As filed with the Securities and Exchange Commission on May 6, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE NETPLEX GROUP, INC.
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(Exact name of Registrant as specified in its charter)
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New York 7372 11-2824578
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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8260 Greensboro Drive, 5th Floor
McLean, Virginia 22102
(703) 356-3001
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(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 22102
(703) 356-3001
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(Name, address, including zip code, and telephone number,
including area code, of agent of service)
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Copies to:
Steven Wolosky, Esq.
Kenneth Schlesinger, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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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/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Prospectus contained within this Registration Statement also relates to
securities which were registered pursuant to Form S-3 Registration Statement
(Registration No. 333-16423)
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CALCULATION OF REGISTRATION FEE
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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
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Common Stock, $.001 par value 1,752,000 1.50(1) $2,628,000 $906.21
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Common Stock, $.001 par value, issuable upon the
exercise of Prepaid Common Stock Purchase Warrants
issued in connection with a private placement
consummated in 1998 (the "1998 Private Placement")
(the "Prepaid Warrants")(2) 4,000,000(2) $1.47(3) $5,880,000 $2,027.58(4)
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Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the
"Incentive Warrants") issued in connection
with the 1998 Private Placement(5) 117,000(5) $1.47(6) $171,990 $59.31
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Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the "GKN
Warrants") 150,000(5) $1.50(6) $225,000 $77.59
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Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the
"Acquisition Warrants") 100,000(5) $1.80(6) $180,000 $62.07
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Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the
"Acquisition Warrants") 30,435(5) $1.15(6) $35,000.25 $12.07
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Total.......................................................................... $9,119,990.25 $3,144.83
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(1) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low price of the Company's common stock,
$.001 par value (the "Common Stock"), on the Nasdaq Stock Market on April
30, 1998.
(2) For purposes of estimating the number of shares of the Common Stock to be
included in this Registration Statement, the Company calculated 200% of the
number of shares of Common Stock issuable upon exercise of or otherwise
pursuant to 1,500 Prepaid Common Stock Purchase Warrants based upon the
terms set forth in the Prepaid Warrants in accordance with Rule 416 of the
Securities Act of 1933, as amended (the "Securities Act"). Pursuant to Rule
416, the number of shares to be registered hereunder is subject to
adjustment and could be greater or less than such estimated amount
depending upon factors that cannot be predicted by the Company at this
time, including, among others, stock splits, stock dividends and similar
transactions, the effect of anti-dilution provisions contained in the
Prepaid Warrants and by reason of changes in the exercise price of the
Prepaid Warrants in accordance with the terms thereof. Based upon the
foregoing, this estimate is not intended to constitute a prediction as to
the number of shares of Common Stock into which the Prepaid Warrants will
be exercised.
(3) The exercise price of the Prepaid Warrants is the lower of $1.47 or the
average of the five (5) lowest closing bid prices for the Company's Common
Stock during the twenty (20) consecutive trading day period ending on the
trading day immediately prior to exercise.
(4) In accordance with Rule 457(g), the registration fee for these shares is
calculated based upon a price which represents the highest of (i) the price
at which the Prepaid Warrants may be exercised; (ii) the offering price of
securities of the same class included in the Registration Statement; or
(iii) the price of securities of the same class, as determined pursuant to
Rule 457(c).
(5) Pursuant to Rule 416, additional securities are being registered as may be
required for issuance pursuant to the anti-dilution provisions of the
Incentive Warrants, the GKN Warrants, the Acquisition Warrants and the
Acquisition Warrants.
(6) Pursuant to Rule 457(g), the registration fee for the Common Stock
underlying such warrant is calculated on the basis of the exercise price of
the Incentive Warrants, the GKN Warrants, the Acquisition Warrants and the
Acquisition Warrants.
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 MAY 6, 1998
PRELIMINARY PROSPECTUS
12,386,480 Shares of Common Stock
THE NETPLEX GROUP, INC.
Common Stock ($.001 par value)
This Prospectus relates to the reoffer and resale by certain selling
shareholders (the "Selling Shareholders" or the "Selling Stockholders"), as of
the date hereof, of an aggregate of 12,386,480 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 6,237,045 Shares
were previously registered for resale in December 1996 as follows: (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 rendered in 1992 and 1993; (ii) 150,000 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) 1,129,438 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") (including dividends on such Convertible Preferred Stock) which were
issued by the Company to holders (the "Preferred Stockholders") in connection
with the Company's September 1996 Private Placement (the "1996 Private
Placement"); (iv) 1,575,000 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; (v) 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 GKN Securities Corp., or its designees, the
placement agent of the 1996 Private Placement ("GKN"); (vi) 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 GKN upon exercise of the 1996 Purchase Options;
(vii) 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") (viii) 75,000 shares of Common Stock (the "Kirlin Shares") upon the
exercise of certain warrants (the "Kirlin Warrants") and (ix) 2,812,607 Shares
(the "Merger Shares") were issued to certain Selling Shareholders in connection
with certain mergers consummated in June 1996.
In addition, 6,149,435 Shares to be offered for resale relate to
transactions consummated in 1997 and 1998 as follows: (i) 1,752,000 shares of
Common Stock (the "Acquisition and Related Party Offering Shares") which were
previously issued by the Company to certain of the Selling Shareholders in
connection with certain mergers or acquisitions completed by the Company in 1997
and 1998 or in connection with private a placement consummated in March 1998 to
employees of the Company, and certain accredited investors (the "Related Party
Offering") or another private placement consummated in April 1998 ("April 1998
Private Placement"); (ii) 130,435 shares of Common Stock (the "Acquisition
Warrant Shares") issuable upon the exercise of warrants (the "Acquisition
Warrants") granted to individuals who provided services in connection with the
Company's acquisition of the technical professional staff augmentation
operations and business of Preferred Systems Solutions, Inc.; (iii) 150,000
shares of Common Stock (the "GKN Shares") issuable upon the exercise of warrants
issued to GKN
<PAGE>
(the "GKN Warrants") in connection with certain consulting services; (iv)
4,000,000 shares (the "Prepaid Warrant Shares") issuable upon the exercise of
outstanding prepaid Common Stock Purchase Warrants (the "Prepaid Warrants")
which were issued in connection with a private placement consummated by the
Company in April 1998 (the "1998 Private Placement"); and (v) 117,000 shares
(the "Incentive Warrant Shares") issuable upon the exercise of certain other
warrants (the "Incentive Warrants") held by the purchasers or placement agent of
the 1998 Private Placement. See "Selling Shareholders" and "Plan of
Distribution".
The Shares of Common Stock offered hereby include the resale of such
presently indeterminate number of shares of Common Stock, as may become
issuable, issuable upon exercise or conversion of the outstanding Options,
Warrants, Convertible Preferred Stock, 1996 Warrants, Purchase Option Preferred
Stock, 1996 Purchase Option Warrants, Netplex Warrants, Kirlin Warrants,
Acquisition Warrants, GKN Warrants, Prepaid Warrants and Incentive Warrants. The
number of shares of Common Stock indicated to be issuable in connection with
such transactions and offered for resale hereby is an estimate based upon the
exercise or conversion terms set forth in the options and warrants or the
Certificate of Designation with respect to the Convertible Preferred Stock and
is subject to adjustment pursuant to Rule 416 of the Securities Act of 1933, as
amended (the "Securities Act"), and could be materially greater or less than
such estimated amount depending upon factors that cannot be predicted by the
Company at this time, including, among others, stock splits, stock dividends and
similar transactions and the effect of anti-dilution provisions. In addition,
with respect to the Prepaid Warrants, the number of shares issuable upon the
exercise of the Prepaid Warrants will be dependent on changes in the exercise
price of the Prepaid Warrants in accordance with the terms thereof. If, however,
all of the Prepaid Warrants currently outstanding were exercised, based on the
current bid price of the Company's Common Stock on the Nasdaq SmallCap Market
("NASDAQ") and the terms of Prepaid Warrants, the Company would be obligated to
issue a total of 1,020,408 shares of the Common Stock. This calculation as to
the number of shares of Common Stock into which the Prepaid Warrants will be
exercised is not intended to constitute a prediction as to the future market
price of the Common Stock or the actual number of shares of Common Stock to be
issued. See "Risk Factors".
The Shares of Common Stock covered under the Registration Statement of
which this Prospectus is a part may be offered for sale from time to time by or
for the account of such Selling Stockholders in the open market on the Nasdaq
SmallCap Market in privately negotiated transactions, in an underwritten
offering or in a combination of such methods, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, or at
negotiated prices. The Shares are intended to be sold through one or more
broker-dealers or directly to purchasers. Such broker-dealers may receive
compensation in the form of discounts, concessions or commission from the
Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). The Selling Shareholders and any broker-dealers acting
in connection with the sale of the Shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and any profit realized by them on the resale of
the Shares as principals may be deemed underwriting compensation under the
Securities Act. See "Selling Shareholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders or upon the exercise of the Prepaid Warrants
or the conversion of the Convertible Preferred Stock. The Company will receive
the proceeds from the exercise of the Options, the Warrants, the 1996 Warrants,
the 1996 Purchase Option Warrants, the Netplex Warrants, the Kirlin Warrants,
the Acquisition Warrants, the GKN Warrants and the Incentive Warrants, the net
proceeds of which will amount to $6,710,740 if all such options or warrants are
exercised, after deducting the estimated expenses of this Offering. The Company
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will bear all expenses of this Offering other than discounts, concessions or
commissions on the resale of the Shares.
The Company's Common Stock is publicly traded on NASDAQ under the
symbol ("NTPL") and on the Boston Stock Exchange under the symbol ("NPL"). On
May 1, 1998, the closing sales price for the Common Stock on NASDAQ was $1.813.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK AND SHOULD ONLY BE MADE BY INVESTORS
WHO CAN AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" ON PAGES 8 THROUGH 11 OF THIS PROSPECTUS.
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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.
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The date of this Prospectus is May 6, 1998
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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 December 31, 1997.
(b) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998.
(c) 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 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 22102, 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.
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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 company that
provides the people, technology, and processes to build, manage and protect
business information systems. Its address is 8260 Greensboro Drive, 5th Floor,
McLean, Virginia 22102 and its telephone number is (703) 356-3001. Its Worldwide
Web site address is www.netplexgroup.com.
The Company was incorporated in 1986. From 1986 to June 1996, the
Company, under the name CompLink, Ltd., developed and marketed a communications
software product. On June 7, 1996, the Company (formerly known as CompLink, Ltd.
or "Complink") acquired and merged with The Netplex Group, Inc. ("Netplex
Virginia") and America's Work Exchange, Inc. ("AWE") by issuing approximately
3,245,000 shares of Common Stock. The merger agreement also provided for
CompLink to issue 1,691,000 options to purchase its Common Stock in exchange for
the 1,691,000 outstanding options to purchase the Common Stock of Netplex
Virginia. The mergers have been accounted for under the purchase method of
accounting as a reverse merger, since the shareholders of the acquirees, who
have common control, received the larger percentage of the voting rights of the
combined entity. The mergers resulted in a recapitalization of the Company, so
that the resulting capitalization after the mergers are that of CompLink's,
giving effect to the new share issuance and the elimination of CompLink's
accumulated deficit. The acquisition of the assets and liabilities of CompLink
has been accounted for at book value, which approximates fair value.
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<PAGE>
The Offering
Securities Offered by the Company........ None.
Securities Offered for resale
by the Selling Shareholders.............. 170,000 Option Shares; 150,000
Warrant Shares, 1,129,438 Conversion
Shares; 1,575,000 1996 Warrant
Shares; 87,500 Purchase Option
Conversion Shares; 87,500 1996
Purchase Option Warrant Shares;
150,000 Netplex Shares; 75,000
Kirlin Shares; 2,812,607 Merger
Shares; 1,752,000 Acquisition and
Related Party Offering Shares;
130,435 Acquisition Warrant Shares;
150,000 GKN Shares; 4,000,000
Prepaid Warrant Shares; and 117,000
Incentive Warrant Shares.
Common Stock Outstanding................. 9,007,370(1) shares of Common Stock
before the exercise or conversion,
as the case may be, of the Options,
the Warrants, the Convertible
Preferred Stock, the 1996 Warrants,
the Purchase Option Preferred Stock,
the 1996 Purchase Option Warrants,
the Netplex Warrants, the Kirlin
Warrants, the Acquisition Warrants,
the GKN Warrants, the Prepaid
Warrants and the Incentive Warrants
and 16,829,243 shares of Common
Stock assuming the exercise or
conversion, as the case may be, of
all such options, warrants, or
preferred stock.
NASDAQ SmallCap Market 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 or the exercise of the Prepaid
Warrants or the conversion of the Convertible Preferred Stock. The Company will
receive the proceeds from the exercise of each of the Options, the Warrants, the
1996 Warrants, the 1996 Purchase Option Warrants, the Netplex Warrants, the
Kirlin Warrants, the GKN Warrants, the Acquisition Warrants and the Incentive
Warrants. The net proceeds of which will amount to $6,710,740 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
the development of additional core competency practice units, geographic
expansion, marketing and working capital and other general corporate purposes.
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(1) Unless otherwise indicated, the references to Common Stock
outstanding do not give effect to (i) 150,000 shares of Common Stock issuable
upon exercise of the Warrants at $3.00 per share; (ii) 1,129,438 shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock; (iii)
1,575,000 shares of Common Stock issuable upon exercise of the 1996 Warrants;
(iv) 87,500 shares of Common Stock issuable upon conversion of the Purchase
Option Preferred Stock; (v) 87,500 shares of Common Stock issuable upon exercise
of the 1996 Purchase Option Warrants (vi) 3,000,000 shares of the Common Stock
issuable upon exercise of stock options which may be granted under the Company's
1992 Incentive
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<PAGE>
and Non-Qualified Stock Option Plan (the "1992 Plan"), of which options to
purchase 2,181,000 shares of Common Stock at an average exercise price of
approximately $1.06 per share have been issued; (vii) 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 $3.56 per share have been granted; (viii) 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 options to purchase 205,000 shares of Common Stock at exercise prices
ranging from $1.57 per share to $3.00 per share have been granted; (ix) 170,000
shares of Common Stock issuable upon exercise of the Options at an exercise
price of $4.00 per share; (x) 150,000 shares of Common Stock issuable upon the
exercise of the Netplex Warrants at an exercise price of $2.50 per share, (xi)
75,000 shares of Common Stock issuable upon the exercise of the Kirlin Warrants
at an exercise price of $3.50 per share; (xii) 130,435 shares of Common Stock
issuable upon the exercise of the Acquisition Warrants at an average exercise
price of $1.65; (xiii) 150,000 shares of Common Stock issuable upon the exercise
of the GKN Warrants at an exercise price of $1.50 per share; (xiv) 4,000,000
shares of Common Stock issuable upon the exercise of the Prepaid Warrants; and
(xv) 117,000 shares of Common Stock issuable upon the exercise of the Incentive
Warrants at an exercise price of $1.47 per share.
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<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 $2,873,603 for the year
ended December 31, 1997 and $415,257 for the three months ended March 31, 1998.
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 March 31, 1998, the Company had negative
working capital of $347,434. After giving effect to the 1998 Private Placement
and the April 1998 Private Placement, the Company as of March 31, 1998 on a pro
forma basis had working capital of $1,162,741. Management believes that its
existing resources will be adequate for the Company's cash needs through
December 31, 1998. 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 could 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.
NASDAQ Listing. The Company's Common Stock currently is quoted or
traded on NASDAQ and The Boston Stock Exchange, respectively. As of December 31,
1997, the Company did not meet the new requirements. The Company believes that
with the proceeds from the Related Party Offering, the 1998 Private Placement
and the April 1998 Private Placement, it is in compliance with NASDAQ's
requirements. However, there can be no assurance that the Company will continue
to meet the applicable requirements for continued listing. NASDAQ is currently
reviewing whether the Company is in compliance with the new requirements and the
terms of the 1998 Private Placement. The failure to meet the new NASDAQ
requirements may result in the Common Stock no longer being eligible for
quotation on NASDAQ and trading, if any, of the Common Stock would thereafter be
conducted in the non-NASDAQ over-the-counter market. As a result of such
delisting of the Common Stock from NASDAQ, it may be more difficult for
investors to dispose of, or to obtain accurate quotations as to the market value
of, the Common Stock.
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
maintain a sufficient number of senior professionals to oversee existing client
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<PAGE>
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 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
Company provides to its customers. Accordingly, the Company may be subject to
-9-
<PAGE>
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.
Outstanding Options and Warrants. There are currently outstanding
options and warrants to purchase 3,463,435 shares (not including the Prepaid
Warrants) in the aggregate at exercise prices ranging between $.97 to $4.00 per
share. In addition, there are currently 1,129,438 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. In addition, the
exercise price of the outstanding warrants and options issued by the Company or
the conversion of Convertible Preferred Stock and the sale of the underlying
shares of Common Stock (or even the potential of such exercise or sale) may have
a depressive effect on the market price of the Company's securities depending on
the timing of such sales, and may have a dilutive effect on the book value per
share of Common Stock. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected because the
holders of the outstanding warrants and options and Convertible Preferred Stock
can be expected to exercise or convert them, to the extent they are able to, at
a time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than those provided in the
warrants and options. In addition, depending upon market conditions at the time
of exercise of the Prepaid Warrants, the number of shares of Common Stock
issuable upon such exercise could increase significantly in the event of a
decrease in the trading price of the Common Stock. Purchasers of Common Stock
could therefore experience significant dilution upon exercise of the Prepaid
Warrants.
Issuance of Indeterminate Amount of Shares Upon the Exercise of Prepaid
Warrants. The number of shares of Common Stock issuable upon the exercise of the
Prepaid Warrants is determined by taking the lower of $1.47 or the average of
the bid price of the Common Stock immediately prior to exercise. Accordingly,
the number of shares of Common Stock issuable upon the exercise of the Prepaid
Warrant could fluctuate.
Failure or Inability to Register Shares; Failure to Obtain Shareholder
Approval. If the Company fails or is unable to timely register any of the shares
of Common Stock issuable upon exercise of the Prepaid Warrants and/or the
Incentive Warrants, or if the Company fails to maintain its listing on the
NASDAQ SmallCap Market or if the Company fails to obtain shareholder approval of
certain of the transactions contemplated by the 1998 Private Placement, the
Company will incur penalties and costs pursuant to the terms of the Prepaid
Warrants and that certain registration rights agreement among the Company and
the purchasers of the Prepaid Warrants, which may have a material and adverse
effect on the Company's financial condition and results of operations.
Common Stock Eligible for Future Sale. Future sales of shares of Common
Stock by existing shareholders under Rule 144 of the Act or through the exercise
of outstanding registration rights or the issuance of shares of Common Stock
upon the exercise of options or warrants or the conversion of the Convertible
Preferred Stock could materially adversely affect the market price of the Common
Stock and could materially impair the Company's future ability to raise capital
through an offering of equity securities. A substantial number of shares of
Common Stock are available for sale under Rule 144 in the public market or will
become available for sale in the near future and no predictions can be made as
to the effect, if any, that market sales of such shares or the availability of
-10-
<PAGE>
such shares for future sale will have on the market price of the Common Stock
prevailing from time to time.
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, 1996 Warrants, 1996 Purchase Option Warrants,
Netplex Warrants, Kirlin Warrants, Acquisition Warrants, GKN Warrants and
Incentive Warrants.
Assuming that all of the Options registered herein, the Warrants, 1996
Warrants, 1996 Purchase Option Warrants, Netplex Warrants, Kirlin Warrants,
Acquisition Warrants, GKN Warrants and Incentive Warrants are exercised, the net
proceeds to the Company upon the exercise of such warrants and options is
estimated to be approximately $6,710,740. The Company intends to apply any net
proceeds from such exercises for the development of additional core competency
practice units, geographic expansion, marketing and working capital and other
general corporate purposes.
Conversion of Preferred Stock and Exercise of the Prepaid Warrants
The Company will not receive any proceeds from the conversion of the
Convertible Preferred Stock or the exercise of the Prepaid Warrants.
Offering by Selling Shareholders
The Company will not receive any of the proceeds from the sale of any
of the Shares.
-12-
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth (i) the number of shares of Common Stock
owned by each Selling Shareholder at April 30, 1998; (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. The
Shares being offered hereby are being registered to permit public secondary
trading, and the Selling Shareholders may offer all or part of the Shares for
resale from time to time. However, such Selling Shareholders are under no
obligation to sell all or any portion of such Shares nor are such Selling
Shareholders obligated to sell any Shares immediately under this Prospectus.
All information with respect to share ownership has been furnished by
the Selling Shareholders. Because the Selling Shareholders may sell all or part
of their Shares no estimates can be given as to the number of Shares that will
be held by any Selling Shareholders upon termination of any offering made
hereby. See "PLAN OF DISTRIBUTION."
In connection with the Prepaid Warrant Shares and the Incentive Warrant
Shares, the Company granted such Selling Shareholders certain registration
rights pursuant to which the Company agreed to keep the Registration Statement,
of which this Prospectus is a part, effective until the date that all of such
Shares have been sold pursuant to the Registration Statement. The Company has
agreed to indemnify such Selling Shareholders and each of their officers,
directors, employees, partners, legal counsel and accountants, and each
underwriter, if any, and each person who controls any such underwriter, against
certain expenses, claims, losses, damages and liabilities (or action in respect
thereof). The Company has agreed to pay its expenses of registering the Shares
under the Securities Act, including registration and filing fees, blue sky
expenses, printing expenses, accounting fees, administrative expenses and its
own counsel fees.
Pursuant to Rule 416 under the Securities Act, Selling Shareholders may
also offer and sell Shares issued with respect to the Prepaid Warrants and/or
the other warrants, options and Convertible Preferred Stock as a result of (i)
stock splits, stock dividends or similar transactions and (ii) the effect of
anti-dilution provisions contained in the underlying documents. In addition, in
the case of the Shares underlying the Prepaid Warrants, there maybe changes in
the number of shares offered hereby due to changes in the exercise price of the
Prepaid Warrants in accordance with the terms thereof. This is not intended to
constitute a prediction as to the number of Shares into which the Prepaid
Warrants will be exercised. Moreover, in the case of the Shares underlying the
Prepaid Warrants, the number of Shares owned and offered for sale hereby
represents an estimate of the number of shares of Common Stock issuable upon
conversion of or otherwise with respect to the Prepaid Warrants, based on 200%
of the number of shares of Common Stock issuable at an exercise price of $1.47
in accordance with Rule 416 and the terms of the Prepaid Warrants.
-13-
<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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Harvey B. Adams 51,455(2) * 51,455 0 0
Ronald J. Adams 12,500(10) * 12,500 0 0
Larry Altman 26,455(2) * 26,455 0 0
Jan Arnett, M.D. 51,455(2) * 51,455 0 0
B&B Trading Corp. Retirement 51,455(2) * 51,455 0 0
Plan
Neil Bellet 25,000(10) * 25,000 0 0
Kenneth Cole 77,182 * 77,182 0 0
Craig W. Effron 12,500(10) * 12,500 0 0
Drew Effron 12,500(10) * 12,500 0 0
Richard Etra 25,728(2) * 25,728 0 0
Steven Etra 102,909(2) 1.1 102,909 0 0
F&T Planning Centers, Inc. 25,728(2) * 25,728 0 0
Ernest Gottdiener 25,000(10) * 25,000 0 0
Scott & Lee Havens, JTWROS 26,455(10) * 26,455(10) 0 0
Gloria Hindes 25,728(2) * 25,728 0 0
Frank & Charlotte Joy, JTWROS 12,500(10) * 12,500 0 0
Stuart Kahn & Company 12,500(10) * 12,500 0 0
Daniel Kaplan 12,500(10) * 12,500 0 0
Richard Kaufman & Elaine J. 51,455(2) * 51,455 0 0
Leanaut, JTWROS
Norman Kurtz 51,455 * 51,455 0 0
Howard Landis 158,344(2)(3) 1.7 158,344 0 0
Dr. Steven B. Landman 6,250(10) * 6,250 0 0
Mariwood Investments 25,000(10) * 25,000 0 0
The Northern Union Club 102,909(2) 1.1 102,909 0 0
Russell D. Pollock & Susan K. 12,864(2) * 12,864 0 0
Waldman, JTWROS
Mark H. Rachesky 102,909(2) 1.1 102,909 0 0
RJB Partners 25,728(2) * 25,728 0 0
Steven Rosen 12,500(10) * 12,500 0 0
Alan J. Rubin 25,000(10) * 25,000 0 0
Jeffery Rubenstein 25,000(10) * 25,000 0 0
Leonard M. Schiller 12,500(10) * 12,500 0 0
Phillip J. Schiller 12,500(10) * 12,500 0 0
Curtis Schenker 12,500(10) * 12,500 0 0
Dean Spellman 6,250(2) * 6,250 0 0
David Thalheim Revocable Living 39,682(2) * 39,682 0 0
Trust DTD 3/5/96
Greg Trubowitsch 12,864(2) * 12,864 0 0
</TABLE>
-14-
<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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard Warren 12,500(10) * 12,500 0 0
Charles Warshaw 25,000(10) * 25,000 0 0
Michael Weissman 25,000(10) * 25,000 0 0
Woodland Partners 125,000(10) 1.9% 125,000 0 0
William Wolfson 12,500(10) * 12,500 0 0
Mel Atlas 25,728(2) * 25,728 0 0
Marvin Baron 77,182(2) * 77,182 0 0
Norman Basner 25,728(2) * 25,728 0 0
Arthur Birnbaum 25,728(2) * 25,728 0 0
Edward Cohen 25,728(2) * 25,728 0 0
Michael Cohen 25,728(2) * 25,728 0 0
Bruce Frankel 25,728(2) * 25,728 0 0
Morris Goldfarb 51,455(2) * 51,455 0 0
Stuart Goldstein 25,728(2) * 25,728 0 0
Gertrude Gordon 25,728(2) * 25,728 0 0
Jeffrey Greenstein 25,728(2) * 25,728 0 0
Jeffrey Herdan 51,455(2) * 51,455 0 0
James Jannello 25,728(2) * 25,728 0 0
Harry Karten 25,728(2) * 25,728 0 0
Joel Katz Profit Sharing Plan 25,728(2) * 25,728 0 0
Steven Kess 25,728(2) * 25,728 0 0
Anton & Margie Kirincic, JTWROS 25,728(2) * 25,728 0 0
Abraham Klein 102,909(2) 1.1 102,909 0 0
Susan Lary 51,455(2) * 51,455 0 0
Zena Lary Trust 25,728(2) * 25,728 0 0
Monis Lev 25,728(2) * 25,728 0 0
Ruben Levitin & Jamie Walter 25,728(2) * 25,728 0 0
Cordoba, JTWROS
Miguel Lieber 25,728(2) * 25,728 0 0
Charles Lindner 25,728(2) * 25,728 0 0
Peter Lontai, M.D. 25,728(2) * 25,728 0 0
Alvin Margulies 25,728(2) * 25,728 0 0
John Milcetich 102,909(2) 1.1 102,909 0 0
Mel Paikoff 25,728(2) * 25,728 0 0
Jaques Palombo 25,728(2) * 25,728 0 0
Bertram Podell 25,728(2) * 25,728 0 0
Milton & Blanche Prane, JTWROS 25,728(2) * 25,728 0 0
Mark Rubin 51,455(2) * 51,455 0 0
</TABLE>
-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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Stanley Spielman Profit Sharing 26,455(2) * 26,455 0 0
Plan
Stanley Spielman 76,455(4) * 76,455 0 *
Ben Bazian(6) 66,920 * 56,920 10,000 *
Michael C. Buchner(6) 615 * 615 0 *
Eden Cowans(6) 4,096 * 1,846 2,250 *
Dale A. Dillow(6) 3,077 * 3,077 0 *
Stan W. Fischer(5)(6) 498,380 7.4% 448,380 50,000 *
Frank D. Henderson(6) 47,112 * 24,612 22,500 *
David Koehler(6) 39,960 * 18,460 21,500 *
Leo Komorowski(6) 615 * 615 0 *
Don L. Lehman(6) 13,077 * 3,077 10,000 *
Michelle Love(6) 1,115 * 615 500 *
Joseph McCoy(6) 63,460 * 33,460 30,000 *
James L. Patterson(6) 5,077 * 3,077 2,000 *
Azita L. Rutti(6) 308 * 308 0 *
Andrew W. Schug(6) 308 * 308 0 0
John & Elizabeth Ann Thompson, 418,246 5.2% 230,746 187,500 2.0%
JTWROS(6)
Ann M. Utt(6) 4,346 * 1,846 2,500 *
John P. Williams(5)(6) 308 * 308 0 *
Gene F. Zaino(5)(6) 1,637,350 17.4% 1,322,350 315,000 3.4%
Scott Pogoda 644,778 8.2% 644,778 0 0
P.O. Box 10229
Zephyr Cove, Nevada 89448
Ayudh Athakravi-Soonthorn 177,212 2.8% 177,212 0 0
GKN Securities Corp. 202,936(7) 2.2% 202,936 0 0
David M. Nussbaum 14,438(8) * 14,438 0 0
Roger Gladstone 14,438(8) * 14,438 0 0
Robert Gladstone 14,438(8) * 14,438 0 0
Richard Goldstein(9) 12,500(9) * 5,000 7,500 *
Ted Tashlik 25,728(10) * 25,728 0 0
Saul Victor Profit Sharing Plan 25,728(10) * 25,728 0 0
Kirlin Securities, Inc. 108,750(11) * 108,750 0 0
Louis Rosenwein 160,000 1.7% 160,000 0 0
Eva Low 151,455(12) * 151,455(12) 0 0
Eli Oxenhorn 50,000(13) * 50,000 0 0
Irwin Lieber 175,000(14) 1.9% 175,000 0 0
Barry Rubenstein 175,000(15) 1.9% 175,000 0 0
Ronald Birnbaum 45,000(16) * 40,000 0 *
Seymour Cohen 105,000(17) 1.1% 105,000 0 *
</TABLE>
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<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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
David O. Lindner 19,875(18) * 19,875 0 0
Anthony J. Kirincig 19,875(18) * 19,875 0 0
Robert A. Paduano 3,150(18) * 15,000 0 0
Susan Paduano 2,100(18) * 2,100 o 0
Steven Wolosky 10,000(19) * 10,000 0 0
James P. McNeil 10,000(19) * 10,000 0 0
Zanett Lombardier, Ltd. 1,076,440(20)(22)(23) 10.7% 1,076,440 0 0
David McCarthy 21,968(20)(22)(23) * 21,968 0 0
The Zanett Securities 39,000(24) * 39,000 0 0
Corporation
David Cohen 25,000 * 25,000 0 0
Richard DeAngelis 5,000 * 5,000 0 0
Andrew O'Lear 15,000 * 15,000 0 0
Seymour Feinstein 10,000 * 10,000 0 0
Dr. & Mrs. Elliott & Lillian 15,000 * 15,000 0 0
Hahn
Leonard Katz 10,000 * 10,000 0 0
Alan Ross 15,000 * 15,000 0 0
Fred Taubman 5,000 * 5,000 0 0
Thomas Matusak 25,000 * 10,000 * *
Amy O'Donnell 17,500 * 5,000 * *
Robert Baillie 5,000 * 5,000 0 0
Lawrence Friedman 5,000 * 5,000 0 0
George Gellert 140,000 1.6% 140,000 0 0
Max Gonenn 50,000 * 50,000 0 0
Peter & Linda Gurman 15,000 * 15,000 0 0
Armand & Barbara Herreras 10,000 * 10,000 0 0
Konrad Krill 15,000 * 15,000 0 0
Russell Rothstein 12,000 * 12,000 0 0
Eddie Shain 20,000 * 20,000 0 *
Steven Wasserstrom 140,000 1.6% 120,000 * 0
Jay Zelnick 5,000 * 5,000 0 0
Paulette Aaronson 10,000 * 10,000 0 0
Dr. Michael Abrams 10,000 * 10,000 0 0
Robert Carpentier 10,000 * 10,000 0 0
Phyllis Cheng 15,000 * 15,000 0 0
Howard Cooper 5,000 * 5,000 0 0
George & Patti Cooper, JTWROS 15,000 * 15,000 0 0
Frank Dinaro 5,000 * 5,000 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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
James Dinaro 15,000 * 15,000 0 0
Herbert Katz 10,000 * 10,000 0 0
Helena Marks 5,000 * 5,000 0 0
Stanley Oken 10,000 * 10,000 0 0
Dr. Steven Oken 15,000 * 15,000 0 0
Joe Piazza 5,000 * 5,000 0 0
Matthew Reich 25,000 * 25,000 0 0
Dr. & Mr. Sara & Andrew, 10,000 * 10,000 0 0
Rosenwen & Warshaw
Jordan Rosenwein Trust 10,000 * 10,000 0 0
Robert Rosenwein Trust 10,000 * 10,000 0 0
Dr. & Mrs. Stuart & Renee 10,000 * 10,000 0 0
Schwartz
Robert Spielman 10,000 * 10,000 0 0
Ben Wigder 10,000 * 10,000 0 0
Marc Wigder 5,000 * 5,000 0 0
Andrew Zaino 5,000 * 5,000 0 0
Douglas Austin 57,400 * 37,400 20,000 *
Janet Fischer 10,500 * 9,000 1,500 *
Steven Giles 57,400 * 37,400 20,000 *
Kirby Joss 3,100 * 1,600 1,500 *
Charles Craft 3,100 * 1,600 1,500 *
Brian Weaver 9,500 * 8,000 1,500 *
Phil Zaro 50,000 * 50,000 0 0
Steve Hanau 15,000 * 15,000 0 0
Pam Lawler 15,000 * 15,000 0 0
Stuart Wachnin 17,500 * 17,500 0 0
Patrick Lawler 15,000 * 15,000 0 0
Kathi Ali'varius 8,000 * 7,500 500 *
James Rhodes 5,000 * 5,000 0 *
Roger Toms 10,000 * 7,500 2,500 *
Philip Baratz 10,000 * 10,000 0 0
Martin & Lorraine Bedick 10,000 * 10,000 0 0
Averell Elliot 5,000 * 5,000 0 0
Ben Geret 10,000 * 10,000 0 0
Dalewood Assoc. LP 250,000 2.8% 250,000 0 0
Erez Gottlieb 5,000 * 5,000 0 0
Roy Larson 5,000 * 5,000 0 0
Eric Ovits 5,000 * 5,000 0 0
Jacob & Rivkah Ovits 10,000 * 10,000 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(21) After Offering
---- -------------------- ------------ --------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Shermon Feldman Stauber 15,000 * 15,000 0 0
Keith & Jessica Wasserstrom 30,000 * 30,000 0 0
Christian Yegan 30,000 * 30,000 0 0
Paul Martinowitz 7,500 * 7,500 0 0
Susan Abbracciamento 10,000 * 10,000 0 0
Robert Hammer 10,000 * 10,000 0 0
Michail Steightz 5,000 * 5,000 0 0
Howard Cooper 5,000 * 5,000 0 0
Gus Bassam 10,000 * 10,000 0 0
David Kalichman 80,000 * 80,000 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 and 1996 Warrant Shares issuable upon exercise of the
1996 Warrants. All of such Conversion Shares and 1996 Warrant Shares are
being offered for resale pursuant to this Prospectus.
(3) Mr. Landis was a Director of the Company from June 1996 until August
1997. Consists of 52,909 Conversion Shares, 50,000 1996 Warrant Shares,
30,435 Acquisition Warrant Shares and 25,000 Acquisition and Related
Party Offering Shares.
(4) Includes (i) 26,455 1996 Conversion Shares underlying Convertible
Preferred Stock; and (ii) 50,000 Acquisition and Related Party Offering
Shares, all of which 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 and
Mr. Fischer is an employee and member of the senior management team of
the Company. Includes, with respect to Mr. Zaino and Mr. Fischer, options
to purchase 315,000 and 50,000 shares of Common Stock, respectively,
which are presently exercisable or exercisable within 60 days.
(6) Has been an employee of the Company or a subsidiary of the Company since
at least June 1996.
(7) Consists of (i) 26,468 presently issuable Purchase Option Conversion
Shares underlying shares of Convertible Preferred Stock; (ii) 26,468 1996
Purchase Option Warrant Shares; and (iii) 150,000 GKN Shares underlying
the GKN Warrants. 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. The GKN Warrants are
exercisable commencing March 2, 1998 until March 2, 2000. All of such
Purchase Option Conversion Shares, 1996 Purchase Option Warrant Shares
and GKN Shares are being offered for resale pursuant to this Prospectus.
(8) Consists of (i) 7,219 presently issuable Purchase Option Conversion
Shares underlying shares of Convertible Preferred Stock and (ii) 7,219
1996 Purchase Option Warrant 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 Purchase Option Conversion Shares and 1996 Purchase Option Warrant
Shares are being offered for resale pursuant to this Prospectus.
(9) Consists of 5,000 Acquisition and Related Party Offering shares and
options to purchase 7,500 shares of common stock that are presently
exercisable. Mr. Goldstein has been a Director since July 1996.
(10) Consists of shares issuable upon exercise of 1996 Warrant Shares.
(11) Consists of (i) 39,375 presently issuable Purchase Option Conversion
Shares underlying 1996 Purchase Options; (ii) 39,375 1996 Purchase Option
Warrant Shares underlying 1996 Purchase
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Option Warrants, which presently issuable Purchase Option Warrants
underlie 1996 Purchase Options; and (iii) 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) Consists of Conversion Shares, 1996 Warrant Shares and Acquisition
Warrant Shares
(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 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 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 until August 1995.
(15) Consists of 50,000 Option Shares and securities held by Woodland. 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 until August 1995.
(16) 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.
(17) 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.
(18) Consists of Kirlin Shares, all of which are being offered for resale
pursuant to this Prospectus.
(19) 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.
(20) Assumes that such Selling Shareholder will convert its Prepaid Warrants
into Common Stock at a price of $1.47 per share and eliminates any
fractional shares. Pursuant to the terms of each Prepaid Warrant, the
Selling Shareholders may convert each Prepaid Warrant into such number of
shares of Common Stock as is determined by dividing $1,000 by the lesser
of (i) the five (5) lowest closing bid prices for the Common Stock on the
Nasdaq SmallCap Market for the twenty trading days prior to the date of
exercise or (ii) $1.47.
(21) Assumes that each of the Selling Shareholders sells a pro-rata portion of
the shares of Common Stock offered hereby during the effective period of
the Registration Statement. The actual number of shares of Common Stock
offered hereby is subject to change and could be materially greater or
less than the estimated amount indicated, depending upon a number of
factors, including with respect to all Selling Shareholders whether the
number of shares of the Common Stock outstanding have been adjusted to
account for any stock dividend, stock split and similar transactions or
adjustment and, in addition, with respect to the holders of Prepaid
Warrants, (i) the average closing bid price of the Common Stock for the
ten trading days prior to the date of exercise and (ii) whether any of
the Prepaid Warrants have been redeemed.
(22) Except under certain circumstances, none of the Selling Shareholders is
entitled to exercise the Prepaid Warrants to the extent that such
exercise would cause the Selling Stockholder to beneficially own more
than 4.99% of the total outstanding Common Stock of the Company.
Therefore, the number of shares set forth herein and which a Selling
Stockholder may sell pursuant to this Prospectus may exceed the number of
shares such Selling Stockholder may beneficially own as determined
pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended.
(23) Consists of 1,000,000 Prepaid Warrant Shares and 76,440 Incentive Warrant
Shares with respect to Zanett Lombardier, Ltd. and 20,408 Prepaid Warrant
Shares and 1,560 Incentive Warrant Shares with respect to David McCarthy.
(24) Consists of Incentive Warrant Shares.
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PLAN OF DISTRIBUTION
The Shares offered hereby are being offered for the account of the
Selling Shareholders or by pledgees, donees or transferees of, or successors in
interest to, the Selling Shareholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or may acquire Shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the Shares may be effected in one or more of the following
methods: (i) ordinary brokers transactions, which may include long or short
sales, (ii) transactions involving cross or block trades or otherwise on NASDAQ,
(iii) purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this Prospectus, (iv) "at the
market" to or through market makers or into an existing market for the Common
Stock, (v) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents,
(vi) through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or (vii) any combination of the foregoing, or by
any other legally available means. In addition, the Selling Shareholders or
their successors in interest may enter into hedging transactions with
broker-dealers who may engage in short sales of shares of Common Stock in the
course of hedging the positions they assume with the Selling Shareholders. The
Selling Shareholders or their successors in interest may also enter into option
or other transactions with broker-dealers that require that delivery by such
broker-dealers of the Shares, which Shares may be resold thereafter pursuant to
this Prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the Shares may receive compensation in the form of discounts,
concessions or commission from the Selling Shareholders and/or the purchasers of
Shares for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both (which compensation as to a particular broker-dealer may be
in excess of customary commissions). The Selling Shareholders and any
broker-dealers acting in connection with the sale of the Shares hereunder may be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act, and any commissions received by them and any profit realized by them on the
resale of Shares as principals may be deemed underwriting compensation under the
Securities Act. Neither the Company nor any Selling Stockholder can presently
estimate the amount of such compensation. The Company knows of no existing
arrangements between any Selling stockholder and any other stockholder, dealer,
underwriter or agent relating to the sale or distribution of the Shares.
Each Selling Shareholder and any other persons participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchasers and sales of securities by, Selling Shareholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
Any securities covered by this Prospectus that qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that the Selling Shareholder will sell any or
all of the shares of Common Stock offered by them hereunder or otherwise.
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LEGAL MATTERS
The legality of the shares of Common Stock reoffered hereby has been
passed upon for the Company by Olshan Grundman Frome & Rosenzweig LLP, New York,
New York. Certain members of such firm hold options to purchase Common Stock of
the Company.
EXPERTS
The consolidated financial statements of The Netplex Group, Inc. and
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
two year period ended December 31, 1997, 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.
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
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
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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.
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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....................................... 4
Prospectus Summary..................................... 5
Risk Factors........................................... 8
Use of Proceeds........................................ 12
Selling Shareholders................................... 13
Plan of Distribution................................... 21
Legal Matters.......................................... 22
Experts................................................ 22
Indemnification for Securities Act Liabilities......... 22
12,386,480 Shares of Common Stock
THE NETPLEX GROUP, INC.
PROSPECTUS
May __, 1998
<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............. $ 3,144.83
Accounting Fees and Expenses..... 10,000.00
Legal Fees and Expenses.......... 15,000.00
Blue Sky Fees and Expenses....... 10,000.00
Miscellaneous Expenses........... 11,855.17
-------------
Total............................ $50,000.00
==========
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.
Section721 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 of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was
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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.
Section722 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.
Section723 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.
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<PAGE>
(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.
Section724 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 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.
Section725 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
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<PAGE>
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).
Section726 Insurance for Indemnification of Directors and Officers--(a)
Subject to paragraph (b), a corporation shall have power to purchase and
maintain insurance:
(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
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(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").
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.
II-5
<PAGE>
*4(i) -- Certificate of Designation for Class A
Convertible Preferred Stock.
***4(j) -- Form of Prepaid Warrant.
***4(k) -- Form of Incentive Warrant.
****4(l) -- Form of Warrant issued to GKN Securities
Corp.
****4(m) -- Form of Warrant issued in connection with
the acquisition of Preferred Systems
Solutions, Inc.
****4(n) -- Form of Warrant issued to Kirlin Securities
Corp.
****4(o) -- Form of Warrant issued in connection with
Netplex Merger.
****4(p) -- Form of option granted to consultants.
****5 -- Opinion of Olshan Grundman Frome &
Rosenzweig LLP
*****23 -- Consent of KPMG Peat Marwick 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-9.
- ---------------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on November
19, 1996 (Commission File No. 333-16423), as amended.
** 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.
*** Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997.
**** To be filed by amendment.
***** Filed herewith.
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
II-6
<PAGE>
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:
(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 4th day of May, 1998.
THE NETPLEX GROUP, INC.
By:/s/ Gene Zaino
-------------------------------
Gene Zaino, Chairman, 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 and Robert Skelton 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 Chairman, President and Chief May 4, 1998
- ---------------------------- Executive Officer (Principal
Gene Zaino Executive Officer)
/s/ Matthew Jones Chief Financial Officer and May 4, 1998
- ---------------------------- Treasurer (Principal Financial
Matthew Jones Officer)
/s/ Richard Goldstein Director May 4, 1998
- ----------------------------
Richard Goldstein
/s/ Deborah Schondorf-Novick Director May 4, 1998
- -----------------------------
Deborah Schondorf-Novick
/s/ Neil Luden Director May 4, 1998
- ----------------------------
Neil Luden
/s/ Frank C. Laguttuta Director May 4, 1998
- ----------------------------
Frank C. Laguttuta
II-8
Exhibit 23(a)
Accountants' Consent
The Board of Directors
The Netplex Group, Inc.:
We consent to the use of our report incorporated by reference in the
registration statement on Form S-3 of The Netplex Group, Inc. and subsidiaries
as listed with the Securities and Exchange Commission on May 4, 1998, relating
to the consolidated balance sheets of The Netplex Group, Inc. and subsidiaries
as of December 31, 1996 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 1997, which report appears in the December
31, 1997, annual report on Form 10-KSB of the Netplex Group, Inc. and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
McLean, Virginia
May 4, 1998
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