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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Defnitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Netplex Group, Inc.
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(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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The Netplex Group, Inc.
1800 Robert Fulton Drive, Second Floor
Reston, Virginia 20191-9992
Notice of Special Meeting of Stockholders
January 31, 2001 -- 10:00 A.M.
To the Stockholders of The Netplex Group, Inc.:
You Are Hereby Notified that a Special Meeting of Stockholders of The
Netplex Group, Inc. (the "Company") will be held on January 31, 2001 at 10:00
A.M., the Executive Conference Center, Conference Room 3, 8201 Greensboro Drive,
McLean, Virginia 22102, to consider and act upon the following matters:
1. To approve the issuance of certain shares of Common Stock issuable
upon the conversion of the Series E Preferred Stock held by certain
investors of the Company; and
2. To transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
The Board of Directors of the Company has fixed the close of business on
December 18, 2000 as the record date for the determination of stockholders
entitled to notice of and vote at the Special Meeting and any adjournment(s) or
postponement(s) thereof.
Only shareholders of record on the stock transfer books of Netplex at the
close of business on that date are entitled to notice and to vote at the
Meeting.
By Order of the Board of Directors,
Kimberly Osgood
Secretary
Reston, Virginia
Dated: January 8, 2001
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING YOU ARE URGED TO FILL IN,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. ALTERNATIVELY, YOU MAY VOTE
VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS SET FORTH ON YOUR
PROXY CARD. STOCKHOLDERS ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF
THEY HAVE PREVIOUSLY VOTED.
THE NETPLEX GROUP, INC. 1800 ROBERT FULTON DRIVE, SECOND FLOOR RESTON, VIRGINIA
20191-9992
<PAGE>
Proxy Statement
For Special Meeting of the Shareholders
January 31, 2001
INTRODUCTION
This Proxy Statement is being furnished to shareholders by the Board of
Directors of The Netplex Group, Inc., a New York corporation (the "Company"), in
connection with the solicitation of proxies for use at the January 31, 2001
Special Meeting of Shareholders of the Company (the "Meeting") to be held at the
Executive Conference Center, Conference Room 3, 8201 Greensboro Drive, McLean,
Virginia 22102, on January 31, 2001, at 10:00 a.m., local time, or at any
adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying Proxy
will first be sent or given to shareholders is January 8, 2001.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on December 18, 2000, the
record date (the "Record Date") for the Meeting, will be entitled to notice of,
and to vote at, the Meeting and any adjournment(s) thereof. As of the close of
business on the Record Date, there were outstanding 20,878,448 shares of the
Company's common stock, $0.01 par value (the "Common Stock"). Each outstanding
share of Common Stock is entitled to one vote. There was no other class of
voting securities of the Company outstanding on the Record Date. A majority of
the outstanding shares of Common Stock present in person or by proxy is required
for a quorum.
VOTING OF PROXIES
Shares of Common Stock represented by a proxy which is properly executed, duly
returned and not revoked, or properly voted via the internet or telephonically
(a "Proxy") will be voted in accordance with the instructions contained therein.
If no instruction is indicated on the Proxy, the shares of Common Stock
represented thereby will be voted (i) For the issuance of the shares of Common
Stock issuable upon conversion of the Series E Preferred Stock (as defined in
Proposal I), and (ii) at the discretion of the person or persons voting the
Proxy with respect to any other matter that may properly be brought before the
Meeting. The execution of a Proxy will in no way affect a shareholder's right to
attend the Meeting and vote in person. Any Proxy executed and returned by a
shareholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy which is presented
at the Meeting, or if the shareholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. The cost of
solicitation of the Proxies being solicited on behalf of the Board of Directors
will be borne by the Company. In addition to the use of the mails, proxy
solicitation may be made personally or by telephone, or telegraph by officers,
directors and employees of the Company. The Company will, upon request,
reimburse banks, brokerage firms and other custodians for their reasonable
expenses in sending soliciting material to the beneficial owners of shares of
Common Stock.
The manner in which your shares may be voted by proxy depends on how your shares
are held.
If you own shares through a bank or brokerage firm account, you may instead
receive a voting instruction form with this proxy statement, which you may use
to instruct how your shares should be voted. Just as with a proxy, you may vote
those shares by completing, signing and returning the voting instruction form in
the enclosed envelope. Many banks and brokerage firms have arranged for internet
or telephonic voting shares and provide instructions for using those services on
the voting instruction form.
If you own shares of record, meaning that your shares of common stock are
represented by certificates or book entries in your name so that you appear as
stockholder on the records of our stock transfer agent, American Stock Transfer
and Trust Company, a proxy card for voting those shares will be included with
this proxy statement. You may vote those shares by completing, signing and
returning the proxy card in the enclosed envelope. Alternatively, by following
the instructions on your proxy card, you may vote those shares via the internet
at http://www.voteproxy.com or telephonically by calling 1-800-PROXIES.
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of the Company's
Common Stock, as of January 4, 2001 by each person known by the Company to
be the beneficial owner of more than five percent of the Common Stock, each
director, each executive officer, and by all directors and executive officers of
the Company as a group.
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<TABLE>
<CAPTION>
Name of Beneficial Owner* Number of Shares of Common Stock Beneficially Owned(1)
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Number Percent
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<S> <C> <C>
Gene Zaino 2,088,350(2) 10%
Peter Russo 100,000 **
Richard Goldstein 30,000(3) **
Steve Hanau 15,000(3) **
J. Alan Lindauer 12,500(4) **
Amy O'Donnell 149,999(5) **
All directors and 2,395,849(6) 11.4%
Executive officers as a
Group
</TABLE>
________________________
* All of the above Beneficial Owners use The Netplex Group, Inc., 1800 Robert
Fulton Drive, Second Floor, Reston, Virginia 20191 as a business address with
respect to the matters provided herein.
** Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and, unless otherwise indicated, includes
sole voting and investment power with respect to securities. Shares of Common
Stock subject to options or warrants currently exercisable, or exercisable
within 60 days, are deemed outstanding for computing the percentage of the
outstanding Common Stock beneficially owned by the person holding such options
or warrants but are not deemed outstanding for computing the percentage
beneficially owned by any other person. Based solely on a review of Schedules
13G and 13D that have been filed and delivered to the Company, the Company is
not aware of any 5% beneficial holders of its Common Stock, other than the
persons specified in the table above.
(2) Includes 673,420 shares of Common Stock, subject to currently exercisable
options and warrants.
(3) Consists of 15,000 shares of Common Stock subject to currently exercisable
options.
(4) Includes 7,500 shares of Common Stock subject to currently exercisable
options.
(5) Includes 39,999 shares of Common Stock subject to currently exercisable
options.
(6) Includes 947,586 shares of Common Stock subject to currently exercisable
options and warrants.
PROPOSAL I - TO APPROVE THE ISSUANCE OF THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE SERIES E PREFERRED STOCK
Board Approval of the Series E Preferred Stock Issuance
On November 10, 2000, the Company entered into an Exchange, Redemption and
Conversion Agreement with the investors holding Series D Preferred Stock to
restructure the Series D Preferred Stock. Pursuant to the Exchange, Redemption
and Conversion Agreement, the Company retired $6,177,000 of the original face
amount of the Series D Preferred Stock and all of the related warrants in
exchange for the Company's issuance of $3,000,000 of Series E Preferred Stock
(the "Series E Preferred Stock"). The Series E Preferred Stock is redeemable
for $3,000,000 at the Company's option on or before April 30, 2001, provided the
Company redeems at least $1,500,000 of the Series E Preferred Stock on or before
January 31, 2001 and certain other conditions are satisfied. If the Series E
Preferred Stock is not redeemed (and in certain other circumstances) it becomes
convertible into Common Stock at a conversion rate of $0.47 per share. On
November 30, 2000, the Company filed a registration statement with the
Securities and Exchange Commission to register for resale the Common Stock
issuable upon conversion of the Series E Preferred Stock and any Common Stock
issuable as dividends on the Series E Preferred Stock.
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As part of the agreement to restructure the Series D Preferred Stock, the
Company also redeemed 500 of the remaining 3,823 shares of Series D Preferred
Stock at the face value of $500,000 and the holders of the Series D Preferred
Stock converted 1,178 shares of Series D Preferred Stock into 1,808,473 shares
of Common Stock. In addition, the holders of the Series D Preferred Stock
waived their rights to purchase additional shares of Series D Preferred Stock or
receive any further dividends on the Series D Preferred Stock. The remaining
2,145 shares of Series D Preferred Stock have a conversion price of $0.65625 and
are convertible into 3,293,020 shares of Common Stock.
The Board of Directors believes that the restructuring of the Series D Preferred
Stock and the associated issuance of the Series E Preferred Stock was desirable
as a way to reduce the potential dilution associated with the original Series D
Preferred Stock. Furthermore, the Board of Directors believes that the
restructured agreement, which is equity-based with fixed conversion prices, has
improved the Company's capital structure.
Nasdaq Rules
As a condition of continued listing of the Company's Common Stock on the NASDAQ,
the Company is required to obtain shareholder approval of any transaction where
the sale or issuance of Common Stock (or securities convertible into Common
Stock) by the Company equal or exceeds 20% of the Common Stock before the
issuance at a price less than the greater of book or market value (the "Nasdaq
20% Rule"). Shareholder approval is also required in connection with
transactions which are deemed to be a "change in control" under Nasdaq rules.
Although the Company does not believe that the issuance of the Series E
Preferred Stock constitutes a "change in control," if the transaction were to be
so construed, the approval being sought would also be effective to satisfy that
Nasdaq requirement. The Series E Preferred Stock is convertible into Common
Stock at a rate based at a conversion price of $0.47 per share. Accordingly,
the number of shares of Common Stock that the Company shall be required to issue
upon conversion of the Series E Preferred Stock and exercise exceeds 20% of the
Company's outstanding shares of Common Stock. The terms of the Series E
Preferred Stock provide that shares of Common Stock issuable upon conversion of
the Series E Preferred Stock may not be issued if such issuance would violate
Nasdaq rules. Thus, upon approval of the proposal, the Company may be required
to issue shares of Common Stock equal to 20% or more of the shares of Common
Stock outstanding on the date of issuance.
If the Company does not obtain shareholder approval and is not obligated to
issue shares pursuant to the Certificate of Amendment of the Company's
Certificate of Incorporation (filed in connection with the Exchange, Redemption
and Conversion Agreement), the Company will be required to redeem a portion of
the Series E Preferred Stock if requested by the holders of the Series E
Preferred Stock at a premium (see "Summary of Transaction Terms Pursuant to the
Exchange, Redemption, and Conversion Agreement-Redemptions"). The Company is
required to redeem all of the shares of Series E Preferred Stock submitted for
redemption within five business days. If Company fails to redeem the Series E
Preferred Stock during those five business days, the holders can require the
Company to pay interest to the holders on any shares which were not redeemed as
required at 2.0% per month.
Additionally, if the Company fails to redeem at a premium any Series E Preferred
Stock as requested, the holders of at least two-thirds of the outstanding Series
E Preferred Stock have the right to require that the Company voluntarily delist
its shares of Common Stock from the Nasdaq Stock Market. In that event, trading
in the Company's shares would likely decrease substantially, and the price of
the Common Stock may decline. Further, the holders could argue that failure to
obtain such shareholder approval was a breach of the Company's obligations under
the operative transaction documents which had a Material Adverse Effect (as
defined in the Exchange, Redemption and Conversion Agreement). If such an
argument were successful, the Company will be obligated to make certain cash
default payments until it cured such defaults.
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Vote Required
The proposal requires the affirmative vote of a majority of the votes cast, in
person or by proxy, by the holders of Common Stock. Broker non-votes and proxies
marked "abstain" with respect to this proposal will be counted towards a quorum
but are not considered votes cast.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PREFERRED STOCK PROPOSAL.
SUMMARY OF TRANSACTION TERMS PURSUANT TO
THE EXCHANGE, REDEMPTION AND CONVERSION AGREEMENT
The following is a summary of the material terms of the Series E Preferred
Stock, which terms are qualified in their entirety by reference to the full text
of the underlying documents which are filed as exhibits to the Form 8-K of the
Company filed on November 13, 2000 (the "Form 8-K"), such documents can also be
obtained from the Secretary of the Company at the Company's principal office set
forth above. The underlying documents for the Series E Preferred Stock are an
Exchange, Redemption and Conversion Agreement, a Certificate of Amendment of the
Certificate of Incorporation of The Netplex Group, Inc. relating to the Series E
Preferred Stock (the "Certificate of Amendment"), and a Registration Rights
Agreement, all filed as exhibits to the Form 8-K.
As described above, the Company and certain investors entered into an Exchange,
Redemption and Conversion Agreement on November 10, 2000 pursuant to which the
Company, among other things, issued the Series E Preferred Stock in exchange for
a portion of such investors Series D Preferred Stock.
Series E Preferred Stock
GENERAL
On November 10, 2000, the Company issued 3,000 shares of its Series E
Convertible Preferred Stock, $1,000 stated value per share with a conversion
price of $0.47 per share in a private placement to certain institutional
investors. This issuance was, in connection with the restructuring of the Series
D Preferred Stock issued as of March 28, 2000. The terms of the Series E
Preferred Stock included in this Proxy Statement are complex and are only
briefly summarized herein. To obtain further information concerning the rights,
preferences and terms of the Series E Preferred Stock, please refer to the full
description contained in the Company's current report on Form 8-K and exhibits
filed therein with the Securities Exchange Commission.
DIVIDENDS
The Series E Preferred Stock carries a dividend rate of 7% per annum, payable
quarterly, beginning May 1, 2001 and thereafter on the first day of each
calendar quarter commencing July 1, 2001. Subject to the terms of the Company's
Certificate of Incorporation, at the Company's option, the quarterly dividend
may be paid in cash or shares of Common Stock. If the Company chooses to pay
dividends in shares of Common Stock, the number of shares to be issued in
payment of the dividend on each share of the Series E Preferred Stock will be
equal to the accrued dividends (plus any unpaid default interest) divided by the
applicable dividend conversion price. The applicable dividend conversion price
will be equal to the average of the closing sale prices for the Common Stock on
each of the 10 consecutive trading days immediately preceding the date of
determination.
Generally, the Company may not pay dividends in shares of its Common
Stock if any of the "triggering events" identified below under the heading
"Redemption" has occurred and is continuing.
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FINAL CONVERSION OR REDEMPTION DATE
Subject to the Company's rights of redemption described below under the heading
"Redemption", the Series E Preferred Stock must be converted or redeemed on
March 29, 2002, subject to extension in certain circumstances, at which time the
Series E Preferred Stock may be redeemed at the Company's option. If the Company
elects to redeem any Series E Preferred Stock outstanding on March 29, 2002, the
amount required to be paid will be equal to the liquidation preference of the
Series E Preferred Stock, which equals the price originally paid for such shares
plus "accretion" (as defined below). If the Company does not redeem all of these
shares of Series E Preferred Stock by May 31, 2002 (or such applicable extended
date), the Company will be required to convert the shares that it does not
redeem into the number of shares of Common Stock determined by dividing the sum
of $1,000 plus an additional amount equal to a 7% annual return on the principal
amount of the Series E Preferred Stock accrued from the last date on which
dividends were paid (or if no dividends were paid, the date of issuance) plus
unpaid default interest by the applicable conversion price. The applicable
conversion price will be 100% of the closing bid price on the date of such
conversion. "Accretion" equals (.07) (N/365) ($1,000), where N is the number of
days between November 10, 2000 (in the event no dividends have been paid on
shares of the Series E Preferred Stock prior to the date of determination) and
the date of determination, plus any unpaid default interest.
During the period beginning on and including the date which is two business days
after March 29, 2002 and ending on and including May 31, 2002, no holder of
Series E Preferred Stock shall be entitled to sell a number of shares of Common
Stock issued pursuant to the conversion of such preferred stock in excess of the
greater of:
(I) the product of:
. the result of (i) the aggregate conversion amount of all such
shares of Series E Preferred Stock held by such holder on the
date which is two business days after March 29, 2002, divided by
(ii) the lowest conversion price during the period beginning on
and including the date which is two business days after March 29,
2002 and ending on and including the date as of which the
determination is being made, multiplied by
. the result of (X) the number of business days during the period
beginning on and including the date which is two business days
after March 29, 2002 and ending on and including the date as of
which the determination is being made, divided by (Y) 45, and
(II) 15% of the daily trading volume for the Common Stock on such date of
determination, multiplied by (w) the result of (A) the number of
shares of Series E Preferred Stock purchased by such holder on
November 10, 2000, divided by (B) the total number of shares of Series
E Preferred Stock purchased on November 10, 2000.
CONVERSION
Subject to the Company's rights of redemption described below under the heading
"Redemption", the Series E Preferred Stock is convertible at a conversion rate
of $0.47 per share into shares of Common Stock at the option of the holder
thereof at any time after the Company fails to redeem such shares in accordance
with the schedule described under the heading "Redemption" below or upon the
occurrence of certain other events. The number of shares of Common Stock to be
issued upon conversion of a share of Series E Preferred Stock issued November
10, 2000 is determined by dividing the sum of $1,000 (the stated value), plus an
additional amount equal to a 7% annual return on the principal amount of the
Series E Preferred Stock accrued from the last date on which dividends were paid
(or if no dividends have been paid, November 10, 2000) plus unpaid default
interest, by $0.47.
If the Company fails to deliver shares of Common Stock after being requested by
a holder of the Series E Preferred Stock to convert its shares to Common Stock,
then the Company will be subject to certain cash penalties after 5 business days
from the Company's receipt of the request.
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After 12 business days from the Company's receipt of the request, if the Company
has failed to deliver such shares the holder that made the request will be
entitled to require the Company to redeem its shares of Series E Preferred Stock
at a premium.
The conversion of all the outstanding shares Series E Preferred Stock as of
January 4, 2001 at the fixed conversion price of $0.47 would result in the
issuance of 6,382,979 shares of Common Stock, not including any Common Stock
issuable as dividends accruing of the Series E Preferred Stock in lieu of cash
payments.
No holder of shares of the Series E Preferred Stock may convert its shares if
the conversion (i) would make the holder the beneficial owner of more than 4.99%
of the Company's then outstanding Common Stock, excluding shares deemed
beneficially owned through ownership of unconverted shares of the Series E
Preferred Stock (and any unconverted shares of Series D Preferred Stock held by
such holder) or (ii) would cause such holder together with its affiliates, to
have acquired a number of shares of Common Stock during the 60 day period ending
on the date of conversion which, when added to the number of shares of Common
Stock held at the beginning of such 60 day period, would exceed 9.99% of the
Company's then outstanding Common Stock, excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the Series E
Preferred Stock (and any remaining shares of Series D Preferred Stock) which
have not been converted.
REDEMPTION
Redemption at the Company's Option. The Company has the option to redeem from
the holders of the Series E Preferred Stock all of their shares of Series E
Preferred Stock. The Company's right to redeem the outstanding shares of Series
E Preferred Stock expires on the first to occur of April 30, 2001 if it has
redeemed 1,500 shares of Series E Preferred Stock by January 31, 2001, or
January 31, 2001. The redemption price will be the face value of such shares of
Series E Preferred Stock redeemed plus any unpaid default interest.
Additionally, as described above, on March 29, 2002 (and subject to extension in
certain circumstances), the Company can redeem any remaining unconverted Series
E Preferred Stock for a redemption price equal to the Liquidation Preference (as
described above).
Redemption at Option of Holders of Series E Preferred Stock. Upon the occurrence
of the trigger events listed below, the holders of Series E Preferred Stock have
the right to require the Company to redeem all or a portion of their Series E
Preferred Stock at a redemption price equal to the greater of:
. 125% of the price paid for the shares of Series E Preferred Stock plus
unpaid dividends and unpaid default interest or
. the relative percentage that the average closing sales price of the
Common Stock on the date immediately preceding such trigger event bears
to the applicable conversion price in effect at such time the holders
give notice of their election to redeem upon the occurrence of a
triggering event of the price paid for such share of Series E Preferred
stock plus any unpaid dividends and any unpaid default interest.
The events that will entitle the holders of the Series E Preferred Stock to
exercise these redemption rights are the failure by the Company to deliver
shares of Common Stock upon conversion of the Series E Preferred Stock and the
occurrence of any of the following trigger events:
. The Company's failure to file any registration statement it is required
to file under the terms of the registration rights agreement entered
into with the holders of the Series E Preferred Stock on or prior to the
date required by the terms of the registration rights agreement;
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<PAGE>
. The Company gives notice to any holder of Series E Preferred Stock of
the Company's intent not to comply with a request for conversion
tendered in accordance with the terms of the Series E Preferred Stock;
. The Company fails to issue shares of Common Stock to any holder of the
Series E Preferred Stock prior to the 12th business day after the holder
requests such conversion;
. The Company fails to delist from the Nasdaq SmallCap Market (or if the
Company's Common Stock is not traded on the Nasdaq SmallCap Market, then
the principal securities exchange or trading market (including, without
limitation, the over-the-counter electronic bulletin board (sponsored by
the Nasdaq Stock Market, Inc.)) within five (5) Business Days of the
Corporation's receipt of a conversion notice because such issuance would
cause the Company to exceed the limitation on the number of shares that
may be issued in accordance with the applicable rules of the Nasdaq
SmallCap Market;
. The Company fails to make any liquidity default payments (See
Description under the heading "Liquidity Defaults" below); or
. The Company failed to call a meeting of the shareholders by January 31,
2001 and fails to recommend the approval of the proposal to issue Common
Stock in excess of 20% of the Company's outstanding Common Stock to the
holders of the Series E Preferred Stock or fail to obtain a waiver from
the NASD of such 20% limitation.
In addition, holders also may redeem the Series E Preferred Stock upon a change
of control of the Company at a redemption price equal to the greater of:
. 100% of the price paid for the shares of Series E Preferred Stock plus
unpaid dividends and unpaid default interest or
. The relative percentage that the average closing sales price of the
Common Stock during the five trading days immediately preceding the date
the holders give notice of their election to redeem upon a change of
control bears to the applicable conversion price in effect at such time
the holders give notice of their election to redeem upon a change of
control of the price paid for such share of Series E Preferred stock
plus any unpaid dividends and any unpaid default interest.
Liquidity Defaults
Upon the occurrence of the following events, the Company will incur certain cash
penalties payable to the holders of the Series E Preferred Stock:
. The failure of the applicable registration statement filed in connection
with the Series E Preferred Stock to be declared effective within 90
days of the issuance of the Series E Preferred Stock.
. The effectiveness of a registration statement the Company is required to
file under the terms of the registration rights agreement lapses for any
reason or is unavailable to the holders of the Series E Preferred Stock
and such lapse or unavailability continues for a period of five
consecutive trading days or for more than an aggregate of 10 trading
days in any 365-day period;
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. The Company's Common Stock is suspended or delisted from trading on the
Nasdaq SmallCap Market, the Nasdaq National Market, the American Stock
Exchange, the over-the-counter electronic bulletin board (sponsored by
the Nasdaq Stock Market, Inc.) or the New York Stock Exchange for a
period of at least five consecutive trading days or for more than 10
trading days in any 365-day period;
. The Company breaches any representation, warranty, covenant or other
term or condition of the documents governing the issuance of the Series
E Preferred Stock and the breach would have a material adverse effect on
the Company's business or is not cured within 20 days after its
occurrence.
. A purchase, tender or exchange offer made to and accepted by the holders
of more than 50% of the outstanding shares of Common Stock
LIQUIDATION PREFERENCE
In the event of the Company's liquidation, the holders of the Series E Preferred
Stock will be entitled to a liquidation preference before any amounts are paid
to the holders of any of the Company's capital stock of any class junior in rank
to the Series E Preferred Stock. The liquidation preference is equal to the
amount originally paid for the shares of Series E Preferred Stock, or $1,000 per
share, plus an additional amount equal to a 7% annual return on the amount
originally paid for the shares of Series E Preferred Stock plus any unpaid
dividends and any unpaid default interest.
VOTING RIGHTS
The holders of the Series E Preferred Stock are not entitled to vote on any
matter except as required by law, except that the consent of holders of at least
two-thirds of the outstanding shares of Series E Preferred Stock will be
required to effect any change in the Company's amended Certificate of
Incorporation that would change any of the rights of the shares of Series E
Preferred Stock.
PROHIBITION ON ISSUANCE OF CERTAIN SECURITIES
While any Series E Preferred Stock remains outstanding, the Company is
prohibited from issuing any options or convertible securities that are
convertible into or exchangeable or exercisable for Common Stock at a price
which may vary with the market price of the Common Stock.
RISKS ASSOCIATED WITH SERIES E PREFERRED STOCK CONVERSIONS
In connection with the Series E Preferred Stock, the following risks are
associated with Series E Preferred Stock conversions:
. To the extent that Common Stock received upon conversion is sold into
the market, and disregarding the manner in which such shares are sold as well as
any other factors such as reactions to the Company's operating results and
general market conditions which may be operative in the market at such time,
such sales may cause a decrease in the market price of the Common Stock;
. Short sales of the Common Stock may be attracted by or accompany
conversions and sales of Common Stock from conversions, which sales in the
aggregate could cause downward pressure upon the price of the Common Stock,
excluding the effect of other market factors possibly operative at the time; and
. Conversions of the Series E Preferred Stock may result in the
dilution of the interests of the other holders of Common Stock.
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<PAGE>
In this regard, the ownership limitation which prohibits the purchasers from
owning more than 4.99% of the Common Stock of the Company only applies to shares
of Common Stock held at one time and does not prevent purchasers from converting
and selling some of their holdings and then later converting the rest of their
holdings. In addition, the Company's Common Stock could be delisted by Nasdaq if
either: (i) the Company's stock price is less than below the $1 minimum bid
price as required by Nasdaq or (ii) the Company otherwise fails to satisfy the
minimum listing requirements of Nasdaq, including tangible net worth
requirements. In such an event, should such a delisting extend for five or more
consecutive trading days, a liquidating default or triggering event, as
described above, would occur and the holders of the Series E Preferred Stock
could require the Company to redeem the outstanding shares of Series E Preferred
Stock. Registration of Shares; Possible Adjustment of Conversion Price and
Exercise Price In accordance with the terms of a Registration Rights Agreement
with the holders of the Series E Preferred Stock, the Company has agreed to
register the resale of 100% of the number of shares of Common Stock issuable
upon conversion of the Series E Preferred Stock, determined as if the Series E
Preferred Stock were converted in full at the assumed conversion price of
$0.65625, plus 100% of the number of shares of Common Stock issuable in lieu of
cash dividends payable on the Series E Preferred Stock. The Company agreed to
use its best efforts to have the registration statement declared effective by
the Securities and Exchange Commission ("SEC") as soon as practical, but in no
event later than 90 days after the initial closing.
OTHER TERMS RELATING TO THE SERIES E PREFERRED STOCK
The transaction documents relating to the Series E Preferred Stock also contain
certain other representations, warranties, agreements, and indemnification
obligations of the Company. These include, among other things, the obligation of
the Company to hold a shareholders meeting on or before January 31, 2001, where
it includes a proposal recommending the approval of the issuance of the Series E
Preferred Stock and the warrants. If the Company fails to hold such meeting by
the required deadline, it will be subject to certain liquidated damages as set
forth in the Exchange, Redemption and Conversion Agreement.
The operative agreements also contain provisions which (i) prohibit the Company
from redeeming any of its Common Stock, paying any cash dividends on its Common
Stock, and making certain distributions on its Common Stock without prior
express written consent of the holders of not less than two-thirds of the then
outstanding Series E Preferred Stock, (ii) limit the ability of the Company to
issue any senior preferred stock without prior express written consent of the
holders of not less than two-thirds of the then outstanding Series E Preferred
Stock, and (iii) limit the Company from entering into certain related party
transactions. The shares of Series E Preferred Stock are also subject to
antidilution provisions which are triggered in the event of certain stock
splits, recapitalizations, or other dilutive transactions, as well as issuances
of Common Stock at a price below the market price or the applicable conversion
price in effect, or the issuance of warrants, options, rights, or convertible
securities which have an exercise price or conversion price less than the market
price on the date of issuance or the applicable conversion price, other than for
certain previously outstanding securities and certain "excluded securities" (as
defined in the Certificate of Amendment).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of change in ownership of Common Stock of the Company. The
same persons are also required by Commission regulation to furnish the Company
with copies of all Section 16(a) forms that they file. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company, and written representations that no other reports were required
during the fiscal year ended December 31, 1999, compliance was made with all
Section 16(a) filing requirements applicable to the Company's executive
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities.
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<PAGE>
SHAREHOLDER PROPOSALS
From time to time, shareholders of the Company submit proposals which they
believe should be voted upon at a meeting of shareholders or nominate persons
for election to the Board of Directors. The persons named in the accompanying
Proxy shall vote in their discretion with respect to any matter that may
properly be brought before the Meeting. Pursuant to applicable rules under the
Exchange Act, shareholder proposals may be eligible for inclusion in the
Company's 2001 Proxy Statement. Any such shareholder proposals must be submitted
in writing to the Secretary of the Company no later than February 7, 2001.
Shareholders interested in submitting such a proposal are advised to contact
knowledgeable counsel with regards to the detailed requirements of such
securities rules. It is suggested that proposals be forwarded by certified mail,
return receipt requested. Shares of Common Stock represented by Proxies held by
persons designated by the Board of Directors shall vote in their discretion with
respect to any matter that may properly be brought before the 2001 Annual
Meeting about which notice was not received by the Company on or before April
23, 2001 unless the Company announces another date.
OTHER MATTERS
At the date hereof, there are no other matters which the Board of Directors
intends to present or has reason to believe others will present at the Meeting.
If other matters come before the Meeting, the persons named in the accompanying
form of proxy will vote in accordance with their best judgment with respect to
such matters.
By Order of the Board of Directors,
Kimberly Osgood
Secretary
Dated: January 8, 2001
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FORM OF PROXY CARD
------------------
REVOCABLE PROXY - THE NETPLEX GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS ON JANUARY 31, 2001
The undersigned hereby appoints Gene Zaino and Kimberly Osgood, and each of
them, proxies, with full powers of substitution, to act for and in the name of
the undersigned to vote all shares of Common Stock, $.001 par value, (the
"Common Stock"), of The Netplex Group, Inc. (the "Company" or "Netplex"), which
the undersigned is entitled to vote at the Special Meeting of Shareholders (the
"Special Meeting") and any adjournment thereof. The Special Meeting will be held
at The Executive Conference Center, 8201 Greensboro Drive, Conference Room 3,
McLean, Virginia 22102, on January 31, 2001, at 10:00 a.m., local time. The
shares represented by this proxy will be voted as directed by the undersigned.
IF NO INSTRUCTIONS ARE SPECIFIED, THE UNDERSIGNED'S VOTE WILL BE CAST "FOR"
PROPOSAL I AND II AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS
PRESENTED AT THE SPECIAL MEETING. At the present time, the Board of Directors
knows of no other business to be presented at the Special Meeting. The
undersigned shareholder may revoke this proxy at any time before it is voted by
delivering to the Secretary of the Company wither a written revocation of the
proxy or a duly elected proxy bearing a later date, or by appearing at the
Annual Meeting and voting the shares subject to the proxy by written ballot.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting and any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" PROPOSAL 1
1. To approve the issuance of certain of the shares of Common Stock issuable
upon conversion of the Series E Preferred Stock.
2. The approval of a proposal to transact such other business as may properly
be brought before the Meeting or any adjournment thereof.
SIGNATURE(S) _______________________ Date_________________________
Please sign exactly as your name appears on the certificate or certificates
representing shares to be voted by this proxy. When shares are held jointly,
both holders should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If the signer is a
corporation, the full corporate name should be signed by a duly authorized
officer.
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