As filed with the Securities and Exchange Commission on February 16, 1999
Registration No. 333-67321
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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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<CAPTION>
<S> <C> <C>
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)
</TABLE>
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 & Wolosky 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 956,000 $0.938(1) $896,728 $271.74
Common Stock, $.001 par value, issuable upon the
Conversion of Class B preferred shares issued or
to be issued in connection with the acquisition
to be consummated
in October 1998(2) 1,287,540(9) $1.5625(9) $1,000,000 $303.03
Common Stock, $.001 par value, issuable upon the
Conversion of Class C preferred shares issued or to
be issued in connection with a Private Placement
consummated in September 1998 2.450,000(7) $0.938(1) $2,298,100 $696.39
Warrant for up to 550,000 shares of Common Stock
issued to Waterside Capital Corporation in connection
with the issuance of the Class C Preferred Shares
(the "Waterside Warrant")(8) one -- -- --
Common Stock, $.001 par value, issuable upon
exercise of Prepaid Common Stock Purchase Warrants
issued in connection with a private placement
consummated in September 1998s
(the "September 1998 Private Placements")
(the "September 1998 Prepaid Warrants")(2) 2,500,000(2) $1.3938(3) $3,484,500 $1,055.91(4)
Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the "Priva
Placement Warrants") issued in connection with the
September 1998 Private Placement(5) 691,667(5) $1.3789(10) $953,740 $289.01
Common Stock, $.001 par value, issuable upon
exercise of certain outstanding warrants (the "FBW
Warrants") 250,000 $1.59(6) $397,500 $120.45
Total 8,135,207 $9,030,568 $2,736.53
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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
November 11, 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 1,700 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 is125% of the fixed exercise
price of $1.3938. The exercise price of the Prepaid Warrants after the
first year is the lower of $1.3938 or 80% ofthe average of the three (3)
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 provisions of the Private Placement
Warrants issued to Waterside Capital Corporation.
(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 FBW Warrants.
(7) For purposes of estimating the number of shares of the Common Stock to be
included in this Registration Statement, the Company used the negotiated
number of shares of Common Stock issuable upon conversion of the Class C
Preferred in accordance with Rule 416 of the
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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 provisions contained
in the Certificate of Designation for the Preferred Stock 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 Preferred Stock will be exercised.
(8) The Common Stock underlying the Warrant issued to Waterside Capital
Corporation is included in the Common Stock to be issued if the Private
Placement Warrants are exercised.
(9) Includes 643,770 shares of Common Stock issuable upon the conversion of
643,770 shares of Class B Preferred Stock which was issued as part of the
acquisition, and an additional 643,770 shares of Common Stock issuable upon
the conversion of an additional 643,770 shares of Class B Preferred Stock
which may be issued in the futute, contingent upon the acquisition
achieving certain performance criteria over the nine quarters beginning
October 1, 1998. The offering price was a calculated value used to
determine the number of Class B preferred shares to be issued in the
acquisition.
(10) The offering price is the average exercise price of the Waterside Warrant
and the incentive warrants issued in connection with the September 1998
Prepaid Warrants (together referred to as the "Private Placement
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.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 16, 1999
PRELIMINARY PROSPECTUS
8,135,207 Shares of Common Stock
THE NETPLEX GROUP, INC.
Common Stock ($.001 par value)
and One (1) Warrant
This prospectus covers the offer and sale of an estimated 8,135,407
shares of the common stock of the Company. The common stock is being offered and
sold by certain of our shareholders. As part of a series of mergers and private
placements occurring from June to October 1998, the Company issued (1) 956,000
shares of common stock, (2) two series of preferred stock and (3) warrants
including prepaid warrants. The preferred stock is convertible into 3,737,540
shares of common stock, and 3,441,667 shares of common stock are issuable upon
exercise of the warrants. Some or all of the selling shareholders expect to sell
their shares. The prospectus also related to the offer and resale of a warrant
to purchase up to 550,000 shares of common stock.
The selling shareholders may offer their shares of common stock for
sale through public or private transactions, on or off the United States
exchanges, at prevailing market prices, or at privately negotiated prices. The
Company will bear all expenses in connection with the preparation of this
prospectus.
THE PROCEEDS AND DETERMINING THE OFFERING PRICE
All proceeds from the sale of the common stock under this prospectus
will go to the selling shareholders. The Company will not receive any proceeds
from sales of the common stock or the exercise of the prepaid warrants. The
Company will, however, receive the exercise price of the other warrants at the
time of exercise.
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
February 11, 1999, the closing sales price for one share of the Company's common
stock on Nasdaq was $2.6875.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 6 THROUGH 10 OF THIS PROSPECTUS.
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THE COMPANY'S SHARES OFFERED OR SOLD UNDER THIS PROSPECTUS HAVE NOT BEEN
APPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE
ORGANIZATIONS DETERMINED THAT THIS PROSPECTORS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is ___________, 1999
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ADDITIONAL INFORMATION
We have filed with the SEC (the "SEC" or the "Commission") a
registration statement on Form S-3 under the Securities Act, with respect to the
resale of common stock and the resale of a warrant, the exercise of the
warrants, the conversion of the preferred stock and the resale of a warrant.
This prospectus, which constitutes a part of that registration statement, does
not contain all the information contained in that registration statement and its
exhibits. For further information with respect to us and our common stock, you
should consult the registration statement and its exhibits. Statements contained
in this prospectus concerning the provisions of any documents are necessarily
summaries of those documents, and each statement is qualified in its entirety by
reference to the copy of the document filed with the SEC. The registration
statement and any of its amendments, including exhibits filed as a part of the
registration statement or an amendment to the registration statement, are
available for inspection and copying through the entities listed below. See
"Where You Can Find More Information."
TABLE OF CONTENTS
Page
----
Where You Can Find More Information.................. 3
Prospectus Summary..................................... 4
Risk Factors........................................... 6
Operating Losses................................... 6
Cash Requirements; Need for
Additional Financing; Uncertainty
of Capital Funding................................. 6
Potential Fluctuations in Quarterly
Results............................................ 6
Dependence Upon Key Personnel...................... 6
Competition........................................ 7
Legal Uncertainties................................ 7
Project Risks...................................... 7
Dilution; Shares Available for
Future Sale........................................ 8
Failure or Inability to Register
Shares; Failure to Obtain
Shareholder Approval............................... 8
Common Stock Eligible for Future
Sale............................................... 8
No Dividends....................................... 8
Year 2000 Compliance............................... 8
Listing............................................ 9
Use of Proceeds........................................ 11
Selling Shareholders................................... 12
Plan of Distribution................................... 16
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Legal Matters.......................................... 17
Experts................................................ 17
Indemnification for Securities Act
Liabilities.......................................... 17
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
(a) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(b) Quarterly Report on Form 10-Q for the fiscal quarters
ended March 31, 1998, June 30, 1998 and September 30, 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.
(d) Current Reports on Form 8-K filed on February 17, 1998,
March 20, 1998, April 15, 1998, July 2, 1998, and November 2, 1998 and
on Form 8-K/A filed on September 30, 1998 and December 30, 1998.
You may request a copy of the filings, at no cost, by writing or
telephoning the following address:
Mr. Walton Bell
Chief Financial Officer
8260 Greensboro Drive
5th Floor
McLean, Virginia 22102
(703) 356-3001.
When you are deciding whether to purchase the shares being offered by
this prospectus, you should rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making any offer of
the shares in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
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Prospectus Summary
The following summarizes the business and operations of The Netplex
Group, Inc. (referred to in this prospectus as "we", "us", "Netplex" or the
"Company"). This summary highlights certain information about the Company that
is included and incorporated by reference in this prospectus. This summary is
not complete and does not contain all of the information about us or all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the information under the
caption "Risk Factors" and the information in the financial statements and the
notes to the financial statements that are incorporated by reference in this
prospectus. The securities offered by this prospectus involve a high degree of
risk. See "Risk Factors."
The Company
Based in McLean, Virginia with twelve offices throughout the U.S., The
Netplex Group, Inc. together with its wholly owned subsidiaries, is an
Information Technology (IT) Services and Solutions company providing the people,
technologies, and processes that build, manage, and protect business information
systems. Through the strategic teaming of business consulting practice areas,
operating units, and wholly owned subsidiaries, we believe that we are
positioned to deliver: IT Solutions - Design and implementation of systems
solutions to address IT related business needs; IT Staffing - Staff augmentation
and flexible task outsourcing; and IT Contractor Resources Business services for
the independent IT Consultant. Our address is 8260 Greensboro Drive, 5th Floor,
McLean, Virginia 22102 and our telephone number is (703) 356-3001. Our Worldwide
Web site address is www.netplexgroup.com.
We were incorporated in 1986. From 1986 to June 1996, under the name
CompLink, Ltd., we developed and marketed a communications software product. On
June 7, 1996, CompLink acquired and merged with The Netplex Group, Inc. and
America's Work Exchange, Inc. by issuing approximately 3,245,000 shares of
common stock. CompLink also issued 1,691,000 options to purchase its common
stock in exchange for the 1,691,000 outstanding options to purchase the common
stock of The Netplex Group. 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. As a result of the merger, CompLink gave effect
to the new share issuance and eliminated its accumulated deficit. The
acquisition of the assets and liabilities of CompLink has been accounted for at
book value, which approximates fair value. CompLink then changed its name to The
Netplex Group, Inc.
We acquired Onion Peel Solutions L.L.C., a Raleigh, NC based provider
of network management solutions as of July 1, 1997, by issuing 80,000 shares of
our common stock to the members of Onion Peel, subject to the issuance of
additional shares based on the closing price of our common stock during the
fourth quarter 1998 We expect to issue an additional 297,396 shares by February
15, 1999 to meet this obligation.
On January 30, 1998, we completed the purchase of all of the stock of
The PSS Group, Inc. ("PSS"). PSS was the technical professional staff
augmentation operations and business of Preferred Systems Solutions, Inc.
("Preferred") and formerly a wholly owned subsidiary of Preferred. In
consideration for the purchase, we paid $300,000 at closing, and on or before
January 15, 1999 we will pay $300,000 in cash or 200,000 shares of our common
stock or any combination thereof, at Preferred's option. The agreement also
provides that Preferred will receive additional consideration (the "Earn-out")
if PSS meets certain operating targets. Such PSS Earn-out may be paid at our
option in cash or in our common stock based on future stock prices, or any
combination thereof. In connection with the acquisition, we have entered into
employment agreements with certain employees of PSS. As of December 31, 1998, we
have not paid and do not owe any additional consideration, in connection with
the acquisition of PSS.
On June 18 1998, we completed the purchase of all of the stock of
Automated Business Solutions and Kellar Technology Group, Inc. (collectively,
"ABS"). In consideration for the purchase, we paid $200,000 and issued 450,000
shares of our common stock. The agreement also provides that the former
shareholders of ABS will receive additional consideration (the "ABS Earn-out")
if ABS meets certain operating targets. As of September 30, 1998, we have
recorded
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$158,000 of additional consideration under the ABS Earn-Out. Such consideration
was recorded as an addition to goodwill and will be amortized over the remaining
life of the goodwill resulting from the transaction.
On October 16, 1998, we completed the purchase of the information
technology consulting business of Applied Intelligence Group, Inc. of Oklahoma
City ("AIG") effective as of September 1, 1998. In consideration for the
purchase, we paid $3,000,000 and issued 643,770 shares of Class B Preferred
Stock ("AIG") (valued at $1,000,000) at closing. The Class B Preferred Stock is
convertible into common stock of the Company at any time on a share for share
basis. No dividends are payable on the Class B Preferred Stock. The holders of
the Class B Preferred Stock have agreed not to sell or otherwise distribute the
common stock underlying the Class B Preferred Stock for a period of one year.
The agreement also provides that AIG will receive additional consideration (the
"AIG Earn-out") if AIG meets certain operating targets. Such AIG Earn-out would
consist of (i) up to $1.5 million of cash if AIG achieves certain net profit
targets over the next six quarters from the date of acquisition and (ii) up to
643,700 shares of Class B Preferred Stock if AIG achieves certain net profit
targets over the next 9 quarters from the date of acquisition.
As of September 30, 1998, the Company has recorded $133,000 of
additional consideration in accordance with the AIG acquisition agreement. Such
consideration was recorded as an addition to goodwill and will be amortized over
the remaining life of such goodwill.
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<PAGE>
Risk Factors
An investment in the shares offered by this prospectus involves a high
degree of risk. You should carefully consider the following risk factors, as
well as information contained and incorporated by reference in this prospectus
before deciding to invest in our common stock.
Operating Losses. We had a net loss of $2,873,603 for the year ended
December 31, 1997 and $2,423,378 for the nine months ended September 30, 1998.
We anticipate that losses will continue until we earn enough from the sales of
our products and services to cover our costs. We are unsure whether our
operations will ever become profitable or that we will generate cash flows
sufficient to meet our costs and sustain our operations.
Cash Requirements; Need for Additional Financing; Uncertainty of
Capital Funding. As of September 30, 1998, we had negative working capital of
$1,145,617. We believe that our existing resources will be adequate for our cash
needs through September 1999. Beyond such period, we may need to raise
substantial additional capital to pay for our operations. We are uncertain
whether additional financing will be available on acceptable terms or at all. If
we raise additional funds by issuing equity securities, our shareholders will be
further diluted. If adequate funds are unavailable, we may delay, curtail,
reduce the scope of or eliminate (1) the expansion of our operations and/or (2)
our marketing and sales efforts which could have a material adverse effect on
our financial condition and business operations.
Potential Fluctuations in Quarterly Results. Our revenues and operating
results may vary due to (1) the number and dollar value of client engagements
commenced and completed during a quarter, (2) the number of working days in a
quarter and (3) employee hiring and utilization rates. The timing of revenues is
difficult to forecast because our sales cycle for new clients is relatively long
and may depend on the size and scope of assignments and general economic
conditions. Because a high percentage of our expenses are relatively fixed, a
change in the timing of the beginning or end of client assignments, particularly
at or near the end of any quarter, could cause operating results to
significantly vary from quarter to quarter and result in reported losses for
that quarter. In addition, clients can terminate our engagement at will,
resulting in a higher than expected number of unassigned persons or higher
severance expenses. While we adjust professional staffs to reflect active
projects, we must maintain a sufficient number of senior professionals to
oversee existing client projects and help our sales force secure new client
assignments. Because we perform work on a fixed-price basis, we also bear the
risk of cost overruns and inflation. New product introductions and market
acceptance of new and enhanced versions of our products or the products of third
parties may also significantly affect our operating results.
Dependence Upon Key Personnel. Our future success depends in large part
on the continued services of Gene Zaino, the Company's President and Chief
Executive Officer, and of our technical, marketing, sales and management
personnel, as well as on our ability to continue to attract, motivate and retain
highly qualified employees. We have a $1,000,000 key man insurance policy on the
life of Mr. Zaino. Our employees can terminate their employment at any time.
Competition for such employees is intense. It is difficult to locate technical,
marketing, sales and management personnel with the combination of skills and
attributes required to execute our strategy. We believe we need to hire
additional technical personnel to improve existing products and services and to
develop new products and services and new sales personnel to sell our products
and services. The inability to attract new personnel could have a material
adverse effect our results of operations and research and development efforts.
Our success depends in large part upon our ability to attract and retain
qualified technical project managers. Although we have attracted and retained
qualified employees, qualified project managers are in particularly great demand
and will remain a limited resource for the foreseeable future. Accordingly, we
may be unable to continue to retain and attract qualified project management.
Competition. We provide information technology services which is a
highly competitive field, subject to rapid changes and includes competitors from
a variety of market segments, including:
o systems consulting and integration firms
o contract programming companies
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o the professional service groups of computer equipment
companies (such as Hewlett-Packard Company, IBM,
Unisys Corporation and Digital Equipment Corporation)
o facilities management and MIS outsourcing companies
o "Big Five" accounting firms
o general management consulting firms
Our competitors include Andersen Consulting, Technology Solutions Corporation,
Computer Task Group, Inc., Alternative Resources, Inc., Innovative Information
Systems, Inc., Cap Gemini America, The Registry, INS, Cambridge Technology
Partners, Electronic Data Systems Corporation and New Boston Systems, Inc. Many
of our competitors have significantly greater financial, technical and marketing
resources, greater name recognition and generate greater systems consulting and
integration revenues than us. The information technology services market is also
highly fragmented and served by numerous local firms.
We believe that the principal competitive factors in the information
technology services industry include:
o responsiveness to client needs
o speed or project implementation
o quality of service
o price
o project management capability
o technical expertise
Legal Uncertainties. Technical services firms face legal uncertainties,
including the extent of liability for violations of employment and
discrimination laws. Our liability can include violations of employment and
discrimination laws committed by consultants we provide to our customers. We
believe the Company complies in all material respects with all applicable rules,
regulations and licensing requirements.
Project Risks. Occasionally, we must guarantee to our customers that
the integrated system which we are consulting will operate properly when
completed. Due to rapid changes in technology or other unforeseen developments
it may be difficult and costly to comply with such guarantees.
Dilution; Indefinite Amount of Shares Issuable Upon Conversion or
Exercise of Certain Shares of Preferred Stock and Warrants; Shares Available for
Future Sale. We have outstanding options and warrants to purchase an aggregate
of 6,047,052 shares of our common stock (not including the prepaid warrants) at
a weighted average exercise price per share (subject to adjustment in certain
circumstances) of $1.79 per share and outstanding shares of convertible class a
and class b preferred stock that are convertible into an aggregate of
approximately 1,631,343 shares of common stock. In addition, we have 1,500,000
shares of class c preferred stock outstanding which is convertible at any time
after the earlier of a change in control or five years from the date of
issuance. The number of shares of common stock into which the class c preferred
stock is convertible can fluctuate since it is equal to $1,500,000 (plus accrued
but unpaid dividends) divided by 25% of the 20 day average trading price of our
common stock immediately prior to conversion. We also have outstanding prepaid
warrants which as of January 31, 1999 are exercisable into 3,283,442 shares of
common stock. The number of shares of common stock issuable upon the exercise of
the prepaid warrants fluctuate due to a number of factors including the bid
prices of one share of common stock. The exercise of all of the outstanding
warrants (including the prepaid warrants), options and/or conversion of the
outstanding convertible preferred stock would dilute the then-existing
stockholders' percentage ownership of our common stock, and any sales in the
public market could adversely affect prevailing market prices for our common
stock. Moreover, the terms upon which we would be able to obtain additional
equity capital could be adversely affected since the holders of such securities
can be expected to exercise them at a time when we would, in all likelihood, be
able to obtain any needed capital on terms more favorable than those provided by
such securities. We do not control the timing of any exercise or the number of
shares issued or sold if such exercise takes place.
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<PAGE>
Failure or Inability to Register Shares. We will incur penalties and
costs under the terms of the prepaid warrants issued in private placements in
April and September 1998 if we do not register the shares of common stock
issuable upon exercise of those warrants, or if we fail to maintain listing on
the Nasdaq SmallCap Market. These penalties may have a material and adverse
effect on our 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 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 such
shares for future sale will have on the market price of the common stock
prevailing from time to time.
No Dividends. We have never paid dividends on our common stock. We
intend to retain any future earnings to finance our growth. In addition,
dividends on common stock are subject to the preferences for dividends on the
preferred stock. Any future dividends will depend upon our earnings, if any, our
financial requirements, and other factors.
Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two-digit entries in the date code
field. These date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. This problem could
result in system failures or miscalculations causing disruptions of business
operations. As a result, by January 1, 2000, computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the potential effects associated with such compliance.
Our vendors, customers, suppliers and service providers are under no
contractual obligation to provide Year 2000 information to us. Generally, we
believe our key internal software systems are either compliant, the vendors
claim compliance, or the problems can be corrected by purchasing small amounts
of hardware, software or software upgrades, where necessary. We are also
continuing to assess the readiness of external entities, such as subcontractors,
suppliers, vendors, and service provides that interface with us.
Based on our assessments and current knowledge, we believe we will not,
as result of the Year 2000 issue, experience any material disruptions in
internal processes, information processing or services from outside
relationships. We believe that the Year 2000 issue will not pose significant
operational problems and we will be able to manage the total Year 2000
transition without any material effect on our results of operations or financial
condition. The most likely risks to us from Year 2000 issues are external, due
to the difficulty of validating all key third parties' readiness for Year 2000.
We have sought and will continue to seek confirmation of such compliance and
seek relationships which are complaint.
We currently anticipate that all internal systems and equipment will be
Year 2000 complaint by the end of the second quarter of 1999 and that the
associated costs will not have a material adverse effect on our results of
operations and financial condition. However, the failure to properly assess or
timely implement a material Year 2000 problem could result in a disruption of
our normal business activities or operations. Such failures, depending on the
extent and nature, could materially and adversely effect the Company's
operations and financial condition. To date, we have not developed a contingency
plan.
We do not believe that the costs of its Year 2000 Program have been or
are material to its financial position or results of operations. All expenses
have been charged against earnings as incurred and we intend to continue to
charge such costs against earning as the costs are incurred.
We believe that the network management software products of our new
Onion Peel Software L.L.C. subsidiary will properly process/utilize dates beyond
December 31, 1999.
-8-
<PAGE>
We do not engage in any Year 2000 work.
The estimates and conclusions set forth herein regarding Year 2000
compliance contain forward-looking statements and are based on management's
estimates of future events and information provided by third parties. We are
unsure if such estimates and information provided will prove to be accurate.
Risks to completing the Year 2000 project include the availability of resources,
our ability to discover and correct potential Year 2000 problems and the ability
of suppliers and other third parties to bring their system into Year 2000
compliance.
Failure to Maintain Listing; Penalties. Our common stock currently is
quoted or traded on Nasdaq and The Boston Stock Exchange, respectively. We are
currently in compliance with Nasdaq's listing requirements. However, we may be
unable to continue to meet the applicable requirements for continued listing.
The failure to continue to meet Nasdaq's 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. In addition, we will incur penalties and costs under
the terms of the prepaid warrants issued in April and September 1998 if we do
not maintain a Nasdaq listing. If our common stock is delisted from Nasdaq, it
may be more difficult to sell, or obtain accurate quotations as to the market
value of, our common stock.
-9-
<PAGE>
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of the selling shareholders identified in this prospectus. See "Selling
Shareholders." All net proceeds from the sale of the common stock will go to the
shareholders who offer and sell their shares of common stock. We will not
receive any part of the proceeds from such sales of common stock, the sale of
warrants to purchase up to 550,000 of common stock, the conversion of the
preferred stock or the exercise of the prepaid warrants. We will, however,
receive proceeds from the exercise price of warrants issued in September 1998
being offered in this prospectus. If all of the warrants are exercised, we will
realize gross proceeds in the amount of $1,153,125. Such proceeds will be
contributed to working capital and will be used for general corporate purposes.
-10-
<PAGE>
SELLING SHAREHOLDERS
The following list of selling shareholders includes (1) the number of
shares of common stock currently owned by each selling shareholder, (2) the
number of shares being offered for resale hereby by each selling shareholder;
and (3) 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, no such selling shareholder has been
an officer, director or employee of the Company for the past three years. The
registration of the shares does not necessarily mean that the selling
shareholders will sell all or any of the shares.
The selling shareholders provided us with all information with respect
to their share ownership. Because the selling shareholders may sell all or part
of their shares, we are unable to estimate 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 shares issuable upon exercise of the prepaid
warrants, we granted the selling shareholders certain registration rights
pursuant to which we 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. We have 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). We will pay the expenses of
registering the shares under the Securities Act, including registration and
filing fees, blue sky expenses, printing expenses, accounting fees,
administrative expenses and our 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 preferred stock as a result of (1) stock splits,
stock dividends or similar transactions and (2) the effect of anti-dilution
provisions contained in the underlying documents. In addition, in the case of
the shares underlying the prepaid warrants, there may be 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.
-11-
<PAGE>
<TABLE>
<CAPTION>
Shares to be
Number of Share of Common Stock Sold in Shares Beneficially Owned
Beneficially Owned Prior to Offering(1) Offering(2) After Offering
Name Number Percentage Number Percent
---- ------ ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Leon Atkin 50,000 * 50,000 0 0
James Daleen 10,000 * 10,000 0 0
Paul Edelman 20,000 * 20,000 0 0
George Gellert 265,000(3) 2.6 125,000 140,000 1.4
Neil Glassberg 20,000 * 20,000 0 0
Natalie Gonnen 50,000 * 50,000 0 0
Cyra Kerven 10,000 * 10,000 0 0
Todd Koffman 30,000 * 30,000 0 0
Louis Rosenwein 285,000(4) 2.8 125,000 160,000 1.6
Harold Stangler 6,000 * 6,000 0 0
Stuart Wachnin 22,500(5) * 5,000 17,500 0
J. Craig Jones 152,922 1.5 152,922 0 0
Stephen S. Turner 218,390 2.1 218,390 0 0
David C. Turner 18,042 * 18,042 0 0
Steven S. McBryde 19,073 * 19,073 0 0
Timothy Shelton 19,073 * 19,073 0 0
William K. Bell 22,500 * 22,500 0 0
The ViaLink Company 1,287,540 11.2 1,287,540 0 0
Waterside Capital 3,000,000(6) 22.7 3,000,000 0 0
Corporation
Goldman Sachs Performance 1,432,394(10) 12.3(11) 1,432,394 0 0
Partners, LP
Goldman Sachs Performance 1,162,523(10) 10.2(11) 1,162,523 0 0
Partners (Offshore), LP
Claudio Guazzoni(7) 30,025 * 30,025 0 0
David McCarthy(8) 51,993 * 30,025 21,968 *
Samuel L. Milbank(9) 21,350 * 21,350 0 0
Augie LaTorre 8,000 * 8,000 0 0
The Zanett Securities 51,350 * 12,350 39,000 *
Corporation (10)
Ferris, Baker and Watts, Inc. 150,000 1.4 150,000 0 0
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Richard Prinz 40,000 * 40,000 0 0
Steven Shea 25,000 * 25,000 0 0
John Hagan 20,000 * 20,000 0 0
Peter Malekian 10,000 * 10,000 0 0
Charles Place 3,000 * 3,000 0 0
Mark Rust 2,000 * 2,000 0 0
</TABLE>
- ----------------------------
o Less than one percent
(1) Beneficial ownership is determined in accordance with SEC rules and
generally include voting or investment power with respect to
securities. Shares of common stock subject to options, warrants and
convertible preferred stock currently exercisable or convertible, or
exercisable or convertible within sixty (60) days, are counted as
outstanding for computing the percentage of the person holding such
options or warrants but are not counted as outstanding for computing
the percentage of any other person.
(2) Assumes that all of the shares held by the selling shareholders and
being offered under this prospectus are sold, and that the selling
shareholders acquire no additional shares of common stock before the
completion of this offering. 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 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, if converted during the first year, 125%
of $1.3938 and thereafter the lower of (i) 80% of the average of the
three lowest closing bid prices of common stock for the twenty trading
days prior to the date of exercise and (ii) $1.3938, and whether any of
the prepaid warrants have been redeemed.
(3) Includes 125,000 shares of common stock purchased in a private
placement in August 1998 and 140,000 shares of common stock purchased
in a private placement in March 1998.
(4) Includes 125,000 shares of common stock purchased in a private
placement in August 1998 and 160,000 shares of common stock purchased
in a private placement in March 1998.
(5) Includes 5,000 shares of common stock purchased in a private placement
in August 1998 and 17,500 shares of common stock purchased in a private
placement in March 1998.
(6) Includes 2,450,000 shares of common stock reserved for the conversion
of the Class C preferred stock and 550,000 shares of common stock
reserved for conversion of the Private Placement Warrants.
(7) Includes 16,000 shares of common stock and 14,025 private placement
warrant shares.
(8) Includes 14,025 private placement warrant shares, 21,968 prepaid
warrant shares and 16,000 shares of common stock.
(9) Includes 12,000 shares of common stock and 9,350 private placement
warrant shares.
(10) Assumes that such selling shareholder will convert its prepaid warrants
into common stock at a price of $1.3938 per share and eliminate 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 125%
of $1.3938 during the first year, or thereafter by the lesser of (i)
80% of the three (3) 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) $1.3938.
(11) Except under certain circumstances, none of the selling shareholders
may exercise the prepaid warrants to the extent that such exercise
would cause the selling shareholder to beneficially own more than 4.99%
of the total outstanding common stock of the Company. Therefore, the
number of shares listed here and which a selling shareholder may sell
pursuant to
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<PAGE>
this prospectus may exceed the number of shares such selling
shareholder may beneficially own as determined pursuant to Section
13(d) of the Securities Exchange Act of 1934, as amended.
-14-
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders may offer their shares at various times in one
or more of the following transactions:
o ordinary brokers transactions, which may include long or short
sales
o cross or block trades or otherwise on Nasdaq
o purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to
this prospectus
o "at the market" to or through market makers or into an
existing market for the common stock
o in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents
o options, swaps or other derivatives (whether exchange listed
or otherwise)
o any combination of the foregoing, or by any other legally
available means
o in connection with short sales of shares of common stock
o option or other transactions
Brokers, dealers, underwriters or agents participating in the
distribution of the shares of common stock may receive compensation in the form
of discounts, concessions or commission from the selling shareholders and/or the
purchasers of shares of common stock 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 of common stock hereunder may be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act because of the number of shares
of common stock to be sold or reserved by such persons or entities or the manner
of sale of such shares, or both. If a selling shareholder or any broker-dealer
or other holders were determined to be underwriters any commissions received by
them and any profit realized by them on the resale of shares of common stock as
principals may be deemed underwriting compensation under the Securities Act.
Neither the Company nor any selling shareholder can presently estimate the
amount of such compensation. We don't know of existing arrangements between any
selling shareholder and any other shareholder, dealer, underwriter or agent
relating to the sale or distribution of the Shares.
The selling shareholders have represented to us that any
purchase or sale of shares of common stock by them will comply with Regulation M
promulgated under the Securities Exchange Act of 1934, as amended. In general,
Rule 102 under Regulation M prohibits any person connected with a distribution
of our common stock (a "Distribution") from directly or indirectly bidding for,
or purchasing for any account in which he or she has a beneficial interest, any
of our common stock or any right to purchase our common stock, for a period of
one business day before and after completion of his or her participation in the
distribution (we refer to that time period as the "Distribution Period").
During the Distribution Period, Rule 104 under Regulation M
prohibits the selling shareholders and any other persons engaged in the
Distribution from engaging in any stabilizing bid or purchasing our common stock
except for the purpose of preventing or retarding a decline in the open market
price of our common stock. No such person may effect any stabilizing transaction
to facilitate any offering at the market. Inasmuch as the selling shareholders
will be reoffering and reselling our common stock at the market, Rule 104
prohibits them from effecting any stabilizing transaction in contravention of
Rule 104 with respect to our common stock.
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<PAGE>
There can be no assurance that the selling shareholders will sell any
or all of the shares offered by them hereunder or otherwise.
LEGAL MATTERS
For purposes of this offering Olshan Grundman Frome Rosenzweig &
Wolosky LLP, New York, New York is giving its opinion on the validity of the
shares. Members of such firm have options to purchase shares of common stock of
the Company.
EXPERTS
The financial statements of The Netplex Group, Inc. and subsidiaries as
of December 31, 1997 and 1996 and for each of the years in the three-year period
ended December 31, 1997, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG 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
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
-16-
<PAGE>
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.
-17-
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
prospectus at any time does not imply that the information herein is correct as
of any time subsequent to the date hereof. We have not authorized any dealer,
salesperson or other person to give any information or represent anything not
contained in this prospectus. You must not rely on any unauthorized information.
This prospectus does not offer to sell or buy any shares in any jurisdiction
where it is unlawful. The information in this prospectus is current only as of
November 13, 1998.
----------------
8,135,207 Shares of Common Stock
THE NETPLEX GROUP, INC.
----------------
PROSPECTUS
----------------
___________, 1999
<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..................... $ 2,736.53
Accounting Fees and Expenses............. 10,000.00
Legal Fees and Expenses.................. 15,000.00
Blue Sky Fees and Expenses............... 10,000.00
Miscellaneous Expenses................... 12,263.47
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.
ss.721 Nonexclusivity of Statutory Provisions for Indemnification of
Directors and Officers -- The indemnification and advancement of expenses
granted pursuant to, or provided by, this article shall not be deemed exclusive
of any other rights to which a director or officer seeking indemnification or
advancement of expenses may be entitled, whether contained in the certificate of
incorporation or the by-laws or, when authorized by such certificate of
incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of
directors, or (iii) an agreement providing for such indemnification, provided
that no indemnification may be made to or on behalf of any director or officer
if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. Nothing contained in this
article shall affect any rights to indemnification to which corporate personnel
other than directors and officers may be entitled by contract or otherwise under
law.
II-1
<PAGE>
ss.722 Authorization for Indemnification of Directors and Officers--(a)
A corporation may indemnify any person, made, or threatened to be made, a party
to an action or proceeding other than one by or in the right of the corporation
to procure a judgment in its favor, whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the corporation served in any
capacity at the request of the corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding
by judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation or that he had reasonable
cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be
made, a party to an action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer or any other corporation of
any type or kind, domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation, except that no indemnification under this paragraph shall be
made in respect of (1) a threatened action, or a pending action which is settled
or otherwise disposed of, or (2) any claim issue or matter as to which such
person shall have been adjudged to be liable to the corporation, unless and only
to the extent that the court in which the action was brought, or, if no action
was brought, any court of competent jurisdiction, determines upon application
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
(d) For the purpose of this section, a corporation shall be deemed to
have requested a person to serve an employee benefit plan where the performance
by such person of his duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines; and
action taken or omitted by a person with respect to an employee benefit plan in
the performance of such person's duties for a purpose reasonably believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the corporation.
ss.723 Payment of Indemnification Other Than By Court Award--(a) A
person who has been successful, on the merits or otherwise, in the defense of a
civil or criminal action or proceeding of the character described in section 722
shall be entitled to indemnification as authorized in such section.
(b) Except as provided in paragraph (a), any indemnification under
section 722 or otherwise permitted
II-2
<PAGE>
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 finding that the
director or officer has met the applicable
standard of conduct set forth in such sections.
(C) Expenses incurred in defending a civil or
criminal action or proceeding may be paid
by the corporation in advance of the &al disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount as, and to the extent, required by paragraph (a) of
section 725.
ss.724 Indemnification of Directors and Officers by a Court--(a)
Notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders in the
specific case under section 723 (Payment of indemnification other than by court
award), indemnification shall be awarded by a court to the extent authorized
under section 722 (Authorization for indemnification of directors and officers),
and paragraph (a) of section 723.
Application therefor may be made, in every case, either:
(1) In the civil action or proceeding in which the expenses
were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which
case the application shall set forth the disposition of any previous application
made to any court for the same or similar relief and also reasonable cause for
the failure to make application for such relief in action or proceeding in which
the expenses were incurred or other amounts were paid.
(b) The application shall be made in such manner and form as may be
required by the applicable rules of court or, in the absence thereof, by
direction of a court to which it is made. Such application shall be upon notice
to the corporation. The court may also direct that notice be given at the
expense of the corporation to the shareholders and such other persons as it may
designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may
allow a person such reasonable expenses, including attorneys' fees, during the
pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
ss.725 Other Provisions Affecting Indemnification of Directors and
Officers--(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under paragraph (c) of section
723 (Payment of indemnification other than by court award) or allowed by a court
under paragraph (c) of section 724
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<PAGE>
(Indemnification of directors and officers by a court) shall be repaid in case
the person receiving such advancement or allowance is ultimately found, under
the-procedure set forth in this article, not to be entitled to indemnification
or, where indemnification is granted, to the extent the expenses so advanced by
the corporation or allowed by the court exceed the indemnification to which he
is entitled:
(b) No indemnification, advancement or allowance shall be made under
this article in any circumstance where it appears:
(1) That the indemnification would be inconsistent with the
law of the jurisdiction of incorporation of a foreign corporation which
prohibits or otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with a
provision of the certificate of incorporation, a by-law, a resolution of the
board or of the shareholders, an agreement or other proper corporate action, in
effect at the time of the accrual of the alleged cause of action asserted in the
threatened or pending action or proceeding in which the expenses were incurred
or other amounts were paid, which prohibits or otherwise limits indemnification;
or
(3) If there has been a settlement approved by the court, that
the indemnification would be inconsistent with any condition with respect to
indemnification expressly imposed by the court in approving the settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholders,
the corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three months from the date of such payment,
and in any event, within fifteen months from the date of such payment, mail to
its shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(d) If any action with respect to indemnification of directors and
officers is taken by way of amendment of the by-laws, resolution of directors,
or by agreement, then the corporation shall, not later than the next annual
meeting of shareholders, unless such meeting is held within three months from
the date of such action, and, in any event, within fifteen months from the date
of such action, mail to its shareholders of record at the time entitled to vote
for the election of directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing
paragraph (c) or (d) of this section by any domestic mutual insurer shall be
satisfied by compliance with the corresponding provisions of section one
thousand two hundred sixteen of the insurance law.
(f) The provisions of this article relating to indemnification of
directors and officers and insurance therefor shall apply to domestic
corporations and foreign corporations doing business in this state, except as
provided in section 1320 (Exemption from certain provisions).
ss.726 Insurance for Indemnification of Directors and Officers--(a)
Subject to paragraph (b), a corporation shall have power to purchase and
maintain insurance:
(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
II-4
<PAGE>
(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) -- Certificate of Designations,
Preferences and other Rights and
Qualifications of Class B
Convertible Preferred Stock.
*****4(b) -- Certificate of Amendment of the
Certificate of Incorporation of The
Netplex Group, Inc.
*****4(c) -- Investor Rights Agreement dated
September 30, 1998.
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<PAGE>
*****4(d) -- Registration Rights Agreement
(between Netplex and Waterside
Capital) dated September 30, 1998.
*****4(e) -- Stock Purchase Warrant dated
September 30, 1998.
*****4(f) -- Placement Agency Agreement dated
September 25, 1998.
*****4(g) -- Incentive Stock Purchase Warrant.
*****4(h) -- Prepaid Common Stock Purchase
Warrant.
*****4(i) -- Registration Rights Agreement
(between Netplex and the Initial
Investors) dated September 25, 1998.
*****4(j) -- Securities Purchase Agreement dated
September 25, 1998.
****5 -- Opinion of Olshan Grundman Frome &
Rosenzweig LLP
******23 -- Consent of KPMG 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.
***** Previously filed.
****** 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
precedent, submit to a court of
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<PAGE>
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.
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<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 __th day of February, 1999.
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 February 11, 1999
- -------------------------- and Chief Executive
Gene Zaino Officer (Principal
Executive Officer)
* Chief Financial Officer February 11, 1999
- -------------------------- and Treasurer
Walton E. Bell III (Principal Financial
Officer)
* Director February 11, 1999
- --------------------------
Richard Goldstein
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<PAGE>
* Director February 11, 1999
- --------------------------
Deborah Schondorf-Novick
* Director February 11, 1999
- --------------------------
Steven Hanau
* Vice President and Director February 11, 1999
- --------------------------
Frank C. Laguttuta
By: /s/Robert Skelton
- --------------------------
Robert Skelton
Attorney-in-fact
II-9
Exhibit 23(a)
Accountants' Consent
The Board of Directors
The Netplex Group, Inc.:
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the prospectus.
/S/ KPMG, LLP
-------------
KPMG, LLP
McLean, Virginia
February 16, 1998
