
listing. While the Company's Common Stock currently trades above $3.00 per share
and while the Company has agreed to use its best efforts, including undertaking
a reverse stock split to increase the trading price of the Common Stock so that
the Common Stock can be listed on Nasdaq, there can be no assurance the
Company's Common Stock will continue to trade above $3.00 per share.
LIMITED PUBLIC MARKET TRADING; POTENTIAL EFFECT OF "PENNY STOCK" RULES.
There can be no assurance that an active market will exist for the reoffer and
resale of the Common Stock even after the shares are registered, or that such
stock could be sold without a significant negative impact on the publicly quoted
stock price per share. Furthermore, if the Company's Common Stock is not listed
on Nasdaq or the Boston Stock Exchange, it is subject to the "penny stock" rules
adopted pursuant to Section 15(g) of the Securities Exchange Act of 1934. The
penny stock rules apply to non-Nasdaq or exchange listed companies whose common
stock trades at less than $5.00 per share or which have tangible net worth of
less than $5,000,000 ($2,000,000 if the company has been operating for three or
more years). Such rules require, among other things, that brokers who trade
"penny stock" to persons other than "established customers" complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade "penny stock" because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited.
OUTSTANDING OPTIONS AND WARRANTS. There are currently outstanding
options and warrants to purchase 5,125,500 shares (including the Purchase Option
Warrants and the 1996 Purchase Option Warrant) in the aggregate at exercise
prices ranging between $2.00 to $6.00 per share. In addition, there are
currently 1,750,000 shares of Convertible Preferred Stock outstanding. The
exercise of such options and warrants or the conversion of the Convertible
Preferred Stock will have a dilutive effect on the ownership interests of the
Company's existing shareholders.
SHARES ELIGIBLE FOR FUTURE SALE. Currently, 3,321,213 shares of the
Common Stock held by shareholders are "restricted securities", as that term is
defined in Rule 144 under the Securities Act of 1933, as amended. All of such
shares are being registered hereby. Of such shares, 75,918 may currently be sold
under Rule 144. In addition, commencing June 7, 1998 (or June 7, 1997 if the
Securities and Exchange Commission reduces the holding period under Rule 144 to
one year), the
-10-
<PAGE>
balance of such shares (or 3,245,295 shares) may be sold under Rule 144. Such
sales may tend to depress the price of the Company's securities. Of such
3,245,295 shares, 2,303,053 shares are subject to lock-up periods which will
terminate either on June 7, 1997 or December 7, 1997.
NO DIVIDENDS. The Company has paid no dividends on its outstanding
Common Stock and anticipates that income, if any, received from operations will
be devoted to the Company's future operations. In addition, dividends on Common
Stock are subject to the preferences for dividends on the Convertible Preferred
Stock. Accordingly, the Company does not anticipate the payment of cash
dividends on its Common Stock in the foreseeable future. Any future dividends
will depend upon earnings, if any, of the Company, its financial requirements,
and other factors.
-11-
<PAGE>
USE OF PROCEEDS
EXERCISE OF OPTIONS, WARRANTS, PURCHASE OPTIONS, PURCHASE OPTION WARRANTS, 1996
WARRANTS, 1996 PURCHASE OPTION WARRANTS, NETPLEX WARRANTS AND KIRLIN WARRANTS.
Assuming that all of the Options, the Warrants, Purchase Options,
Purchase Option Warrants, 1996 Warrants, 1996 Purchase Options, 1996 Purchase
Option Warrants, Netplex Warrants and Kirlin Warrants are exercised, the net
proceeds to the Company the issuance of shares of Common Stock upon the exercise
of such warrants and options are estimated to be approximately $7,686,250. The
Company intends to apply any net proceeds from such exercises for the
development of additional core competency practice units, geographic expansion,
marketing, working capital and general corporate purposes.
CONVERSION OF PREFERRED STOCK
The Company will not receive any proceeds from the conversion of the
Convertible Preferred Stock.
OFFERING BY SELLING SHAREHOLDERS
The Company will not receive any of the proceeds from the sale of any
of the Merger Shares.
-12-
<PAGE>
DILUTION
As of September 30, 1996, the unaudited net tangible book value of the
outstanding shares of the Company's Common Stock was $3,532,370, or
approximately $.55 per share based on 6,442,903 shares of Common Stock
outstanding. Assuming the issuance of an additional 1,750,000 shares of Common
Stock upon the conversion of the Convertible Preferred Stock, the Pro Forma net
tangible book value of the Company's Common Stock at September 30, 1996 would
have been $3,532,370 or approximately $.43 per share based on 8,192,903 shares
of Common Stock outstanding. Net tangible book value per share represents the
tangible assets of the Company less all liabilities, divided by the number of
shares outstanding. Dilution represents the difference between the price per
share of Common Stock paid by the holders of the Options, the Warrants, the
Purchase Options, the Purchase Option Warrants, the Convertible Preferred Stock,
the 1996 Warrants, the Purchase Option Preferred Stock, the 1996 Purchase Option
Warrants and the Netplex Warrants exercising or converting, as the case may be,
of all such securities pursuant to this Offering and the pro forma net tangible
book value per share of Common Stock after this Offering. After giving effect to
the sale of the shares of Common Stock by the Company hereby (assuming the
exercise or conversion, as the case may be, of all the Options, the Warrants,
Purchase Options, Purchase Option Warrants, 1996 Warrants, Purchase Option
Preferred Stock, 1996 Purchase Option Warrants, Netplex Warrants and Kirlin
Warrants), the adjusted net tangible book value of the Company at September 30,
1996, would have been $11,209,870 or $1.02 per share. This represents an
immediate increase in net tangible book value of $.47 per share to existing
shareholders and an immediate dilution of (i) $2.98 per share to holders of the
Options exercising their Options at $4.00; (ii) $1.98 per share to holders of
the Warrants exercising their Warrants at $3.00; (iii) $1.38 per share to
holders of the Purchase Options exercising their Purchase Options at the
equivalent of $2.40 per share (assuming no amount of the exercise price is
attributed to the purchase of the underlying Warrants) in this Offering; (iv)
$4.23 per share to holders of the Purchase Option Warrants exercising their
Purchase Option Warrants at the equivalent of $5.25 per share; (v) $1.48 per
share to holders of the 1996 Warrants exercising their 1996 Warrants at the
equivalent of $2.50 per share; (vi) $.98 per share to holders of the Purchase
Option Preferred Stock converting their Purchase Option Preferred Stock at the
equivalent of $2.00 per share; (vii) $1.48 per share to holders of the 1996
Purchase Option Warrants exercising their 1996 Purchase Option Warrants at the
equivalent of $2.50 per share; (viii) $1.48 per share to holders of the Netplex
Warrants exercising their Netplex Warrants at the equivalent of $2.50 per share
and (ix) $2.48 per share to holders of Kirlin Warrants exercising their Kirlin
Warrants at the equivalent of $3.50 per share. The following table illustrates
this dilution on a per share basis:
<TABLE>
<CAPTION>
Exercise or conversion price, as
the case may be, of Options,
Warrants, Purchase Options,
Purchase Option Warrants, 1996
Warrants, Purchase Option
Preferred Stock, 1996 Purchase
Option Warrants, Netplex Warrants
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
and Kirlin Warrants (per share)....... $4.00 $3.00 $2.40 $5.25 $2.50 $2.00 $2.50 $2.50 $3.50
Pro forma net tangible book value
per share before offering(1).......... $ .43 $ .43 $ .43 $ .43 $ .43 $ .43 $ .43 $ .43 $ .43
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Net tangible book value immediately
after the exercise or conversion of
the Options, the Warrants, the
Purchase Options, the Purchase
Option Warrants, the 1996 Warrants,
the Purchase Option Preferred Stock,
the 1996 Purchase Option Warrants
and Netplex Warrants upon exercise
or conversion, as the case may be,
of Options, Warrants, Purchase
Options, Purchase Option Warrants,
Convertible Preferred Stock, 1996
Warrants, Purchase Option Preferred
Stock, 1996 Purchase Option
Warrants, Netplex Warrants
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
and Kirlin Warrants(2)................ $ .98 $ .90 $.49 $1.02 $ .86 $.45 $ .86 $ .86 $ .94
Adjusted net tangible book value
after this Offering................... $1.02 $1.02 $1.02 $1.02 $1.02 $1.02 $1.02 $1.02 $1.02
Dilution of net tangible book value
to purchasers or converters, as the
case may be, of Common Stock
underlying Warrants, Purchase
Options, Purchase Option Warrants,
1996 Warrants, Purchase Option
Preferred Stock, 1996 Purchase
Option
Warrants, Netplex
Warrants and Kirlin Warrants.......... $2.98 $1.98 $1.38 $4.23 $1.48 $.98 $1.48 $1.48 $2.48
===== ===== ===== ===== ===== ==== ===== ===== =====
</TABLE>
(1) Reflects the receipt of the Net Proceeds from the August 1996 Private
Placement and the conversion of 1,750,000 shares of Convertible
Preferred Stock into 1,750,000 shares of Common Stock.
(2) Assumes that all options and warrants (excluding options granted under
the 1992 Plan and the Directors' Plan) which have an exercise price
which is less than or equal to the exercise price of the warrant or
option have been exercised.
-14-
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Gene Zaino 39 President, Chief Executive Officer &
Director
Howard Landis 42 Director
Richard Goldstein 50 Director
Robert M. Skelton 35 Secretary
Matthew G. Jones 35 Treasurer
Kathryn C. Eggleston 32 Assistant Secretary & Assistant
Treasurer
Neil Luden 41 Director & Vice President
Deborah Schondorf- 32 Director
Novick
SELLING SHAREHOLDERS
The following table sets forth (i) the number of shares of Common Stock
owned by each Selling Shareholder at September 30, 1996; (ii) the number of
shares being offered for resale hereby by each Selling Shareholder; and (iii)
the number and percentage of shares of Common Stock to be held by each Selling
Shareholder after the completion of this Offering. Except as otherwise indicated
in the Footnotes to such table, none of such Selling Shareholders has been an
officer, director or employee of the Company for the past three years.
-15-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Shares to be
Stock Beneficially Owned Sold in Shares Beneficially Owned
Name Prior To Offering(1) Offering After Offering
---- -------------------- -------- --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Harvey B. Adams 25,000(2) * 50,000 0 0
Ronald J. Adams 12,500(2) * 25,000 0 0
Larry Altman 25,000(2) * 50,000 0 0
Jan Arnett, M.D. 25,000(2) * 50,000 0 0
B&B Trading Corp. Retirement 25,000(2) * 50,000 0 0
Plan
Neil Bellet 25,000(2) * 50,000 0 0
Kenneth Cole 37,500(2) * 75,000 0 0
Craig W. Effron 12,500(2) * 25,000 0 0
Drew Effron 12,500(2) * 25,000 0 0
Richard Etra 12,500(2) * 25,000 0 0
Steven Etra 50,000(2) * 100,000 0 0
F&T Planning Centers, Inc. 12,500(2) * 25,000 0 0
Ernest Gottdiener 25,000(2) * 50,000 0 0
Scott & Lee Havens, JTWROS 25,000(2) * 50,000 0 0
Gloria Hindes 12,500(2) * 25,000 0 0
Frank & Charlotte Joy, JTWROS 12,500(2) * 25,000 0 0
Stuart Kahn & Company 12,500(2) * 25,000 0 0
Daniel Kaplan 12,500(2) * 25,000 0 0
Richard Kaufman & Elaine J. 25,000(2) * 50,000 0 0
Leanaut, JTWROS
Norman Kurtz 25,000(2) * 50,000 0 0
Howard Landis 50,000(2)(3) * 100,000 0 0
Dr. Steven B. Landman 6,250(2) * 12,500 0 0
Mariwood Investments 25,000(2) * 50,000 0 0
Jonathan & Patricia Meyers, 25,000(2) * 50,000 0 0
JTWROS
The Northern Union Club 50,000(2) * 100,000 0 0
Russell D. Pollock & Susan K. 6,250(2) * 12,500 0 0
Waldman, JTWROS
Mark H. Rachesky 50,000(2) * 100,000 0 0
RJB Partners 12,500(2) * 25,000 0 0
Steven Rosen 12,500(2) * 25,000 0 0
Alan J. Rubin 25,000(2) * 50,000 0 0
Jeffrey Rubinstein 25,000(2) * 50,000 0 0
Curtis Schenker 12,500(2) * 25,000 0 0
Leonard M. Schiller 12,500(2) * 25,000 0 0
Phillip J. Schiller 12,500(2) * 25,000 0 0
Dean Spellman 6,250(2) * 12,500 0 0
David Thalheim Revocable Living 37,500(2) * 75,000 0 0
Trust DTD 3/5/96
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Shares to be
Stock Beneficially Owned Sold in Shares Beneficially Owned
Name Prior To Offering(1) Offering After Offering
---- -------------------- -------- --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Greg Trubowitsch 6,250(2) * 12,500 0 0
Vanwood 72nd Street Assoc. LP 100,000(2) 1.5% 200,000 0 0
Richard Warren 12,500(2) * 25,000 0 0
Charles Warshaw 25,000(2) * 50,000 0 0
Michael Weissman 25,000(2) * 50,000 0 0
Woodland Partners 125,000(2) 1.9% 250,000 0 0
William Wolfson 12,500(2) * 25,000 0 0
Mel Atlas 12,500(2) * 25,000 0 0
Marvin Baron 37,500(2) * 75,000 0 0
Norman Basner 12,500(2) * 25,000 0 0
Arthur Birnbaum 12,500(2) * 25,000 0 0
Edward Cohen 12,500(2) * 25,000 0 0
Michael Cohen 12,500(2) * 25,000 0 0
Bruce Frankel 12,500(2) * 25,000 0 0
Morris Goldfarb 25,000(2) * 50,000 0 0
Stuart Goldstein 12,500(2) * 25,000 0 0
Gertrude Gordon 12,500(2) * 25,000 0 0
Jeffrey Greenstein 12,500(2) * 25,000 0 0
Jeffrey Herdan 25,000(2) * 50,000 0 0
James Jannello 12,500(2) * 25,000 0 0
Harry Karten 12,500(2) * 25,000 0 0
Joel Katz Profit Sharing Plan 12,500(2) * 25,000 0 0
Steven Kess 12,500(2) * 25,000 0 0
Anton & Margie Kirincic, JTWROS 12,500(2) * 25,000 0 0
Abraham Klein 50,000(2) * 100,000 0 0
Susan Lary 25,000(2) * 50,000 0 0
Zena Lary Trust 12,500(2) * 25,000 0 0
Monis Lev 12,500(2) * 25,000 0 0
Ruben Levitin & Jamie Walter 12,500(2) * 25,000 0 0
Cordoba, JTWROS
Miguel Lieber 12,500(2) * 25,000 0 0
Charles Lindner 12,500(2) * 25,000 0 0
Peter Lontai, M.D. 12,500(2) * 25,000 0 0
Eva Low 25,000(2) * 50,000 0 0
Alvin Margulies 12,500(2) * 25,000 0 0
John Milcetich 50,000(2) * 100,000 0 0
Mel Paikoff 12,500(2) * 25,000 0 0
Jaques Palombo 12,500(2) * 25,000 0 0
Bertram Podell 12,500(2) * 25,000 0 0
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Shares to be
Stock Beneficially Owned Sold in Shares Beneficially Owned
Name Prior To Offering(1) Offering After Offering
---- -------------------- -------- --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Milton & Blanche Prane, JTWROS 12,500(2) * 25,000 0 0
Mark Rubin 25,000(2) * 50,000 0 0
Stanley Spielman Profit Sharing 25,000(2) * 50,000 0 0
Plan
Stanley Spielman 45,000(4) * 70,000 0 *
Ted Tashlik 12,500(2) * 25,000 0 0
Saul Victor Profit Sharing Plan 12,500(2) * 25,000 0 0
Ben Bazian(6) 43,587 * 36,920 6,667 *
Michael C. Buchner(6) 13,949 * 615 13,333 *
Eden Cowans(6) 3,179 * 1,846 1,333 *
Dale A. Dillow(6) 3,910 * 3,077 833 *
Kathryn C. Eggleston(6) 17,025 * 3,692 13,333 *
Stan W. Fischer(6) 481,713 7.4% 448,380(22) 33,333 *
Elizabeth Fleischer(6) 31,569 * 26,903 4,667 *
Aimee Harabes(6) 18,785 * 13,451 5,333 *
Frank D. Henderson(6) 37,946 * 24,612 13,333 *
David Koehler(6) 31,793 * 18,460 13,333 *
Leo Komorowski(6) 949 * 615 333 *
Don L. Lehman(6) 9,744 * 3,077 6,667 *
Michelle Love(6) 949 * 615 333 *
Joseph McCoy(6) 31,793 * 18,460 13,333 *
Diane E. Moore(6) 949 * 615 333 *
Michael O'Connor(6) 483,026 7.4% 408,026(22) 75,000 *
James L. Patterson(6) 4,410 * 3,077 1,333 *
Azita L. Rutti(6) 641 * 308 333 *
Andrew W. Schug(6) 308 * 308 0 0
John & Elizabeth Ann Thompson, 355,746 5.2% 230,746(22) 125,000 *
JTWROS(6)
Ann M. Utt(6) 3,512 * 1,846 1,667 *
Jon P. Williams(6) 1,141 * 308 833 *
Gene F. Zaino(5)(6) 1,529,850 23% 1,322,350 207,500 1.9%
Scott Pogoda 649,778 10.6% 649,778 0 0
Ayudh Athakravi-Soonthorn 177,212 2.8% 177,212 0 0
GKN Securities Corp. 65,468(7) 1.1% 91,936 0 0
Deborah Schondorf-Novick 8,750(8) * 2,500 7,500 0
Ira Greenspan 2,500(8) * 2,500 0 0
Andrea Goldman 800(8) * 800 0 0
Anthony Ciofari 450(8) * 450 0 0
David M. Nussbaum 25,219(9) * 32,438 0 0
Roger Gladstone 25,219(9) * 32,438 0 0
Robert Gladstone 25,219(9) * 32,438 0 0
Richard Buonocore 2,000(8) * 2,000 0 0
Wien Securities Corp. 100,000(10) 1.5% 100,000 0 0
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Shares to be
Stock Beneficially Owned Sold in Shares Beneficially Owned
Name Prior To Offering(1) Offering After Offering
---- -------------------- -------- --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Kirlin Securities, Inc. 45,750(11) * 61,500 0 0
Applewood Associates, L.P. 50,000(12) 4.3% 50,000 0 0
Eli Oxenhorn 50,000(13) * 50,000 0 0
Irwin Lieber 175,000(14) 2.6% 300,000 0 0
Barry Rubenstein 275,000(15) 3.4% 500,000 0 0
Anthony DeFrances 202,959(16) 3.1% 37,959 165,000 1.5
Eileen DeFrances 37,959 * 37,959 0 0
Ronald Birnbaum 94,725(17) 1.0% 79,450 20,000 *
Seymour Cohen 174,725(18) 2.2% 139,450 40,000 *
David O. Lindner 26,136(19) * 32,396 0 0
Anthony J. Kirincic 26,135(19) * 32,395 0 0
Robert A. Paduano 4,142(20) * 5,134 0 0
Susan Paduano 2,762(20) * 3,424 0 0
Steven Wolosky 10,000(21) * 10,000 0 0
James P. McNiel 10,000(21) * 10,000 0 0
</TABLE>
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of the Company's Common Stock subject to options,
warrants and convertible preferred stock currently exercisable or
convertible, or exercisable or convertible within sixty (60) days, are
deemed outstanding for computing the percentage of the person holding
such options or warrants but are not deemed outstanding for computing the
percentage of any other person.
(2) Consists of presently issuable Conversion Shares underlying Convertible
Preferred Stock. Does not include a like number of 1996 Warrant Shares
issuable upon exercise of the 1996 Warrants, which 1996 Warrants are
exercisable at any time during the period commencing March 19, 1997 and
ending September 19, 2001. All of such Conversion Shares and 1996 Warrant
Shares are being offered for resale pursuant to this Prospectus. All of
such Shares may not be sold until September 1997 without the consent of
the Underwriter.
(3) Mr. Landis has been a Director of the Company since June 1996.
(4) Includes (i) 25,000 presently issuable Conversion Shares underlying
Convertible Preferred Stock; and (ii) 20,000 presently issuable Warrant
Shares underlying the Warrants. Does not include 25,000 1996 Warrant
Shares issuable upon exercise of the 1996 Warrants, which 1996 Warrants
are exercisable at any time during the period commencing March 19, 1997
and ending September 19, 2001. All of such Conversion Shares, Warrant
Shares and 1996 Warrant Shares are being offered for resale pursuant to
this Prospectus.
(5) Mr. Zaino has been a Director of the Company since August 1995 and the
President and Chief Executive Officer of the Company since June 1996.
Includes presently exercisable options to purchase 207,500 shares of
Common Stock which are presently exercisable or exercisable within 60
days. Mr. Zaino may not sell any of the shares being offered by him for
resale until December 7, 1997 without the consent of the Underwriter.
(6) Has been an employee of the Company or a subsidiary of the Company since
June 1996. The amount beneficially owned by such person includes options
exercisable within 60 days.
(7) Consists of (i) 19,500 presently issuable Purchase Option Shares
underlying Purchase Options; (ii) 19,500 presently issuable Purchase
Option Warrant Shares underlying Purchase Option Warrants, which
presently issuable Purchase Option Warrants underlie Purchase Options;
and (iii) 26,468 presently issuable Purchase Option Conversion Shares
underlying shares of Convertible Preferred Stock. Does not include 26,468
1996 Purchase Option Warrant Shares. The Purchase Options are presently
exercisable until March 8, 1998 and the Purchase Option Warrants, upon
grant, would be presently exercisable until March 10, 2000. The 1996
Purchase Options are presently exercisable until September 19, 2001 and
the 1996 Purchase Option Warrants, upon grant, would be exercisable at
any time during the period commencing March 19, 1997 and ending September
19, 2001. All of such Purchase Option Shares, Purchase Option Warrant
Shares, Purchase Option Conversion Shares and 1996 Purchase Option
Warrant Shares are being offered for resale pursuant to this Prospectus.
-19-
<PAGE>
(8) Consists of an equal number of (i) presently issuable Purchase Option
Shares underlying Purchase Options; and (ii) presently exercisable
Purchase Option Warrant Shares underlying Purchase Option Warrants, which
presently issuable Purchase Option Warrants underlie Purchase Options.
The Purchase Options are presently exercisable until March 8, 1998 and
the Purchase Option Warrants, upon grant, would be presently exercisable
until March 10, 2000. All of such Purchase Option Shares and Purchase
Option Warrant Shares are being offered for resale pursuant to this
Prospectus. In addition with respect to Deborah Schondorf - Novick, a
Director of the Company since August 1994, and includes 7,500 shares
underlying presently exercisable options.
(9) Consists of (i) 9,000 presently issuable Purchase Option Shares
underlying Purchase Options; (ii) 9,000 presently exercisable Purchase
Option Warrant Shares underlying Purchase Option Warrants, which
presently issuable Purchase Option Warrants underlie Purchase Options;
and (iii) 7,219 presently issuable Purchase Option Conversion Shares
underlying shares of Convertible Preferred Stock. Does not include 7,219
1996 Purchase Option Warrant Shares. The Purchase Options are presently
exercisable until March 8, 1998 and the Purchase Option Warrants, upon
grant, would be presently exercisable until March 10, 2000. The 1996
Purchase Options are presently exercisable until September 19, 2001 and
the 1996 Purchase Option Warrants, upon grant, would be exercisable at
any time during the period commencing March 19, 1997 and ending September
19, 2001. All of such Purchase Option Shares, Purchase Option Warrant
Shares, Purchase Option Conversion Shares and 1996 Purchase Option
Warrant Shares are being offered for resale pursuant to this Prospectus.
(10) Consists of (i) 50,000 presently issuable Purchase Option Shares
underlying Purchase Options; and (ii) 50,000 presently exercisable
Purchase Option Warrant Shares underlying Purchase Option Warrants, which
presently issuable Purchase Option Warrants underlie Purchase Options.
The Purchase Options are presently exercisable until March 8, 1998 and
the Purchase Option Warrants, upon grant, would be presently exercisable
until March 10, 2000. All of such Purchase Option Shares and Purchase
Option Warrant Shares are being offered for resale pursuant to this
Prospectus.
(11) Consists of 15,750 presently issuable Purchase Option Conversion Shares
underlying 1996 Purchase Options and 30,000 Kirlin Shares. Does not
include 15,750 1996 Purchase Option Warrant Shares underlying 1996
Purchase Option Warrants, which presently issuable Purchase Option
Warrants underlie 1996 Purchase Options or 30,000 Kirlin Shares. The 1996
Purchase Options are presently exercisable until September 19, 2001 and
the 1996 Purchase Option Warrants, upon grant, would be exercisable at
any time during the period commencing March 19, 1997 and ending September
19, 2001. All of such 1996 Purchase Option Shares, 1996 Purchase Option
Warrant Shares and Kirlin Shares are being offered for resale pursuant to
this Prospectus.
(12) Includes 50,000 Warrant Shares issuable upon exercise of the Warrants,
which Warrants are presently exercisable until March 1997. All of such
Warrant Shares are being offered for resale pursuant to this Prospectus.
(13) Consists of 50,000 Option Shares issuable upon exercise of the Options,
which Options are presently exercisable. All of such Option shares are
being offered for resale pursuant to this Prospectus. Mr. Oxenhorn is a
limited partner of Applewood Associates, L.P. ("Applewood"), but as a
limited partner he is not deemed to have beneficial ownership of any of
the shares held by Applewood. Mr. Oxenhorn was a Director of the Company
for more than 2 years prior to August 1995.
(14) Consists of 50,000 Option Shares and securities held by Applewood and
Woodland Partners ("Woodland"). Mr. Lieber may be deemed a beneficial
owner of such securities. Mr. Lieber disclaims beneficial ownership of
such securities. Mr. Lieber was a Director of the Company for more than
two years prior to August 1995.
(15) Consists of 50,000 Option Shares and securities held by Woodland,
Applewood and Vanwood 72nd Street Assoc. LP. Mr. Rubenstein may be deemed
to be a beneficial owner of such securities. Mr. Rubenstein disclaims
beneficial ownership of all such securities. Mr. Rubenstein was a
Director of the Company for more than 2 years prior to August 1995.
(16) Includes 165,000 shares of Common Stock issuable upon exercise of certain
presently exercisable options. Mr. DeFrances has been a Director of the
Company since August 1995 and has been an officer of TDS for more than
three years. Does not include Shares of Common Stock held by Eileen
DeFrances, the wife of Anthony DeFrances.
(17) Includes 45,000 Warrant Shares issuable upon exercise of the Warrants.
All of such Warrant Shares are being offered for resale pursuant to this
Prospectus. Also includes 25,000 Kirlin Shares, all of which are being
offered for resale pursuant to this Prospectus and 4,725 Purchase Option
Conversion Shares.
(18) Includes 105,000 Warrant Shares issuable upon exercise of the Warrants.
All of such Warrant Shares are being offered for resale pursuant to this
Prospectus. Also includes 25,000 Kirlin Shares, all of which are being
offered for resale pursuant to this Prospectus and 4,725 1996 Purchase
Option Conversion Shares. Does not include 4,725 1996 Purchase Option
Shares.
(19) Consists of 19,875 Kirlin Shares, all of which are being offered for
resale pursuant to this Prospectus and 6,261 and 6,260 1996 Purchase
Option Shares for Mr. Lindner and Mr. Kirincic, respectively. Does not
include 1996 Purchase Option Warrant Shares.
(20) Robert Paduano and Susan Paduano are husband and wife. Includes an
aggregate of 5,250 Kirlin Shares and 1,654 1996 Purchase Option Shares.
Does not include 1996 Purchase Option Warrant Shares. Mr. Paduano and Ms.
Paduano disclaim beneficial ownership of all securities held by the
other.
(21) Consists of 10,000 Option Shares issuable upon exercise of the Options.
All of such Option Shares are being offered for resale pursuant to this
Prospectus.
(22) The Shares being offered for resale by such person may not be sold until
June 7, 1997 without the consent of the Underwriter.
-20-
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of the Company's
Common Stock, par value $.001 per share, and 2,000,000 shares of preferred
stock, par value $.01 per share. As of the date of this Prospectus, [6,442,903]
shares of the Company's Common Stock are currently issued and outstanding
convertible and 1,750,000 shares of Preferred Stock are issued and outstanding,
and after the completion of this Offering, assuming the exercise or conversion,
as the case may be, of all of the Options, the Warrants, the Purchase Options,
the Purchase Option Warrants, the Convertible Preferred Stock, the 1996
Warrants, the Purchase Option Preferred Stock, the 1996 Purchase Option Warrants
or the Netplex Warrants, there will be 10,982,903 shares of the Company's Common
Stock issued and outstanding and no shares of Convertible Preferred Stock issued
and outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted can elect all of the
directors then being elected at a meeting at which a quorum is present. The
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining available
for distribution to them after payment of liabilities and after provision has
been made for the Convertible Preferred Stock and any other class of stock, if
any, having preference over the Common Stock. Holders of shares of Common Stock,
as such, have no redemption, preemptive or other subscription rights, and there
are no conversion provisions applicable to the Common Stock.
CONVERTIBLE PREFERRED STOCK
DIVIDENDS. Each share of Convertible Preferred Stock has a stated value
(the "Stated Value") $2.00 and earn cumulative dividends at 10% per annum
payable in additional shares of Convertible Preferred Stock or in cash, at the
Company's option.
LIQUIDATION PREFERENCES. Upon a liquidation of the Company (including a
merger of the Company where the Company is not the survivor or a sale by the
Company of all or substantially all of its assets), the holders of the
Convertible Preferred Stock shall be entitled to receive, prior to the
distribution to the other securityholders of the Company, an amount per share
equal to the greater of (i) two times the Stated Value plus any accrued and
unpaid dividends, or (ii) the amount they would have received had they converted
the Convertible Preferred Stock into Common Stock on the business day
immediately prior to such liquidation.
RANKING. The Convertible Preferred Stock ranks senior to all other
classes of the capital stock of the Company, whether now existing or hereinafter
created, including, but not limited to, any other series of preferred stock.
CONVERSION. The holders of the Convertible Preferred Stock have the
right, at any time, to convert each share of Preferred Stock into one share of
Common Stock.
REDEMPTION. Subject to this conversion right, the Company may redeem
the Convertible Preferred Stock at its Stated Value plus all accrued and unpaid
dividends if the Registration Statement of which this Prospectus forms a part,
is current and effective, upon 30 days written notice given at any time (i)
during the first two years after September 19, 1996, the closing date of the
1996 Private Placement (the "Closing"), if the last sale price of the Common
Stock has
-21-
<PAGE>
been at least $3.75 on all 20 of the trading days ending on the third date prior
to the date on which written notice of redemption is given; (ii) during the
third year after the Closing, if the last price of the Common Stock has been at
least $4.6875 on all 20 of the trading days ending on the third date prior to
the date on which written notice of redemption is given; (iii) during the fourth
year after the Closing, if the last sale price of the Common Stock has been at
least $5.00 on all 20 of the trading days ending on the third date prior to the
date on which written notice of redemption is given; and (iv) after the fourth
year after the Closing, if the last sale price of the Common Stock has been at
least 20 percentage points higher than the prior year's price as such prior
year's price relates to $2.50 per share (i.e., 220% of $2.50 in the fifth year,
240% of $2.50 in the sixth year, etc.) on all 20 of the trading days ending on
the third date prior to the date on which notice of redemption is given.
VOTING. The holders of the Convertible Preferred Stock have no voting
rights until such time as they convert their Convertible Preferred Stock into
Common Stock, except as provided by law.
PURCHASE OPTIONS AND PURCHASE OPTION WARRANTS
The Purchase Options entitle the holders thereof to purchase a unit,
which unit consists of (i) one share of Common Stock; and (ii) one Purchase
Option Warrant at an exercise price of $2.40 per Purchase Option. The Purchase
Option Warrants underlying the Purchase Options are not redeemable by the
Company. The Purchase Options contain anti-dilution provisions providing for
adjustment of the exercise price upon the occurrence of certain events,
including the issuance of shares of Common Stock at a price per share less than
the exercise price or the market price of the Common Stock, or in the event of
any recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. The Purchase Options grant to the holders
thereof certain piggyback and demand rights for periods of seven and five years,
respectively, from March 10, 1993 with respect to the registration under the
Securities Act of the securities directly and indirectly issuable upon exercise
of the Purchase Options.
During the six-year period commencing March 10, 1994, each Purchase
Option Warrant entitles the holder thereof to purchase one share of the
Company's Common Stock at an exercise price of $5.25 per share. The Purchase
Option Warrants are not redeemable by the Company. In the event a holder of the
Purchase Option Warrants fails to exercise the Purchase Option Warrants prior to
their expiration, the Purchase Option Warrants will expire and the holder
thereof will have no further rights with respect to the Purchase Option
Warrants.
-22-
<PAGE>
1996 PURCHASE OPTIONS AND 1996 PURCHASE OPTION WARRANTS
The 1996 Purchase Options entitle the holders thereof to purchase, at
an exercise price of $2.00, a unit, which unit consists of (i) one share
Convertible Preferred Stock; and (ii) one 1996 Purchase Option Warrant. The
rights granted by the 1996 Purchase Options, including the exercise price and
the number of shares to be received upon exercise may, upon the occurrence of
certain specified events, be adjusted. The 1996 Purchase Options grant to the
holders thereof certain registration rights with respect to the registration
under the Securities Act of the Common Stock directly and indirectly issuable
upon exercise of the 1996 Purchase Options.
The 1996 Warrants to purchase an aggregate of 1,750,000 shares of
Common Stock at an exercise price of $2.50 per share, all of which are
exercisable at any time during the period commencing March 19, 1997 and ending
September 19, 2001. Notwithstanding any other provision set forth in the 1996
Warrant, at any time and from time to time during the period that the 1996
Warrant is exercisable, the Company in its sole discretion upon appropriate
notice to the Registered Holder may reduce the exercise price of the 1996
Warrant or extend the period during which the 1996 Warrant is exercisable. No
fractional shares of Common Stock will be issued in connection with the exercise
of the 1996 Warrants. Upon exercise, the Company will pay the holder the value
of any such fractional shares in cash, based upon the market value of the Common
Stock at such time. Unless extended by the Company at its discretion, the 1996
Warrants will expire at 5:00 p.m, Eastern Standard time, on the fifth
anniversary date of the Closing. In the event a holder of the 1996 Warrants
fails to exercise his 1996 Warrants prior to their expiration, such 1996
Warrants will expire and the holder thereof will have no further rights with
respect to the 1996 Warrants. A holder of the 1996 Warrants will not have any
rights, privileges or liabilities as a shareholder of the Company prior to
exercise of the 1996 Warrants. The Company is required to keep reserved a
sufficient number of authorized shares of Common Stock to permit the exercise of
the 1996 Warrants. The exercise price of the 1996 Warrants and the number of
shares of Common Stock issuable upon exercise of the 1996 Warrants will be
subject to adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and reclassifications.
In the event the Company has an effective registration statement
covering the Common Stock issuable upon exercise of the 1996 Warrants, and
provided that notice of redemption of not less than 30 days is given and the
last sale price of the Common Stock has been at least 200% of the Closing Price
on all 20 of the trading days ending on the third business day prior to the day
on which notice is given, the Company shall have the right to call the 1996
Warrants for redemption at a redemption price of $.01 per 1996 Warrant.
DIVIDENDS
To date, the Company has not paid any dividends on its Common Stock.
The payments of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition, and other relevant factors. The Company
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain all earnings, if any, for use in the Company's business.
WARRANTS
In March 1992, in connection with the 1992 Private Placement, the
Company issued Warrants to purchase an aggregate of 220,000 shares of Common
Stock at an exercise price of $3.00 per share, all of which are exercisable at
any time prior to March 23, 1997.
-23-
<PAGE>
NETPLEX WARRANTS
In June 1996, the Company issued the Netplex Warrants to purchase an
aggregate of 150,000 shares of Common Stock at an exercise price of $2.50 per
share, exercisable at any time until June 2001.
KIRLIN WARRANTS
In April 1996, the Company issued the Kirlin Warrants to purchase an
aggregate of 125,000 Shares of Common Stock at an exercise price of $3.50 per
share, exercisable at any time until April 2001.
-24-
<PAGE>
PLAN OF DISTRIBUTION
This offering is self-underwritten; the Company has not employed an
underwriter for the resale of Common Stock by the Selling Shareholders or the
issuance of the Common Stock upon the exercise or conversion, as the case may
be, of the Options, the Warrants, the Purchase Options, the Purchase Option
Warrants, the Convertible Preferred Stock, the 1996 Warrants, the Purchase
Option Preferred Stock, the 1996 Purchase Option Warrants or the Netplex
Warrants, or the issuance of the Purchase Option Warrants, as the case may be,
and will bear all expenses of this Offering.
SELLING SHAREHOLDER SHARES
The Common Stock may be reoffered and resold for the account of the
Selling Shareholders from time to time in the over-the-counter market or the
Boston Stock Exchange, or in negotiated transactions, at fixed prices which may
be changed or at negotiated prices. The Selling Shareholders may effect such
transactions by selling shares to or through broker-dealers, and all such
broker-dealers may receive compensation in the form of discounts, concessions,
or commissions from the Selling Shareholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Any broker-dealer acquiring shares from the Selling Shareholders may
sell the shares 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 in the over-the-counter market or at
prices related to such prevailing market prices or at negotiated prices to its
customers or a combination of such methods. The Selling Shareholders and any
broker-dealers that act in connection with the sale of the Common Stock
hereunder might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act; any commissions received by them and any profit on
the resale of shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act. Any such commissions, as well as other
expenses incurred by the Selling Shareholders and applicable transfer taxes, are
payable by the Selling Shareholders.
EXERCISE OF OPTIONS, WARRANTS, PURCHASE OPTIONS, PURCHASE OPTION WARRANTS, 1996
WARRANTS, 1996 PURCHASE OPTIONS, 1996 PURCHASE OPTION WARRANTS, NETPLEX WARRANTS
AND KIRLIN WARRANTS.
The Options, the Warrants, the Purchase Options, the Purchase Option
Warrants, the 1996 Warrants, the 1996 Purchase Options, the 1996 Purchase Option
Warrants, the Netplex Warrants and the Kirlin Warrants may be exercised, when
exercisable, at the discretion of the holder thereof, by the delivery to the
Company at its principal executive offices at 8260 Greensboro Drive, 5th Floor,
McLean, Virginia 22101 of a Warrant, Purchase Option, Purchase Option Warrant,
1996 Warrant, 1996 Purchase Option, 1996 Purchase Option Warrant, the Netplex
Warrants and the Kirlin Warrants, accompanied by an election of exercise and
payment of the exercise price for each share of Common Stock purchased in
accordance with the terms of such Warrant, Purchase Option, the Purchase Option
Warrant, 1996 Warrant, 1996 Purchase Warrant, 1996 Purchase Option Warrant, the
Netplex Warrant and the Kirlin Warrants, as the case may be. Payment must be
made in the form of cash or check payable to the order of the Company.
CONVERSION OF CONVERTIBLE PREFERRED STOCK.
The Convertible Preferred Stock may be exercised, when convertible, at
the discretion of the holder thereof, by the surrender to the Company at its
principal executive offices at 8260 Greensboro Drive, 5th Floor, McLean,
Virginia 22101 of the Convertible Preferred Stock share certificate or
certificates, duly endorsed, and shall give written notice to the Company at its
principal corporate
-25-
<PAGE>
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Convertible Preferred Stock to be converted, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date.
LEGAL MATTERS
The legality of the shares of Common Stock reoffered hereby has been
passed upon for the Company and the Selling Shareholders by Olshan Grundman
Frome & Rosenzweig LLP, New York, New York. Steven Wolosky, a member of Olshan
Grundman Frome & Rosenzweig LLP, holds options to purchase 10,000 shares of the
Common Stock of the Company.
EXPERTS
The consolidated financial statements of The Netplex Group, Inc. and
subsidiaries (formerly CompLink, Ltd.) as of July 31, 1995, and for each of the
years in the two year period ended July 31, 1995; the financial statements of
The Netplex Group, Inc. (formerly CompuServe Systems Integration Group
Mid-Atlantic, Inc.) as of December 31, 1995, and for the year then ended; the
financial statements of America's Work Exchange, Inc. and subsidiary as of
December 31, 1995, and for the year ended December 31, 1995 and the period from
April 21, 1994 (inception) to December 31, 1994; and the financial statements of
Software Resources of New Jersey, Inc. as of December 31, 1995, and for each of
the year ended December 31, 1995, incorporated by reference herein, have been
incorporated by reference in the registration statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of The Netplex Group, Inc. (formerly
CompuServe Systems Integration Group Mid-Atlantic, Inc.) as of December 31,
1994, and for the year then ended incorporated by reference herein, have been
incorporated by reference in the registration statement in reliance upon the
report of Tocci, Goldstein & Company LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Amended and Restated Certificate of Incorporation of the Company
provides that the Company shall indemnify to the fullest extent permitted by New
York law any person whom it may indemnify thereunder, including directors,
officers, employees and agents of the Company. Such indemnification (other than
as ordered by a court) shall be made by the Company only upon a determination
that indemnification is proper in the circumstances because the individual met
the applicable standard of conduct. Advances for such indemnification may be
made pending such determination. In addition, the Amended and Restated
Certificate of Incorporation provides for the elimination, to the extent
permitted by New York law, of personal liability of directors to the Company and
its shareholders for monetary damages for breach of fiduciary duty as directors.
Section 721 through 726 inclusive of the New York Business Corporation
Law (the "New York BCL") also contain provisions relating to the indemnification
of officers and directors. The New York BCL provides that a corporation may (but
is not required to) indemnify a director or officer against judgments, fines,
amounts paid in settlement and reasonable expenses of litigation (other than in
an action brought by the corporation against such person or by shareholders
against such person on behalf of the corporation), even if the director or
-26-
<PAGE>
officer is not successful on the merits, if he acted in good faith and for a
purpose he reasonably believed to be in (or not opposed to) the best interests
of the corporation (and, criminal actions or proceedings, had no reason to
believe his conduct was unlawful). In addition, a corporation may (but is not
required to) indemnify a director or officer against amounts paid in settlement
and reasonable expenses of an action brought against him by the corporation or
by shareholders on behalf of the corporation, even if he is not successful on
the merits, if he acted in good faith and for a purpose he reasonably believed
to be in (or not opposed to) the best interests of the corporation. However, no
indemnification is permitted in an action by the corporation, or shareholders on
behalf of the corporation, in connection with the settlement or other
disposition of a threatened or pending action or in connection with any claim,
issue or matter as to which a director or officer is adjudged to be liable to
the corporation, unless a court determines that, in view of all of the
circumstances, he is entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper. In addition, the New York BCL
provides that a director or officer shall be indemnified if such person is
successful in the litigation on the merits or otherwise.
Permitted indemnification as described above may only be made if it is
authorized by the Board of Directors, in each specific case, based upon a
determination that the applicable standard of conduct has been met or that
indemnification is proper under New York BCL Section 721. Such authorization is
made by the Board of Directors, either acting as a quorum of disinterested
directors or based upon an opinion by independent legal counsel or the
shareholders that indemnification is proper because the applicable standard of
conduct has been met. Upon application of the person seeking indemnification, a
court may also award indemnification upon a determination that the standards
outlined above have been met. A corporation's board of directors may also
authorize the advancement of litigation expenses to a director or officer upon
receipt of an undertaking by him to repay such expenses, if it is ultimately
determined that he is not entitled to be indemnified for them.
The Company has also agreed to indemnify each director and executive
officer pursuant to an Indemnification Agreement with each such director and
executive officer from and against any and all expenses, losses, claims, damages
and liability incurred by such director or executive officer for or as a result
of action taken or not taken while such director or executive officer was acting
in his capacity as a director, officer, employee or agent of the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
-27-
<PAGE>
No dealer, salesman or any other person is authorized to give any information or
to make any representations in connection with this offering not contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been *authorized by the Company. This Prospectus
does not constitute an offer to sell or solicitation of any offer to buy any
security other than the Securities offered by this Prospectus or an offer by any
person in any jurisdiction where such an offer or solicitation is not authorized
or is unlawful. The delivery of this Prospectus shall not, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to its date.
TABLE OF CONTENTS
Page
Incorporation of Certain Documents
By Reference......................................... 3
Prospectus Summary..................................... 4
Risk Factors........................................... 8
Use of Proceeds........................................ 12
Dilution............................................... 13
Management............................................. 15
Principal and Selling Shareholders..................... 15
Description of Securities.............................. 21
Plan of Distribution................................... 25
Legal Matters.......................................... 26
Experts................................................ 26
Indemnification for Securities Act Liability........... 26
7,861,213 Shares of Common Stock
100,000 Warrants
THE NETPLEX GROUP, INC.
PROSPECTUS
, 1996
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution of the
securities being registered, all of which, will be paid by the Registrant, are
as follows:
SEC Registration Fee.................... $ 7,942.92
Accounting Fees and Expenses............ 10,000
Legal Fees and Expenses................. 15,000
Blue Sky Fees and Expenses.............. 5,000
Miscellaneous Expenses.................. 12,057.08
-----------
Total................................... $ 50,000
===========
- -------------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
Except as hereinafter set forth, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of the Company is insured or indemnified in any
manner against liability which he may incur in his capacity as such.
The Company's authority to indemnify its directors and officers is
governed by the provisions of Article 7 of the New York Business Corporation Law
(the "BCL").
Section 722 of the BCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
judgments, fines, amounts paid in settlement, and reasonable expenses, including
attorneys' fees, in connection with actions or proceedings, whether civil or
criminal (other than an action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
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 their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except indemnification only
extends to amounts paid in settlement and reasonable expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
actions, and the statute does not apply in respect of a threatened action, or a
pending action that is settled or otherwise disposed of, and requires court
approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. Section 721 of the BCL
provides that Article 7 of the BCL is not exclusive of other indemnification
that may be granted by a corporation's certificate of incorporation,
disinterested director vote, shareholder vote, agreement or otherwise.
A more specific description of the relevant law is provided below.
ss.721 Nonexclusivity of Statutory Provisions for Indemnification of
Directors and Officers -- The indemnification and advancement of expenses
granted pursuant to, or provided by, this article shall not be deemed exclusive
of any other rights to which a director or officer seeking indemnification or
advancement of expenses may be entitled, whether contained in the certificate of
incorporation or the by-laws or, when authorized by such certificate of
incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of
directors, or (iii) an agreement providing for such indemnification, provided
that no indemnification may be made to or on behalf of any director or officer
if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause
II-1
<PAGE>
of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled. Nothing
contained in this article shall affect any rights to indemnification to which
corporate personnel other than directors and officers may be entitled by
contract or otherwise under law.
ss.722 Authorization for Indemnification of Directors and Officers--(a)
A corporation may indemnify any person, made, or threatened to be made, a party
to an action or proceeding other than one by or in the right of the corporation
to procure a judgment in its favor, whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the corporation served in any
capacity at the request of the corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding
by judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation or that he had reasonable
cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be
made, a party to an action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer or any other corporation of
any type or kind, domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation, except that no indemnification under this paragraph shall be
made in respect of (1) a threatened action, or a pending action which is settled
or otherwise disposed of, or (2) 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 in which the action was brought, or, if no action
was brought, any court of competent jurisdiction, determines upon application
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
(d) For the purpose of this section, a 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 applicable law shall be considered 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.
II-2
<PAGE>
ss.723 Payment of Indemnification Other Than By Court Award--(a) A
person who has been successful, on the merits or otherwise, in the defense of a
civil or criminal action or proceeding of the character described in section 722
shall be entitled to indemnification as authorized in such section.
(b) Except as provided in paragraph (a), any indemnification under
section 722 or otherwise permitted by section 721, unless ordered by a court
under section 724 (Indemnification of directors and officers by a court), shall
be made by the corporation, only if authorized in the specific case:
(1) By the board acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
section 722 or established pursuant to section 721, as the case may be,
or,
(2) If a quorum under subparagraph (1) is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs;
(A) By the board upon the opinion in writing of
independent legal counsel that indemnification is proper in
the circumstances because the applicable standard of conduct
set forth in such sections has been met by such director or
officer, or
(B) By the shareholders upon a &ding that the
director or officer has met the applicable standard of conduct
set forth in such sections.
(C) Expenses incurred in defending a civil or
criminal action or proceeding may be paid by the corporation
in advance of the &al disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount as, and to the
extent, required by paragraph (a) of section 725.
ss.724 Indemnification of Directors and Officers by a Court--(a)
Notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders in the
specific case under section 723 (Payment of indemnification other than by court
award), indemnification shall be awarded by a court to the extent authorized
under section 722 (Authorization for indemnification of directors and officers),
and paragraph (a) of section 723.
Application therefor may be made, in every case, either:
(1) In the civil action or proceeding in which the expenses
were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which
case the application shall set forth the disposition of any previous
application made to any court for the same or similar relief and also
reasonable cause for the failure to make application for such relief in
action or proceeding in which the expenses were incurred or other
amounts were paid.
(b) The application shall be made in such manner and form as may be
required by the applicable rules of court or, in the absence thereof, by
direction of a court to which it is made. Such application shall be upon notice
to the corporation. The court may also direct that notice be given at the
expense of the corporation to the shareholders and such other persons as it may
designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may
allow a person such reasonable expenses, including attorneys' fees, during the
pendency of the litigation as are necessary in connection with his
II-3
<PAGE>
defense therein, if the court shall find that the defendant has by his pleadings
or during the course of the litigation raised genuine issues of fact or law.
ss.725 Other Provisions Affecting Indemnification of Directors and
Officers--(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under paragraph (c) of section
723 (Payment of indemnification other than by court award) or allowed by a court
under paragraph (c) of section 724 (Indemnification of directors and officers by
a court) shall be repaid in case the person receiving such advancement or
allowance is ultimately found, under the-procedure set forth in this article,
not to be entitled to indemnification or, where indemnification is granted, to
the extent the expenses so advanced by the corporation or allowed by the court
exceed the indemnification to which he is entitled:
(b) No indemnification, advancement or allowance shall be made under
this article in any circumstance where it appears:
(1) That the indemnification would be inconsistent with the
law of the jurisdiction of incorporation of a foreign corporation which
prohibits or otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with a
provision of the certificate of incorporation, a by-law, a resolution
of the board or of the shareholders, an agreement or other proper
corporate action, in effect at the time of the accrual of the alleged
cause of action asserted in the threatened or pending action or
proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(3) If there has been a settlement approved by the court, that
the indemnification would be inconsistent with any condition with
respect to indemnification expressly imposed by the court in approving
the settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholders,
the corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three months from the date of such payment,
and in any event, within fifteen months from the date of such payment, mail to
its shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(d) If any action with respect to indemnification of directors and
officers is taken by way of amendment of the by-laws, resolution of directors,
or by agreement, then the corporation shall, not later than the next annual
meeting of shareholders, unless such meeting is held within three months from
the date of such action, and, in any event, within fifteen months from the date
of such action, mail to its shareholders of record at the time entitled to vote
for the election of directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing
paragraph (c) or (d) of this section by any domestic mutual insurer shall be
satisfied by compliance with the corresponding provisions of section one
thousand two hundred sixteen of the insurance law.
(f) The provisions of this article relating to indemnification of
directors and officers and insurance therefor shall apply to domestic
corporations and foreign corporations doing business in this state, except as
provided in section 1320 (Exemption from certain provisions).
ss.726 Insurance for Indemnification of Directors and Officers--(a)
Subject to paragraph (b), a corporation shall have power to purchase and
maintain insurance:
II-4
<PAGE>
(1) To indemnify the corporation for any obligation which it
incurs as a result of the indemnification of directors and officers
under the provisions of this article, and
(2) To indemnify directors and officers in instances in which
they may be indemnified by the corporation under the provisions of this
article, and
(3) To indemnify directors and officers in instances in which
they may not otherwise be indemnified by the corporation under the
provisions of this article provided the contract of insurance covering
such directors and officers provides, in a manner acceptable to the
superintendent of insurance, for a retention amount and for
co-insurance.
(b) No insurance under paragraph (a) may provide for any payment, other
than cost of defense, to or on behalf of any director or officer.
(1) if a judgment or other final adjudication adverse to the
insured director or officer establishes that his acts of active and
deliberate dishonesty were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled, or
(2) in relation to any risk the insurance of which is
prohibited under the insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph (a) may be
included in a single contract or supplement thereto. Retrospective rated
contracts are prohibited.
(d) The corporation shall, within the time and to the persons provided
in paragraph (c) of section .725 (Other provisions affecting indemnification of
directors or officers), mail a statement in respect of any insurance it has
purchased or renewed under this section, specifying the insurance carrier, date
of the contract, cost of the insurance, corporate positions insured, and a
statement explaining all sums, not previously reported in a statement to
shareholders, paid under any indemnification insurance contract.
(e) This section is the public policy of this state to spread the risk
of corporate management, notwithstanding any other general or special law of
this state or of any other jurisdiction including the federal government.
The Company's Amended and Restated Certificate of Incorporation
provides that the personal liability of the directors of the Company to the
Company or its shareholders for damages for any breach of duty as directors, is
eliminated, provided that nothing shall limit the liability of any Director if a
judgment or other final adjudication adverse to him establishes that his acts or
omissions were in bad faith or involved international misconduct.
The Company has also entered into indemnification agreements with each
of its officers and directors.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Company has agreed to indemnify the Underwriters and
the Underwriters have agreed to indemnify the Company and its directors,
officers and controlling persons against certain civil liabilities that may be
incurred in connection with this offering, including certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
II-5
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibit Number
***4(a) -- Form of Common Stock Certificate.
**4(b) -- Form of Warrant granted in exchange for
warrants issued in connection with 1992 Private
Placement.
*4(g) -- Form of 1996 Purchase Option granted in
September 1996.
*4(h) -- Form of Warrant issued in connection with the
1996 Private Placement
*4(i) -- Certificate of Designation for Class A
Convertible Preferred Stock.
*5 -- Opinion of Olshan Grundman Frome & Rosenzweig
LLP
***23(a) -- Consent of KPMG Peat Marwick LLP.
***23(b) -- Consent of Tocci Goldstein & Company LLP
*23(c) -- Consent of Olshan Grundman Frome & Rosenzweig
LLP (contained in their opinion included under
Exhibit 5)
***24 -- Power of Attorney, included on Page II-8.
* Filed herewith.
** Incorporated by Reference to the Registrant's Registration Statement on
Form SB-2 filed with the Securities and Exchange Commission on January
28, 1993 (Commission File No. 33-57546), as amended.
*** Previously filed.
Item 17. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
II-6
<PAGE>
(1) 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 set forth in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) shall 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 Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement;
(2) 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
this offering.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the Town of McLean, State of Virginia, on the 16th day of December, 1996.
THE NETPLEX GROUP, INC.
By: /s/ Gene Zaino
----------------
Gene Zaino, President & Chief
Executive Officer
SIGNATORIES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated. Each of the undersigned
officers and directors of The Netplex Group, Inc. hereby constitutes and
appoints Gene Zaino as true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him in his name in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and to prepare any and all exhibits thereto, and other documents in connection
therewith, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done to enable The Netplex Group, Inc. to comply with the provisions of
the Securities Act of 1933, as amended, and all requirements of the Securities
and Exchange Commission, 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 or substitutes, may lawfully do or
cause to be done by virtue hereof.
Signature Title Date
/s/ Gene Zaino President and Chief December 16, 1996
- ---------------------- Executive Officer,
Gene Zaino Director, Principal
Executive Officer
* (Principal Financial December 16, 1996
- ---------------------- Officer)
Matthew Jones
* Director December 16, 1996
- ----------------------
Howard Landis
* Director December 16, 1996
- ----------------------
Richard Goldstein
* Director December 16, 1996
- ----------------------------
Deborah Schondorf-Novick
* Director December 16, 1996
- ----------------------------
Neil Luden
*/s/ Gene Zaino
- --------------------------------
By: Gene Zaino, Attorney-in-Fact
II-8
THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE
OR JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN
PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, _______ __, 2001.
PURCHASE OPTION
FOR THE PURCHASE OF
______ UNITS, EACH UNIT CONSISTING
OF ONE SHARE OF CLASS A CONVERTIBLE PREFERRED STOCK AND
ONE COMMON STOCK PURCHASE WARRANT
OF
THE NETPLEX GROUP, INC.
(A NEW YORK CORPORATION)
1. PURCHASE OPTION.
THIS CERTIFIES THAT, in consideration of assistance provided in selling
Units of The Netplex Group, Inc. ("Company") in a private placement ("Private
Placement"), as described in the Agency Agreement between GKN Securities Corp.
("GKN") and the Company, dated as of _______ __, 1996,
__________________________ ("Holder") is entitled, at any time or from time to
time at or after ______________ __, 1996 ("Commencement Date"), and at or before
5:00 p.m., Eastern Time, ______________ __, 2001 ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
___________ Units ("Units") of the Company, each Unit consisting of one share of
Class A Convertible Preferred Stock ("Preferred Stock") convertible into one
share of the Company's Common Stock, par value $.01 per share ("Common Stock")
and one Common Stock Purchase Warrant to purchase one share of the Company's
Common Stock during the four and one-half period commencing on the six month
anniversary of the Commencement Date ("Warrant" and together with the Preferred
Stock, the "Securities"). If the Expiration Date is a day on which banking
institutions are authorized by law to close, then this option ("Purchase
Option") may be exercised on the next succeeding day which is not such a day in
accordance with the terms herein. During the period ending on the Expiration
Date, the Company agrees not to take any action that would terminate
1
<PAGE>
the Purchase Option. This Purchase Option is initially exercisable at $_____ per
Unit purchased; provided, however, that upon the occurrence of any of the events
specified in Section 6 hereof, the rights granted by this Purchase Option,
including the exercise price and the number of Shares to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean the initial exercise price or the adjusted exercise price, depending
on the context. The Units and underlying Securities granted hereby are the same
as the Units, Preferred Stock and Warrants being privately offered by the
Company in a minimum $2,000,000, maximum $3,000,000 private placement ("Private
Placement"); except that the Units and underlying Securities comprising this
Purchase Option are not redeemable by the Company; provided, however, that if at
the time that the Holder exercises this Purchase Option, no other shares of
Preferred Stock are outstanding, the Preferred Stock issuable upon exercise of
this Purchase Option will be deemed to have been automatically converted at the
time this Purchase Option is exercised into shares of Common Stock and dividends
as if converted in accordance with Section 7(a) of the Preferred Stock's
Certificate of Designations, Preferences and Other Rights and Qualifications.
2. EXERCISE.
2.1 EXERCISE FORM. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price in cash or by certified check or official bank check for the Units being
purchased. If the subscription rights represented hereby shall not be exercised
at or before 5:00 p.m., Eastern time, on the Expiration Date this Purchase
Option shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire.
2.2 LEGEND. Each certificate for the Preferred Stock and Warrants
purchased under this Purchase Option shall bear a legend as follows unless such
Preferred Stock and Warrants have been registered under the Securities Act:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT OR APPLICABLE STATE SECURITIES LAWS,
SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THE TRANSFER OF SUCH SECURITY AND ANY SECURITIES
ISSUABLE UPON CONVERSION OR EXERCISE OF SUCH
SECURITY IS RESTRICTED AS SET FORTH IN A
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY.
3. TRANSFER.
3.1 RESTRICTIONS IMPOSED BY THE ACT. This Purchase Option and the
Securities underlying this Purchase Option shall not be transferred unless and
until (i) the Company has received the opinion of counsel for the Holder
satisfactory to it that this Purchase Option or the
2
<PAGE>
Securities, as the case may be, may be transferred pursuant to an exemption from
registration under the Act and applicable state law, the availability of which
is established to the reasonable satisfaction of the Company (the Company hereby
agreeing that the opinion of Graubard Mollen & Miller ("GM&M") addressed to the
Company shall be deemed satisfactory evidence of the availability of an
exemption), or (ii) a registration statement relating to such Purchase Option or
Securities, as the case may be, has been filed by the Company and declared
effective by the Securities and Exchange Commission and compliance with
applicable state law.
3.2 EFFECTUATING TRANSFERS. In order to make any permitted assignment,
the Holder must deliver to the Company the assignment form attached hereto duly
executed and completed, together with the Purchase Option and payment of all
transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Purchase Option on the books of the Company and shall
execute and deliver a new Purchase Option or Purchase Options of like tenor to
the appropriate assignee(s) expressly evidencing the right to purchase the
aggregate number of Shares purchasable hereunder or such portion of such number
as shall be contemplated by any such assignment.
4. NEW PURCHASE OPTIONS TO BE ISSUED.
4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in
Section 3 hereof, this Purchase Option may be exercised or assigned in whole or
in part. In the event of the exercise or assignment hereof in part only, upon
surrender of this Purchase Option for cancellation, together with the duly
executed exercise or assignment form and funds sufficient to pay the Exercise
Price, the Company shall cause to be delivered to the Holder without charge a
new Purchase Option of like tenor to this Purchase Option in the name of the
Holder evidencing the right of the Holder to purchase the aggregate number of
Securities purchasable hereunder as to which this Purchase Option has not been
exercised or assigned.
4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any such
new Purchase Option executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. REGISTRATION RIGHTS. The Company will register for resale under a
Registration Statement ("Registration Statement") pursuant to the Securities Act
and applicable Blue Sky or state securities laws, the shares of Common Stock
issuable upon conversion or exercise, as the case may be, of the Preferred Stock
and Warrants underlying the Purchase Option. The Company agrees that the
Registration Statement will be filed on or before the two-month anniversary of
the date of this Purchase Option. The Company agrees to use its best efforts to
have the Registration Statement declared effective by the four-month anniversary
of the date of this Purchase Option ("Extra Warrant Date"). If the Company shall
either fail to so file the Registration Statement or to use it best efforts to
have the Registration Statement declared effective by the Extra Warrant Date,
and the Registration Statement is not declared effective by the Extra Warrant
Date, then on the Extra Warrant Date and on each three-month (quarterly)
anniversary of the Extra Warrant Date thereafter until the earlier of the
effective date of the Registration Statement ("Effective Date") or the tenth
quarterly anniversary of the Extra Warrant Date, the Company shall issue to the
holder hereof (or his successor or transferee), Warrants ("Extra Warrants") to
purchase a number of shares of Common Stock equal to 10% of the number of Units
underlying this Purchase Option. The Extra Warrants shall have the same terms as
the Warrants included in the Units. To the extent that the Company issues any
Extra
3
<PAGE>
Warrants or is obligated to issue any Extra Warrants, the Common Stock
underlying such Extra Warrants will be included in the Registration Statement.
The Company shall keep the Registration Statement effective and current until
all the securities registered thereunder are sold or until all such securities
may be sold by the holders thereof under Rule 144 without limitation. The
Company shall bear all the expenses and pay all the fees it incurs in connection
with the preparation, filing and modification or amendment of the Registration
Statement.
6. INDEMNIFICATION.
6.1 COMPANY'S INDEMNIFICATION OF HOLDER.
The Company shall indemnify and hold harmless the Holder and
each of the Holder's officers, directors, employees, agents, partners, legal
counsel and accountants, and each person, if any, who controls each of the
foregoing within the meaning of Section 15 of the Securities Act or Section
20(a) of the Securities Exchange Act 1934, as amended ("Exchange Act"), against
all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever incurred by the indemnified
party in any action or proceeding between the indemnitor and indemnified party
or between the indemnified party and any third party or otherwise) to which any
of them may become subject under the Securities Act, the Exchange Act or any
other statute or at common law or otherwise arising from such Registration
Statement or based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) any preliminary prospectus, registration
statement or prospectus (as from time to time each may be amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included the Securities and/or
Common Stock underlying the Securities; or (iii) any application or other
document or written communication (collectively called "application") executed
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the commission, any state securities commission or agency,
Nasdaq or any securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; unless such statement or omission is made in reliance upon, and
in strict conformity with, written information furnished to the Company with
respect to the Holder expressly for use in a preliminary prospectus,
registration statement or prospectus, or any amendment or supplement thereof, or
in any application, as the case may be. The Company agrees promptly to notify
the Holder of the commencement of any litigation proceedings against the Company
or any of its officers, directors or controlling persons in connection with the
issue and sale or resale of the Securities and the Common Stock underlying the
Securities or in connection with any such registration statement or prospectus.
6.2 HOLDER'S INDEMNIFICATION OF COMPANY.
The Holder shall indemnify and hold harmless the Company and
each of the Company's officers, directors, employees, agents, partners, legal
counsel and accountants, and each person, if any, who controls each of the
foregoing within the meaning of Section 15 of the Securities Act or Section
20(a) of the Securities Exchange Act 1934, as amended ("Exchange Act"), against
all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any
4
<PAGE>
claim whatsoever incurred by the indemnified party in any action or proceeding
between the indemnitor and indemnified party or between the indemnified party
and any third party or otherwise) to which any of them may become subject under
the Securities Act, the Exchange Act or any other statute or at common law or
otherwise arising from such Registration Statement or based upon any untrue
statement or alleged untrue statement of a material fact furnished by and
relating to the Holder contained in (i) any preliminary prospectus, registration
statement or prospectus (as from time to time each may be amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included the Securities and/or
Common Stock underlying the Securities; or (iii) any application executed by the
Holder or based upon written information furnished by the Holder in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the commission, any state securities commission or agency,
Nasdaq or any securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading relating soley to the Holder; unless such statement or omission
is made in reliance upon, and in strict conformity with, written information
furnished to the Holder with respect to the Company expressly for use in a
preliminary prospectus, registration statement or prospectus, or any amendment
or supplement thereof, or in any application, as the case may be, or, the
information does not relate to the Holder. The Holder agrees promptly to notify
the Company of the commencement of any litigation proceedings against the Holder
or any of its officers, directors or controlling persons, if applicable, in
connection with the issue and sale or resale of the Securities and the Common
Stock underlying the Securities or in connection with any such registration
statement or prospectus.
7. ADJUSTMENTS.
7.1 ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The Exercise
Price and the number of shares of Common Stock underlying the Securities subject
to the Purchase Option shall be subject to adjustment from time to time as
hereinafter set forth:
7.1.1 STOCK DIVIDENDS - SPLIT-UPS. If after the date hereof, and
subject to the provisions of Section 7.2 below, the number of outstanding shares
of Common Stock is increased by a stock dividend payable in shares of Common
Stock or by a split-up of shares of Common Stock or other similar event, then,
on the effective date of such stock dividend or split-up, the number of shares
of Common Stock underlying the Securities issuable on exercise of the Purchase
Option shall be increased in proportion to such increase in outstanding shares.
7.1.2 AGGREGATION OF SHARES. If after the date hereof, and subject
to the provisions of Section 7.2, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of shares
of Common Stock or other similar event, then, upon the effective date of such
consolidation, combination or reclassification, the number of shares of Common
Stock underlying the Securities issuable on exercise of the Purchase Option
shall be decreased in proportion to such decrease in outstanding shares.
7.1.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of shares
of Common Stock underlying the Securities purchasable upon the exercise of this
Purchase Option is adjusted, as provided in this Section 7.1, the Exercise Price
shall be adjusted (to the nearest cent) by multiplying such Exercise Price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Common Stock underlying the Securities
purchasable upon the exercise of this Purchase Option immediately prior to such
5
<PAGE>
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock underlying the Securities so purchasable immediately thereafter.
7.1.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. If after
the date hereof any capital reorganization or reclassification of the Common
Stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation or other similar event shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby the Holder shall thereafter have the
right to purchase and receive, upon the basis and upon the terms and conditions
specified in the Purchase Option and in lieu of the securities of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such shares of stock, securities, or assets as may
be issued or payable with respect to or in exchange for the number of securities
equal to the number of securities immediately theretofore purchasable and
receivable upon the exercise of the rights represented by the Purchase Option,
had such reorganization, reclassification, consolidation, merger, or sale not
taken place and in such event appropriate provision shall be made with respect
to the rights and interests of the Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Exercise Price
and of the number of securities purchasable upon the exercise of the Purchase
Option) shall thereafter be applicable, as nearly as may be in relation to any
share of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company shall not effect any such consolidation, merger or sale
unless prior to the consummation thereof the successor corporation (if other
than the Company) resulting from such consolidation or merger, or the
corporation purchasing such assets, shall assume by written instrument executed
and delivered to the Holder evidencing its obligation to deliver such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.
7.1.5 CHANGES IN FORM OF PURCHASE OPTION. This form of Purchase
Option need not be changed because of any change pursuant to this Section, and
Purchase Options issued after such change may state the same Exercise Price and
the same number of shares of Common Stock underlying the Preferred Stock and
Warrants purchasable upon exercise of this Purchase Option as are stated in the
Purchase Options initially issued pursuant to this Agreement. The acceptance by
any Holder of the issuance of new Purchase Options reflecting a required or
permissive change shall not be deemed to waive any rights to a prior adjustment
or the computation thereof.
7.2 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractional shares of Common Stock or
Securities nor shall it be required to issue scrip or pay cash in lieu of any
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up or down to the nearest
whole share of Common Stock or other Securities, properties or rights.
8. RESERVATION AND LISTING. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of Securities underlying the Purchase Options or
sufficient number of shares of Common Stock. The Company covenants and agrees
that, upon exercise of the Purchase Options and payment of the Exercise Price
therefor and upon exercise of the Securities underlying the Purchase Options,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of
any stockholder. As long as the Purchase Option shall be outstanding, the
Company shall use its best efforts to
6
<PAGE>
cause the Common Stock, issuable upon exercise of the Securities underlying the
Purchase Options to be listed (subject to official notice of issuance) on all
securities exchanges (or, if applicable on Nasdaq) on which the Common Stock is
then listed and/or quoted.
9. CERTAIN NOTICE REQUIREMENTS.
9.1 HOLDER'S RIGHT TO RECEIVE NOTICE. Nothing herein shall be construed
as conferring upon the Holder the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Purchase Options and their exercise, an event
described in Section 7 shall occur, then the Company shall give written notice
to the Holder promptly thereafter. The Company shall also be required to give
written notice to the Holder promptly thereafter if: (i) the Company declares a
dividend or distribution payable in Common Stock, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor. Any such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
9.2 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 7.1
hereof, send notice to the Holder of such event and change ("Price Notice"). The
Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
9.3 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made on the date of delivery if delivered personally or
sent by overnight courier, with acknowledgement of receipt to the party to which
notice is given, or on the fifth day after mailing if mailed to the party to
whom notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as shown
on the books of the Company, or (ii) if to the Company, to its principal
executive office.
10. MISCELLANEOUS.
10.1 AMENDMENTS. The Company and the Holder may from time to time
supplement or amend this Purchase Option without the approval of the Holder in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and GKN may deem necessary or desirable and which
the Company and GKN deem shall not adversely affect the interest of the Holder.
All other modifications or amendments shall require the written consent of the
party against whom enforcement of the modification or amendment is sought.
10.2 EXCHANGE AGREEMENT. As a condition to the Holder's receipt and
acceptance of this Purchase Option, Holder agrees that, at any time prior to the
complete exercise of this Purchase Option by Holder, if the Company and GKN
enter into an agreement ("Exchange Agreement") pursuant to which they agree that
all outstanding Purchase Options issued in connection with the Private Placement
will be exchanged for securities or cash or a combination
7
<PAGE>
of both, then Holder shall agree to such exchange and become a party to the
Exchange Agreement.
10.3 HEADINGS. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Purchase
Option.
10.4 ENTIRE AGREEMENT. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 BINDING EFFECT. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Purchase Option or any provisions
herein contained.
10.6 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws of
the State of New York, without giving effect to conflict of laws. The Company
hereby agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
8 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company agrees
that the prevailing party(ies) in any such action shall be entitled to recover
from the other party(ies) all of its reasonable attor neys' fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
10.7 WAIVER, ETC. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Purchase Option shall not be deemed
or construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
10.8 EXECUTION IN COUNTERPARTS. This Purchase Option may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the _____ day of _______, 1996.
THE NETPLEX GROUP, INC.
By:
-------------------------------------------
Name:
Title:
Accepted and Agreed to:
- ------------------------
Name:
(HOLDER)
9
<PAGE>
Form to be used to exercise Purchase Option:
The Netplex Group, Inc.
8260 Greensboro Drive
McClean, Virginia 22101
Date:_________________, 19__
The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase ______ Units of The Netplex Group, Inc.
(consisting in the aggregate of shares of the Preferred Stock and Warrants of
The Netplex Group, Inc.) and hereby makes payment of $____________ (at the rate
of $_________ per Unit) in payment of the Exercise Price pursuant thereto.
Please issue the number of Securities as to which this Purchase Option is
exercised in the name of the person(s) given below.
OR
The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase _________ Units of The Netplex Group, Inc. by
surrender of the unexercised portion of the within Purchase Option (with a
"Value" of $__________ based on a "Market Price" of $___________). Please issue
the Preferred Stock and Warrants comprising the Units in the name of the
person(s) given below.
------------------------------
Print Name(s)
------------------------------
Signature(s)
------------------------------
Signature(s) Guaranteed
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A
BANK, OTHER THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING
MEMBERSHIP ON A REGISTERED NATIONAL SECURITIES EXCHANGE.
10
<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby sell,
assign and transfer unto _________________________________ the right to purchase
_____________________ Units (consisting of shares of Preferred Stock and
Warrants) of The Netplex Group, Inc. ("Company") evidenced by the within
Purchase Option and does hereby authorize the Company to transfer such right on
the books of the Company.
Dated:____________________, 19___
--------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
11
NEITHER THIS WARRANT NOR THE COMMON STOCK WHICH MAY BE ACQUIRED UPON THE
EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER THE ACT AND COMPLIANCE WITH ANY APPLICABLE
STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. THE
COMPANY'S SUBSCRIPTION AGREEMENT WITH THE HOLDER CONTAINS ADDITIONAL PROVISIONS
RESTRICTING THE TRANSFER OF THIS WARRANT. A COPY OF SUCH AGREEMENT IS AVAILABLE
FOR INSPECTION AT THE COMPANY'S OFFICE.
VOID AFTER 5:00 P.M. EASTERN TIME, _______ __, 2001.
For the Purchase of
_________ shares of
No. _____________ Common Stock
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
THE NETPLEX GROUP, INC.
(A New York corporation)
The Netplex Group, Inc., a New York corporation (the "Company"), hereby
certifies that for value received, _____________________, or his, her or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
during the period commencing on _____________ [THE SIX MONTH ANNIVERSARY OF THE
CLOSING OF THE PRIVATE PLACEMENT] and ending on ________________ [FIFTH YEAR
ANNIVERSARY OF CLOSING], __________ shares of Common Stock, $.01 par value, of
the Company ("Common Stock"), at a purchase price equal to $____ per share. The
number of shares of Common Stock purchasable upon exercise of this Warrant, and
the purchase price per share, each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Shares"
and the "Purchase Price," respectively.
1
<PAGE>
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
Form attached hereto as Exhibit I duly executed by such Registered Holder) at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full, in lawful money of the
United States, of an amount equal to the then applicable Purchase Price
multiplied by the number of Warrant Shares then being purchased upon such
exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in subsection 1(c) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
(c) As soon as practicable after the exercise of the purchase
right represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of the Registered Holder and delivered
to GKN Securities Corp. or Kirlin Securities Corp., as the case may be, for
deposit in the Registered Holder's securities account or, subject to the terms
and conditions hereof, to such other individual or entity as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in writing:
(i) a certificate or certificates for the number of full
shares of Warrant Shares to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such Registered
Holder would otherwise be entitled, cash in an amount determined pursuant to
Section 3 hereof, and
(ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, stating on the face or faces
thereof the number of shares currently stated on the face of this Warrant minus
the number of such shares purchased by the Registered Holder upon such exercise
as provided in subsection 1(a) above.
2. ADJUSTMENTS.
(a) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
outstanding shares of the Company's Common Stock at any time while this Warrant
remains outstanding and unexpired shall be subdivided or split into a greater
number of shares, or a dividend in Common Stock shall be paid in respect of
Common Stock, or a similar change in the Company's capitalization occurs which
affects the outstanding Common Stock, as a class, then the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall, simultaneously with the effectiveness of such subdivision or
split or immediately after the record date of such dividend (as the case may
be), be proportionately decreased. If the outstanding shares of Common Stock
shall be combined or reverse-split into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination or reverse split shall,
simultaneously with
2
<PAGE>
the effectiveness of such combination or reverse split, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of shares of Warrant Shares purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior to
such adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER.
In the case of any reclassification of the Common Stock or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
continuing corporation and which does not result in any reclassification of the
Common Stock), or a transfer of all or substantially all of the assets of the
Company, or the payment of a liquidating distribution then, as part of any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, the Company shall arrange for the other party to the transaction
to agree to, and lawful provision shall be made, so that the Registered Holder
of this Warrant shall have the right thereafter to receive upon the exercise
hereof (to the extent, if any, still exercisable), the kind and amount of shares
of stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of this Warrant such that the provisions set forth in this Section 2
(including provisions with respect to the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
(c) PRICE ADJUSTMENT. No adjustment in the per share exercise
price shall be required unless such adjustment would require an increase or
decrease in the Purchase Price of at least $0.01; provided, however, that any
adjustments which by reason of this paragraph are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be.
(d) PRICE REDUCTION. Notwithstanding any other provision set
forth in this Warrant, at any time and from time to time during the period that
this Warrant is exercisable, the Company in it sole discretion upon appropriate
notice to the Registered Holder may reduce the Purchase Price or extend the
period during which this Warrant is exercisable.
(e) NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such actions as may be necessary or
appropriate in order to protect against
3
<PAGE>
impairment of the rights of the Registered Holder of this Warrant to adjustments
in the Purchase Price.
(f) NOTICE OF ADJUSTMENT. Upon the happening of any event
requiring an adjustment of the exercise price hereunder, the Company shall
forthwith give written notice thereto to the Registered Holder of this Warrant
stating the adjusted exercise price and the adjusted number of shares
purchasable upon the exercise hereof resulting from such event and setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based.
3. FRACTIONAL SHARES. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment thereof in cash on the basis of the last sale price of the Warrant
Shares on the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotations System or on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then fair
market value of the Warrant Shares as shall be reasonably determined by the
Board of Directors of the Company.
4. LIMITATION ON SALES. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as now in force or hereafter amended, or any successor
legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued
upon its exercise in the absence of (a) an effective registration statement
under the Act as to this Warrant or such Warrant Shares and registration or
qualification of this Warrant or such Warrant Shares under any applicable Blue
Sky or state securities law then in effect or (b) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required. Without limiting the generality of the foregoing, unless the offering
and sale of the Warrant Shares to be issued upon the particular exercise of the
Warrant shall have been effectively registered under the Act, the Company shall
be under no obligation to issue the shares covered by such exercise unless and
until the Registered Holder shall have executed an investment letter in form and
substance satisfactory to the Company, including a warranty at the time of such
exercise that it is acquiring such shares for its own account, and will not
transfer the Warrant Shares unless pursuant to an effective and current
registration statement under the Act or an exemption from the registration
requirements of the Act and any other applicable restrictions, in which event
the Registered Holder shall be bound by the provisions of a legend or legends to
such effect which shall be endorsed upon the certificate(s) representing the
Warrant Shares issued pursuant to such exercise. The Warrant Shares issued upon
exercise thereof shall be imprinted with legends in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SAID ACT OR
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN
OPINION OF COUNSEL,
4
<PAGE>
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
THE TRANSFER OF THE WARRANT SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT IS RESTRICTED AS SET FORTH IN A
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY.
After the Registration Statement referenced in Section 6 hereinafter is
declared effective by the Securities and Exchange Commission, if any Registered
Holder shall deliver to the Company the certificate representing the Warrant
Shares, then the Company shall within three days after receipt by the Company of
the foregoing, issue a new certificate representing and in exchange for the
aforementioned certificate, which new certificate shall be legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES MAY BE SOLD PURSUANT TO THE REGISTRATION
STATEMENT PROVIDED THAT THE HOLDER COMPLIES WITH THE
PROSPECTUS DELIVERY REQUIREMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE SALE IS IN COMPLIANCE WITH
THE PLAN OF DISTRIBUTION SET FORTH IN THE PROSPECTUS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTION AS SET FORTH IN A
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY.
5. CERTAIN DIVIDENDS. If the Company pays a dividend or makes a
distribution on the Common Stock (determined in accordance with generally
accepted accounting principles) except for a stock dividend payable in shares of
Common Stock (a "Property Dividend"), then the Company will pay or distribute to
the Registered Holder of this Warrant, upon the exercise hereof, in addition to
the Warrant Shares purchased upon such exercise, the Property Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such shares of Warrant Shares immediately prior to the date on which a
record is taken for such Property Dividend or, if no record is taken, the date
as of which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
6. REGISTRATION RIGHTS OF WARRANT HOLDER; EXTRA WARRANTS. The Company
has agreed to register the Warrant shares issuable hereunder on a Registration
Statement under the Act ("Registration Statement") with the Securities and
Exchange Commission as discussed in Section 7 of the Subscription Agreement
between the Company and the Registered Holder.
5
<PAGE>
7. NOTICES OF RECORD DATE. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution (other than a dividend or distribution payable
solely in capital stock of the Company or out of funds legally available
therefor), or to receive any right to subscribe for or purchase any shares of
any class or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
8. RESERVATION AND MAINTENANCE OF LISTING OF STOCK. The Company will at
all times reserve and keep available, solely for issuance and delivery upon the
exercise of this Warrant, such shares of Warrant Shares and other stock,
securities and property, as from time to time shall be issuable upon the
exercise of this Warrant and shall use its best efforts to list and maintain the
quotation of the Warrant Shares on the same system or exchange as the Company's
outstanding Common Stock.
9. REDEMPTION OF WARRANTS BY THE COMPANY.
(a) REDEMPTION. The Warrants may be redeemed, at the option of the
Company, as a whole at any time prior to the Expiration Date, at the executive
office of the Company, upon the notice referred to in Section 9(b), at the price
of $.01 per Warrant ("Redemption Price"), provided that (i) the last sale price
of the Common Stock has been at least [$____] {200% of the Purchase Price}
("Trigger Price") on each of the twenty (20) consecutive trading days ending on
the third business day prior to the date on which notice of redemption is
6
<PAGE>
given, the satisfaction of which condition shall be certified by the Company,
and (ii) the Registration Statement is effective and current.
(b) DATE FIXED FOR AND NOTICE OF REDEMPTION. Notice of redemption
shall be mailed by first class mail, postage prepaid, by the Company or the
Company's agent at its discretion not less than 30 days from the date fixed for
redemption to the registered holders of the Warrants to be redeemed at their
last address as they shall appear on the registration books. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly
given whether or not the registered holder received such notice.
(c) EXERCISE AFTER NOTICE OF REDEMPTION. The Warrants may be
exercised in accordance with Section 1 of this Agreement at any time after
notice of redemption shall have been given by the Company pursuant to Section
9(b) hereof and prior to the date fixed for redemption. On and after the
redemption date, the record holder of the Warrants shall have no further rights
except to receive, upon surrender of the Warrants, the Redemption Price.
(d) If there is any adjustment in the Purchase Price pursuant to
Section 2 hereof, then the Trigger Price will be adjusted correspondingly.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. TRANSFERS, ETC; RESTRICTIONS AGAINST TRANSFER.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its, his or her address as shown on the warrant register by written
notice to the Company requesting such change.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
(c) The holder hereof has agreed with the Company and the Placement
Agents not to sell, transfer or otherwise dispose of this Warrant, the Extra
Warrants, the Common Stock underlying each of the foregoing, until one year from
the date of this Warrant, without the prior written consent of GKN Securities
Corp.
7
<PAGE>
12. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
13. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
14. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York as such laws are applied to
contracts made and to be fully performed entirely within that state between
residents of that state.
16. JURISDICTION AND VENUE. The Company (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Warrant shall be
instituted exclusively in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding, and the Company further agrees to accept
and acknowledge service or any and all process which may be served in any such
suit, action or proceeding in New York State Supreme Court, County of New York
or in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
suit, action or proceeding.
17. MAILING OF NOTICES, ETC. All notices and other communications under
this Warrant (except payment) shall be in writing and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar
receipt delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
Registered Holder: To his or her address on page 1 of this Warrant.
The Company: The Netplex Group, Inc.
8260 Greensboro Drive
McClean, Virginia 22101
Attn: Gene Zaino
President and Chief Executive Officer
Fax: (703) 356-1717
8
<PAGE>
with a copy to:
Olshan Grundman Frome & Rosenzweig
505 Park Avenue
New York, New York 10022
Attn: Steven Wolosky, Esq.
Fax: (212) 755-1467
Placement Agent: GKN Securities Corp.
61 Broadway
New York, New York 10017
Attn: David M. Nussbaum, Esq.
Fax: (212) 809-6189
Kirlin Securities, Inc.
6901 Jericho Turnpike
Syosset, New York 11791
Attn: Anthony Kirincic
Fax: (516) 393-2500
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attn: David Alan Miller, Esq.
Fax: (212) 818-8881
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.
THE NETPLEX GROUP, INC.
By:
--------------------------------------------------
Gene Zaino, President and Chief Executive Officer
9
<PAGE>
NOTICE OF EXERCISE
TO: The Netplex Group, Inc.
8260 Greensboro Drive
McClean, Virginia 22101
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of The Netplex Group, Inc., pursuant to terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned or in such other name as is
specified below:
3. The undersigned represents that it will sell the shares of Common
Stock pursuant to an effective Registration Statement under the Securities Act
of 1933, as amended, or an exemption from registration thereunder.
(Name)
(Address)
(Taxpayer Identification Number)
[PRINT NAME OF REGISTERED HOLDER]
By:
-----------------------------
Title:
---------------------------
Date:
---------------------------
10
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
THE NETPLEX GROUP, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
----------------------------
It is hereby certified that:
FIRST: The name of the corporation is THE NETPLEX GROUP, INC., F/K/A
COMPLINK, LTD. (the "Corporation").
SECOND: The certificate of incorporation of the Corporation was filed
with the Department of State on August 1, 1986. A Restated Certificate of
Incorporation was filed with the Department of State on March 27, 1992. An
Amended and Restated Certificate of Incorporation was filed with the Department
of State on March 9, 1993. An amendment to the Amended and Restated Certificate
of Incorporation was filed on June 12, 1996. The Amended and Restated
Certificate of Incorporation and the amendment to the Certificate of
Incorporation are collectively referred to herein as "The Certificate of
Incorporation."
THIRD: That the Certificate of Incorporation be and it hereby is
amended by the addition of Article FOURTH (B) stating the number, designation,
relative rights, preferences and limitations of the Company's Preferred Stock as
follows:
1. DESIGNATIONS AND AMOUNT. 2,000,000 shares of the Preferred
Stock of the Corporation, par value $.01 per share, shall constitute a class of
Preferred Stock designated as "Class A 10% Convertible Preferred Stock" (the
"Class A Preferred Stock").
2. RANK. The Class A Preferred Stock shall rank senior to all
classes and series of capital stock of the Corporation now or hereafter
authorized, issued or outstanding, including, without limitation, the Common
Stock, par value $.001 per share ("Common Stock") of the Corporation, and any
other classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding (collectively, the "Junior Securities"). In
addition, the Corporation will not issue any class or series of any class or
capital stock which ranks PARI PASSU with the Class A Preferred Stock with
respect to dividend rights or rights on liquidation, winding-up on dissolution
of the Corporation.
<PAGE>
3. DIVIDENDS.
(a) The holders of shares of Class A Preferred Stock shall be
entitled to receive, out of assets of the Corporation legally available for
payment and subject to Section 3(b) hereof, cash dividends at the rate of 10%
per annum (or $.20) per share of Series A Preferred Stock (the "Preferred
Dividend"), payable quarterly in arrears on March 31, June 30, September 30 and
December 31, commencing December 31, 1996 (each a "dividend payment date");
PROVIDED, HOWEVER that, if on any such day banks in the City of New York are
authorized or required to close, a Preferred Dividend otherwise payable on such
day will be payable on the next day that banks in the City of New York are not
authorized or required to close. Such Preferred Dividend shall be cumulative
from the later of the date of initial issuance of such shares of Class A
Preferred Stock, or the most recent dividend payment date on which dividends
have been paid on the Class A Preferred Stock by the Corporation. Such Preferred
Dividend shall be payable, in arrears, to holders of record as they appear on
the stock books of the Corporation on such record dates, not more than 60 days
nor less than 10 days preceding the dividend payment dates thereof, as shall be
fixed by the Board. The amount of the Preferred Dividend payable per share for
each dividend period shall be computed by dividing by four the 10% annual rate.
The amount of the Preferred Dividend payable for the initial dividend period and
for any period shorter than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months.
(b) At the Corporation's option, so long as the Corporation's
authorized capital is sufficient, the Corporation shall have the right, in lieu
of paying some or all of any Preferred Dividend in cash, to issue such number of
shares of Class A Preferred Stock to holders of Class A Preferred Stock which is
equal to the Preferred Dividend on the basis of one share of Class A Preferred
Stock valued at the lower of $2.00 (stated value) or market value of the
Company's Common Stock. For purposes of this subsection 3((b), market value
shall mean the average closing sale price of the Company's Common Stock on each
trading date during the quarterly period immediately prior to the dividend
payment date. By way of example, if the amount of the Preferred Dividend due to
a holder of Class A Preferred Stock is $9.00 and the average closing sale price
is $1.00 per share, then the Corporation may issue nine shares of Class A
Preferred Stock to the holder of the Class A Preferred Stock; if the average
closing sales price is $2.00 per share or greater then the Corporation may issue
4.5 shares of Class A Preferred Stock to the holder of the Class A Preferred
Stock. Fractional amounts will be rounded to the nearest whole-number.
-2-
<PAGE>
(c) The Corporation may not declare or pay any dividend or make
any distribution of assets on, or redeem, purchase or otherwise acquire, Junior
Securities, unless all accrued and unpaid dividends on the Class A Preferred
Stock for all prior dividend periods have been or contemporaneously are declared
and paid and the full quarterly dividend on the Class A Preferred Stock for the
current dividend period has been or contemporaneously is declared and set apart
for payment.
4. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP, ETC.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to stockholders, whether from capital, surplus or
earnings, shall be distributed in the following order of priority:
(i) The holders of Class A Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution to the holders of any Junior Securities an amount
equal to the greater of (A) ($4.00 per share) for each share of
Class A Preferred Stock then outstanding plus an amount equal
to all accrued but unpaid dividends on such share of Class A
Preferred Stock as of the date such payment is made to the
holders of Class A Preferred Stock, or (B) the amount the
holders of Class A Preferred Stock would have received had the
holders of Class A Preferred Stock converted the Class A
Preferred Stock into Common Stock as provided in Section 7
immediately prior to the voluntary or involuntary liquidation
and, in addition, an amount equal to all accrued but unpaid
dividends on such shares of Class A Preferred Stock as of the
date such payment is made to the holders of Class A Preferred
Stock.
(ii) (x) If there is a distribution pursuant to
Section 4(a)(i)(A) or 4(a)(i)(B) hereof, the remaining assets
of the Corporation available for distribution, if any, to the
stockholders of the Corporation shall be distributed to the
holders of issued and outstanding shares of Common Stock.
(b) If, at any time (the "Change of Control Date"), (i) all or
substantially all of the Corporation's assets are sold as an entirety to any
person or related group of persons other than an Affiliate or Affiliates of the
Corporation, or (ii) the Corporation is merged with or into another corporation
or another corporation is merged into the Corporation with the effect that
immediately after such transaction the stockholders of the Corporation
immediately prior to such transaction hold less than
-3-
<PAGE>
50% of the total voting power entitled to vote in the election of directors,
managers or trustees of the entity surviving such transaction, (collectively,
the "Change of Control"), then the Corporation shall notify the holders of
shares of the Class A Preferred Stock in writing of such occurrence and shall
make an offer to purchase (the "Change of Control Offer") within the 30th day
following the Change of Control Date (the "Change of Control Payment Date") all
shares of the Class A Preferred Stock then outstanding at a purchase price equal
to the greater of (a) two times the stated value ($2.00 per share) plus accrued
and unpaid dividends to the Change of Control Payment Date, if any or (b) the
amount, if any, the holders of the Class A Preferred would have received had the
holders of the Class A Preferred Stock converted the Class A Preferred Stock
into Common Stock as provided in Section 7 immediately prior to the Change of
Control and, in addition, the amount equal to all accrued but unpaid dividends
on such shares of Class A Preferred Stock as of the date such payment is made to
the holders of the Class A Preferred Stock.
Notice of a Change of Control Offer shall be mailed by the
Corporation not less than 30 days nor more than 60 days before the Change of
Control Payment Date to the holders of shares of the Class A Preferred Stock at
their last registered addresses as they appear on the books of the Corporation
or its Transfer Agent. The Change of Control Offer shall remain open from the
time of mailing until the fifth business day preceding the Change of Control
Payment Date. The notice, which shall govern the terms of the Change of Control
Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4(b) and that all shares of the Class A Preferred
Stock will be accepted for purchase;
(2) the purchase price and the Change of Control Payment Date;
(3) that any shares of Class A Preferred Stock not tendered
will continue to accrue dividends;
(4) that any shares of Class A Preferred Stock accepted for
purchase pursuant to the Change of Control Offer shall cease
to accrue dividends after the Change of Control Payment Date;
(5) that holders of shares of the Class A Preferred Stock
electing to have shares purchased pursuant to a Change of
Control Offer will be required to surrender certificates
representing their shares of the Class A Preferred Stock with
such documentation evidencing their election to have their
shares purchased as the
-4-
<PAGE>
Corporation shall reasonably request, to the Corporation prior
to the close of business on the Change of Control Payment
Date;
(6) that holders will be entitled to withdraw their election
if the Corporation receives, not later than the close of
business on the Business Day three Business Days preceding the
Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder,
the number of shares of the Class A Preferred Stock the holder
delivered for purchase and a statement that such holder is
withdrawing his election to have such shares purchased;
(7) that holders whose shares are purchased only in part will
be issued certificates for shares representing the unpurchased
portion of the shares surrendered;
(8) the instructions that holders must follow in order to
tender their shares; and
(9) the circumstances and relevant facts regarding such Change
of Control.
On the Change of Control Payment Date, the Company shall (i)
accept for payment the shares tendered pursuant to the Change of Control Offer
and (ii) promptly mail to the holder of shares so accepted payment in an amount
equal to the purchase price.
For purposes of this Section 4(b), the term "Affiliate" shall
mean any person directly or indirectly controlling, controlled by or under
common control with the Corporation as of the Change of Control Payment Date.
For the purposes of this definition, the beneficial ownership of 10% or more of
the voting common equity of a person shall be deemed to be control.
5. REDEMPTION OF CLASS A PREFERRED STOCK. (a) At any time
there is an effective Registration Statement under the Securities Act of 1933,
as amended, relating to the re-offer and re-sale of the shares of Common Stock
underlying the Class A Preferred Stock and the shares of Common Stock underlying
certain warrants granted in connection with a private offering (the "Offering")
of Units consisting of one share of Class A Preferred Stock and a warrant to
purchase one share of Common Stock, and subject to Section 7 hereinbelow the
Corporation shall have the option to (unless otherwise prevented by law) redeem
the Class A Preferred Stock, as provided in Section 5(b) and upon 30 days prior
written notice of the Corporation's intention to exercise the redemption option
set forth herein as provided in Section
-5-
<PAGE>
5(b) to the holders of the then outstanding shares of Class A Preferred Stock.
The redemption price of shares of the Class A Preferred Stock shall be equal to
$2.00 per share plus all accrued but unpaid dividends through the date of
redemption.
(b) Notice of any Class A Preferred Stock redemption date and
the redemption option exercisable in connection therewith pursuant to this
Section 5 shall be sent by the Corporation by first-class certified mail, return
receipt requested, postage prepaid, to the holders of record of shares of Class
A Preferred Stock at their respective addresses as the same shall appear on the
books of the Corporation. Such notice may be given at any time (i) during the
first two years after the date of the closing (the "Closing") of the issuance of
the Class A Preferred Stock pursuant to the Offering, if the last sale price of
the Common Stock has been at least $3.00 per share on all 20 of the trading days
ending on the third date prior to the date on which written notice of redemption
is given, (ii) during the third year after the Closing, if the last sale price
of the Common Stock has been at least $3.75 per share on all 20 of the trading
days ending on the third date prior to the date on which written notice of
redemption is given, (iii) during the fourth year after the Closing, if the last
sale price of the Common Stock has been at least $4.00 per share on all 20 of
the trading days ending on the third date prior to the date on which written
notice of redemption is given, and (iv) after the fourth year after the Closing,
if the last sale price of the Common Stock has been at least 20 percentage
points higher than the prior year's price as such prior year's price relates to
$2.00 per share (i.e., 220% of $2.00 in the fifth year, 240% of $2.00 in the
sixth year, etc.) on all 20 of the trading days ending on the third date prior
to the date on which notice of redemption is given. Such notice shall be mailed
30 days in advance of the applicable Class A Preferred Stock redemption date. At
any time on or after the Class A Preferred Stock redemption date, the holders of
record of shares of Class A Preferred Stock to be redeemed on such Class A
Preferred Stock redemption date in accordance with this Section 5 shall be
entitled to receive the applicable redemption price upon actual delivery to the
Corporation or its agents of the certificates representing the shares to be
redeemed. If upon any redemption the assets of the Corporation available for
redemption shall be insufficient to pay the holders of the shares of Class A
Preferred Stock the full amounts to which they shall be entitled, the holders of
shares of Class A Preferred Stock shall share ratably in any such redemption
according to the respective amounts which would be payable in respect of such
shares to be redeemed to the holders thereof if all amounts payable on or with
respect to such shares were paid in full.
-6-
<PAGE>
6. VOTING RIGHTS. The holders of Class A Preferred Stock shall
not be entitled to vote on any matter except as required by law.
7. CONVERSION OF CLASS A PREFERRED STOCK.
(a) The holders of Class A Preferred Stock shall have the
right, at such holders' option, at any time or from time to time, to convert
each share of Class A Preferred Stock into one share of Common Stock together
with an amount in cash equal to all accrued unpaid dividends with respect to
such shares of Class A Preferred Stock up to and including the respective
conversion date of the Class A Preferred Stock (the "Conversion Rate"), subject
to adjustment as hereinafter provided. At the holder's option, so long as the
Corporation's authorized capital is sufficient, the Corporation shall have the
right, in lieu of paying some or all of any Preferred Dividend in cash, to issue
shares of Class A Preferred Stock. The number of shares of Class A Preferred
Stock to be issued will be calculated on the same basis as is provided in
Section 3(a) herein.
(b) Before any holder of Class A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class A Preferred Stock, and
shall give written notice to the Corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class A Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid
together with funds in an amount equal to all accrued and unpaid dividends with
respect to such shares of Class A Preferred Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Class A Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
(c) The Corporation shall not be required to issue fractions of
shares of Common Stock upon conversion of the Preferred Stock. If any fractions
of a share would, but for this Section, be issuable upon any conversion of
Preferred Stock, in lieu of such fractional share the Company shall pay to the
holder, in cash, an amount equal to the same fraction of the Closing Price per
share of Common Stock.
-7-
<PAGE>
(d) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of Common Stock sufficient
shares of Common Stock to permit the conversion of the then outstanding shares
of the Class A Preferred Stock pursuant to this Section 7. All shares of Common
Stock which may be issued upon conversion of shares of the Class A Preferred
Stock pursuant to this Section 7 shall be validly issued, fully paid and
nonassessable. In order that the Corporation may issue shares of Common Stock
upon conversion of shares of the Class A Preferred Stock, the Corporation will
endeavor to comply with all applicable Federal and State securities laws and
will endeavor to list such shares of Common Stock to be issued upon conversion
on each securities exchange on which Common Stock is listed and endeavor to
maintain such listing for such period of time as either the Class A Preferred
Stock or Common Stock underlying such Class A Preferred Stock remains
outstanding.
(e) The Conversion Rate in effect at any time for conversion of
Class A Preferred Stock into Common Stock pursuant to this Section 7 shall be
subject to adjustment from time to time as follows:
(i) In the event that the Corporation shall (1) pay a dividend
in shares of Common Stock to holders of Common Stock, (2) make a
distribution in shares of Common Stock to holders of Common Stock, (3)
subdivide the outstanding shares of Common Stock into a greater number
of shares of Common Stock or (4) combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect pursuant to this Section 7 immediately prior
to such action shall be adjusted so that the holder of any shares of
the Class A Preferred Stock thereafter surrendered for conversion
pursuant to this Section 7 shall be entitled to receive the number of
shares of Common Stock which he would have owned immediately following
such action had such shares of the Class A Preferred Stock been
converted immediately prior thereto. Such adjustment shall be made
whenever any event listed above shall occur and shall become effective
(A) immediately after the record date in the case of a dividend or a
distribution and (B) immediately after the effective date in the case
of a subdivision or combination.
(ii) In case the Corporation shall distribute to all holders
of Common Stock shares of any class of capital stock other than Common
Stock, evidences of indebtedness or other assets (other than cash
dividends out of current or retained earnings), or shall distribute to
substantially all holders of Common Stock rights or warrants to
subscribe for securities, then in each such case the Conversion Rate
shall be adjusted so that the same shall equal the number
-8-
<PAGE>
determined by multiplying the number of shares of Common Stock into
which such share of the Class A Preferred Stock was convertible
immediately prior to the date of such distribution by a fraction of
which the numerator shall be the current market price (determined as
provided in Section 7(e)(iii)) of Common Stock on the record date
mentioned below, and of which the denominator shall be such current
market price of Common Stock, less the then fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value) of the portion of the
assets so distributed or of such subscription rights or warrants
applicable to one share of Common Stock. Such adjustment shall become
effective immediately after the record date for the determination of
the holders of Common Stock entitled to receive such distribution.
(iii) For purposes of calculating any adjustment of the
Conversion Rate pursuant to this Section 7, the current market price
per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices for thirty consecutive trading days ending
the last trading day before the day in question. The closing price for
each day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such date, the average of the
reported closing bid and asked prices regular way, on the principal
national securities exchange on which Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the closing sale price of Common Stock,
or in case no reported sale takes place, the average of the closing bid
and asked prices, on the Nasdaq SmallCap Market ("NASDAQ"), the OTC
Electronic Bulletin Board (the "Bulletin Board") or any comparable
system, or if Common Stock is not quoted on NASDAQ, the Bulletin Board
or any comparable system, the closing sale price or, in case no
reported sale takes place, the average of the closing bid and asked
prices, as furnished by any two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation
for that purpose. If Common Stock is not quoted on NASDAQ, the Bulletin
Board or any comparable system, the Board of Directors shall in good
faith determine the current market price on such basis as it considers
appropriate.
(f) No adjustment in the Conversion Rate shall be required
until cumulative adjustments result in a concomitant change of 1% or more of the
Conversion Rate as in effect prior to the last adjustment of the Conversion
Rate; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
7(f) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 7 shall be
made to the nearest cent or to the
-9-
<PAGE>
nearest one-hundredth of a share, as the case may be. No adjustment to the
conversion rate shall be made for cash dividends.
(g) In the event that, as a result of an adjustment made
pursuant to Section 7(e), the holder of any share of the Class A Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of capital stock of the Corporation other than shares of Common Stock,
thereafter the number of such other shares so receivable upon conversion of any
shares of the Class A Preferred Stock shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 7.
(h) The Corporation may make such increases in the Conversion
Rate, in addition to those required by Sections 7(e)(i) and (ii), as it
considers to be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to the
recipients thereof.
(i) Whenever the Conversion Rate is adjusted pursuant to this
Section 7, the Corporation shall promptly mail first class to all holders of
record of shares of the Class A Preferred Stock a notice of the adjustment and
shall cause to be prepared a certificate signed by a principal financial officer
of the Corporation setting forth the adjusted conversion rate and a brief
statement of the facts requiring such adjustment and the computation thereof.
Such certificate shall forthwith be filed with each transfer agent for the
shares of the Class A Preferred Stock.
(j) If any of the following shall occur: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of shares of the Class A Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in name, or par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of Common Stock,
then in addition to all of the rights granted to the holders of the Class A
Preferred Stock as designated herein, the Corporation, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
provide in its certificate of incorporation or other charter document in that
each share of the Class A Preferred Stock shall be convertible
-10-
<PAGE>
into the kind and amount of shares of capital stock and other securities and
property (including cash) receivable upon such Change in Control by a holder of
the number of shares of Common Stock deliverable upon conversion of such share
of the Class A Preferred Stock immediately prior to reclassification, change,
consolidation, merger, sale or conveyance. Such certificate of incorporation or
other charter document shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
7. If, in the case of any such reclassification, change, consolidation, merger,
sale or conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of Common Stock includes shares of capital
stock or other securities and property of a corporation other than the successor
purchasing corporation, as the case may be, in such reclassification, change,
consolidation, merger, sale or conveyance, then the certificate of incorporation
or other charter document of such other corporation shall contain such
additional provisions to protect the interests of the holders of shares of the
Class A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 7(j) shall
similarly apply to successive consolidations, mergers, sales or conveyances.
(k) In the event any shares of Class A Preferred Stock shall
be converted pursuant to Section 7 hereof, the shares so converted shall be
cancelled.
(l) The Corporation will not, by amendment of its Amended and
Restated Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class A Preferred Stock against impairment.
(m) So long as any Class A Preferred Stock is outstanding and
any Preferred Dividend is in arrears, the Corporation shall not, without the
consent of holders of a majority of the outstanding shares of Class A Preferred
Stock purchase, redeem or otherwise acquire any shares of any class of the
Corporation's outstanding capital stock.
Such resolution was signed by the President and Secretary of
the Corporation.
FOURTH: The foregoing amendments to the Certificate of
Incorporation herein certified have been duly adopted by the
-11-
<PAGE>
Board of Directors in accordance with the provisions of Section 502 of the New
York Business Corporation Law.
-12-
<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on
September 19, 1996 and do hereby affirm, under the penalties of perjury, that
the statements contained therein have been examined by us and are true and
correct.
THE NETPLEX GROUP, INC.
By: /s/ Gene Zaino
------------------------------
Name: Gene Zaino
Title: President
By: /s/ Kathryn Chin Eggleston
------------------------------
Name: Kathryn Chin Eggleston
Title: Secretary
-13-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
THE NETPLEX GROUP, INC.
Pursuant to Section 805 of the
New York Business Corporation Law
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
-14-
<PAGE>
CERTIFICATE OF CORRECTION
OF
THE CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE NETPLEX GROUP, INC.
Under Section 105 of the Business Corporation Law
-----------------
It is hereby certified that:
1. The name of the corporation is The Netplex Group, Inc.
2. The instrument to be hereby corrected was filed by the
Department of State on September 19, 1996.
3. The nature of the informality, error, incorrect statement,
or defect of the said instrument to be hereby corrected as follows: Article
Fourth B(5)(b) incorrectly stated the price per share of the Company's Common
Stock which would enable the Company to send a Notice of Redemption to the
holders of its Class A Preferred Stock.
4. The provision hereinabove described is hereby corrected to
read in its entirety as follows:
5. Notice of any Class A Preferred Stock redemption date and
the redemption option exercisable in connection therewith pursuant to this
Section 5 shall be sent by the Corporation by first-class certified mail, return
receipt requested, postage prepaid, to the holders of record of shares of Class
A Preferred Stock at their respective addresses as the same shall appear on the
books of the Corporation. Such notice may be given at any time (i) during the
first two years after the date of the closing (the "Closing") of the issuance of
the Class A Preferred Stock pursuant to the Offering, if the last sale price of
the Common Stock has been at least $3.75 per share on all 20 of the trading days
ending on the third date prior to the date on which written notice of redemption
is given, (ii) during the third year after the Closing, if the last sale price
of the Common Stock has been at least $4.6875 per share on all 20 of the trading
days ending on the third date prior to the date on which written notice of
redemption is given, (iii) during the fourth year after the Closing, if the last
sale price of the Common Stock has been at least $5.00 per share on all 20 of
the trading days ending on the third date prior to the date on which written
notice of redemption is given, and (iv) after the fourth year after the Closing,
if the last sale price of the Common Stock has been at least 20 percentage
points higher
<PAGE>
than the prior year's price as such prior year's price relates to $2.50 per
share (i.e., 220% of $2.50 in the fifth year, 240% of $2.50 in the sixth year,
etc.) on all 20 of the trading days ending on the third date prior to the date
on which notice of redemption is given. Such notice shall be mailed 30 days in
advance of the applicable Class A Preferred Stock redemption date. At any time
on or after the Class A Preferred Stock redemption date, the holders of record
of shares of Class A Preferred Stock to be redeemed on such Class A Preferred
Stock redemption date in accordance with this Section 5 shall be entitled to
receive the applicable redemption price upon actual delivery to the Corporation
or its agents of the certificates representing the shares to be redeemed. If
upon any redemption the assets of the Corporation available for redemption shall
be insufficient to pay the holders of the shares of Class A Preferred Stock the
full amounts to which they shall be entitled, the holders of shares of Class A
Preferred Stock shall share ratably in any such redemption according to the
respective amounts which would be payable in respect of such shares to be
redeemed to the holders thereof if all amounts payable on or with respect to
such shares were paid in full.
-2-
<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on
September 24, 1996 and do hereby affirm, under the penalties of perjury, that
the statements contained therein have been examined by us and are true and
correct.
THE NETPLEX GROUP, INC.
By: /s/ Gene Zaino
---------------------------------
Name: Gene Zaino
Title: President
By: /s/ Kathryn Chin Eggleston
---------------------------------
Name: Kathryn Chin Eggleston
Title: Secretary
-3-
<PAGE>
CERTIFICATE OF CORRECTION
OF
THE CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE NETPLEX GROUP, INC.
Under Section 105 of the Business Corporation Law
-----------------
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022-1170
-4-
OLSHAN GRUNDMAN FROME & ROSENZWEIG
505 Park Avenue
New York, New York 10022
Telepone 212-753-7200
December 16, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: The Netplex Group, Inc.
Commission File No. 333-16423
Registration Statement on Form S-3
Gentlemen:
Reference is made to the Registration Statement on Form S-3 dated
November 20, 1996, as amended, (the "Registration Statement"), filed with the
Securities and Exchange Commission by The Netplex Group, Inc., a New York
corporation (the "Company"). The Registration Statement relates to an aggregate
of 7,861,213 shares (the "Shares") of the Company's Common Stock, $.001 par
value and 100,000 warrants.
We advise you that we have examined original 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 Registration Statement, 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>
December 16, 1996
Page -2-
Based upon the foregoing, we are of the opinion that:
(a) The Shares have been duly authorized and reserved for and, either
are legally issued, fully paid and non-assessable or when issued upon exercise
of the underlying warrant or option, will be legally issued, fully paid and
non-assessable.
(b) The Warrants have been duly authorized and issued.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and we further consent to the reference to this firm
under the caption "Legal Matters" in the Registration Statement and the
Prospectus forming a part thereof. We advise you that Steven Wolosky, a member
of this firm holds Options to purchase 10,000 Option Shares.
Very truly yours,
/s/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
------------------------------------------
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
