<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
X Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant Under Rule 14a-12
The Netplex Group, Inc
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
THE NETPLEX GROUP, INC.
1800 ROBERT FULTON DRIVE, SECOND FLOOR
RESTON, VIRGINIA 20191-9992
___________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on June 30, 2000
___________
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of THE NETPLEX GROUP, INC., a New York corporation ("Netplex" or the
"Company"), will be held at the Executive Conference Center, 8201 Greensboro
Drive, McLean, Virginia 22102, on June 30, 2000, at 10:00 a.m., local time, for
the following purposes:
1. To elect two (2) members of the Board of Directors to serve for
three year terms or until their successors have been duly elected and qualified.
2. To approve an amendment to the Articles of Incorporation of the
Company, as previously amended (the "Articles of Incorporation"), to increase
the number of authorized shares of common stock of the Company, par value $.001
per share (the "Common Stock") from 40,000,000 shares to 100,000,000 shares.
3. To ratify the selection of Grant Thornton LLP as our auditors for
the year ending December 31, 1999 and to approve the selection of Grant Thornton
LLP as our auditors for the year ending December 31, 2000.
4. To transact such other business as may properly be brought before
the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 12,
2000, as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting. 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
ROBERT M. SKELTON
Secretary
Dated: May 15, 2000
1
<PAGE>
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.
THE NETPLEX GROUP, INC.
1800 ROBERT FULTON DRIVE, SECOND FLOOR
RESTON, VIRGINIA 20191-9992
___________
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
June 30, 2000
___________
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 2000 Annual Meeting
of Shareholders of the Company (the "Meeting") to be held at the Executive
Conference Center, 8201 Greensboro Drive, McLean, Virginia 22102, on June 30,
2000, 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 May 19, 2000.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on May 12, 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 __________ shares of the
Company's common stock, $.001 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 (a "Proxy") will be voted in accordance with the
instructions
<PAGE>
contained therein. If no instruction is indicated on the Proxy, the shares of
Common Stock represented thereby will be voted (i) For the election as Directors
of the persons who have been nominated by the Board of Directors to serve for
three year terms as set forth in Proposal I and until their successors have been
duly elected and qualified, (ii) For approval of the amendment to the Articles
of Incorporation to increase the number of authorized shares of Common Stock
from 40,000,000 shares to 100,000,000 shares, (iii) For ratification of Grant
Thornton LLP as our auditors for the year ending December 31, 1999, and for
approval and ratification of Grant Thornton LLP as our auditors for the year
ending December 31, 2000, and (iv) 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
mail, 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.
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of the Company's
Common Stock, as of March 31, 2000, by each person known by the Company to be
the beneficial owner of more than five percent of the Common Stock, each
director, each nominee for Director, each executive officer, and by all
directors and executive officers of the Company as a group.
<PAGE>
Name of Beneficial Owner Number of Shares of Common Stock
Beneficially Owned(1)
Number Percent
------ -------
Gene Zaino 1,938,350(2) 10.9%
The Netplex Group, Inc.
1800 Robert Fulton Drive, Second Floor
Reston, Virginia 20191
Kern Capital Management, LLC 1,390,200 7.8%
114 West 47/th/ Street, Suite 1926
New York, NY 10036
Waterside Capital Corporation 956,264(3) 5.4%
300 East Main Street
Suite 1380
Norfolk, VA 23510
Pamela Fredette 100,000(4) *
Robert Skelton 77,047(5) *
Richard Goldstein 30,000(6) *
Steve Hanau 15,000(6) *
J. Alan Lindauer 12,500(7) *
Walton E. Bell, III 61,666(8) *
All directors and 2,234,578(9) 12.5%
executive officers as a
Group (7 persons)
________________
*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 656,264 shares that would result from the conversion of the
Company's Class C Convertible Preferred Stock and 300,000 Common Stock
purchase warrants.
(4) Holds options to purchase 365,000 shares of Common Stock, of which 100,000
are currently exercisable.
<PAGE>
(5) Includes 75,000 shares of Common Stock subject to currently exercisable
options.
(6) Includes 15,000 shares of Common Stock subject to currently exercisable
options.
(7) Consists of 7,500 shares of Common Stock subject to currently exercisable
options and 5,000 shares of Common Stock owned.
(8) Holds options to purchase 110,000 shares of Common Stock, of which 36,666
are currently exercisable and 25,000 options that are exercisable within 60
days.
(9) Includes 947,586 shares of Common Stock subject to currently exercisable
options and warrants.
Executive Officers
The following table sets forth the names and ages of all executive officers, the
positions and offices with the Company held by each executive officer and the
period served:
Name Age Title Period Served
- ---- --- ----- -------------
Gene Zaino 42 Chief Executive Officer, and 1995 - present
Chairman
Pamela Fredette 48 President 1999 - present
Robert M. Skelton 38 Vice President - Corporate 1996 - present
Development, General
Counsel and Secretary
Walton E. Bell, III 58 Chief Financial Officer and 1998 - present
Treasurer
Information concerning Ms. Fredette is provided under "Proposal I - Election of
Two (2) Members of the Board of Directors to Serve for Three Year Terms and
Until Their Successors Have Been Duly Elected and Qualified."
Gene Zaino has been a director of the Company since August 1995 and became its
Chief Executive Officer and Chairman upon completion of the merger with Netplex
in June 1996. From November 1995 through the completion of the merger, Mr. Zaino
functioned in the capacity of Chief Executive Officer. Mr. Zaino started his
career at KPMG LLP in 1980. He was a founding principal of a subsidiary of
Evernet Systems, Inc., which was acquired by Control Data Systems, Inc. in 1993.
In January 1994, Mr. Zaino developed the business plan that led to the formation
of Netplex. Mr. Zaino is a graduate of the University of Pennsylvania's Wharton
School of Business and is a Certified Public Accountant.
Robert M. Skelton joined the Company as its Vice President of Human Resources
and General Counsel in September 1996 and became its Secretary in November 1996.
From
<PAGE>
November 1990 to June 1996, Mr. Skelton served in similar capacities for Central
Atlantic Toyota Distributors, Inc. and Quality Port Processors, Inc.,
subsidiaries of Toyota Motor Sales, USA. From July 1986 through October 1990,
Mr. Skelton was an attorney with the law firm of Webster, Chamberlain & Bean in
Washington D.C. Mr. Skelton holds a Bachelor of Arts in Political Science and
Modern Language from Union College and a Juris Doctor from George Washington
University. Mr. Skelton is an attorney and a member of the District of Columbia,
Maryland, and Virginia Bars.
Walton E. Bell, III joined the Company in June 1998 as its Chief Financial
Officer and became its Treasurer in August 1998. Prior thereto, he was the
Chief Financial Officer of Boat US from 1995 to 1998. Prior thereto, Mr. Bell
was the Chief Financial Officer of A.J. Dwoskin & Associates, Inc. from 1993 to
1995. From 1987 to 1993, Mr. Bell was the Chief Executive Officer of Sector
Technology, Inc. Mr. Bell also spent 22 years with Arthur Andersen (from 1966
to 1987) achieving partner status and establishing a microcomputer-consulting
group. Mr. Bell holds a Bachelor of Science Degree in Accounting from Abilene
Christian College in Abilene, Texas, and is a Certified Public Accountant.
Certain Related Transactions
In January 1997 the Company loaned $150,000 to Mr. Zaino, its chief executive
officer, for relocation expenses. The loan bears interest at 8% per annum. The
note and accrued interest were paid in January 2000.
In April 2000 the Company loaned $120,000 to Mr. Skelton, its Secretary and
General Counsel. The loan bears an interest rate of 6.6% per annum. One-half
of the principal amount must be repaid by December 31, 2000, and the balance by
December 31, 2001.
Mr. Lindauer, is a director of the Company and the President, Chief Executive
Officer and Director of Waterside Capital Corporation ("WTC"), the holder of the
Company's Class C preferred shares. On January 28, 1999, WTC lent the Company
$800,000 under a subordinated note. On December15, 1999 the subordinated note
was exchanged for an increase in the number of shares that the Company's Class C
Convertible Preferred Stock is convertible into.
The Company paid $45,064 in 1999, $23,756 in 1998 and $28,800 in 1997 for
accounting, tax and consulting services to an accounting firm, in which Mr.
Goldstein, a director of the Company, is a partner.
Committees
The Company has the following standing committees: an Audit Committee, a
Compensation Committee and a Stock Option Committee. The Company does not have
a Nominating Committee. The functions normally performed by a Nominating
Committee are performed by the Board of Directors. The Board will not consider
nominations from security holders. The Audit Committee is comprised of Richard
Goldstein and J. Alan
<PAGE>
Lindauer and is charged with reviewing the Company's annual audit and meeting
with the Company's independent auditors to review the Company's internal
controls and financial management practices. The Compensation Committee, which
is comprised of Richard Goldstein and Steven Hanau, recommends to the Board of
Directors compensation for the Company's Chief Executive Officer and other
executive officers. The Stock Option Committee administers the Company's 1992
Incentive and Nonqualified Stock Option Plan and its 1995 Stock Option Plan for
Consultants. The members of the Stock Option Committee are Steven Hanau and
Richard Goldstein. Messrs. Hanau, Goldstein and Lindauer are independent
directors.
During the fiscal year ended December 31, 1999, the Board of Directors, the
Compensation Committee, the Stock Option Committee and the Audit Committee each
held four meetings. Each of the directors attended no less than 75% of the
meetings of the Board of Directors and each committee to which such director was
assigned. From time to time, the Board acted by unanimous written consent
pursuant to the laws of the State of New York.
Compensation of Directors and Executive Officers
Members of the Board of Directors are not paid to attend meetings; however,
each member receives 15,000 options to purchase the Common Stock when the member
is first elected to the Board. Beginning in 1999, each member who serves for
more than two years will receive an additional 10,000 options for each year of
service beyond two years. To date, options to purchase 120,000 shares at
exercise prices ranging from $1.06 to $3.56 per share have been granted to
Directors. In February 2000, each outside director received a bonus of $10,000.
The following table sets forth, for the fiscal years indicated, all
compensation the Company paid to Gene Zaino, Chief Executive Officer; Pamela
Fredette, President; Robert M. Skelton, Vice President - Corporate Development,
General Counsel and Secretary; and Walton Bell III, Chief Financial Officer.
The Company had no other executive officers, whose salary and bonus exceeded
$100,000 for the year ended December 31, 1999.
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary($) Options(#) Compensation($)
- --------------------------- ------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Gene Zaino, Chief Executive 1999 $744,537 7,500 $13,000
Officer(1)
1998 $140,747 $15,000
1997 $130,000 600,000 (3) $ 4,563
Pamela Fredette, President (2) 1999 $119,683 365,000 $ 704
Robert Skelton, Secretary 1999 $119,990 $ 3,000
1998 $101,988 15,000 $11,000
1997 $100,000 70,000 (3) $ 2,903
Walton Bell III, Chief 1999 $112,000 110,000
Financial Officer
</TABLE>
_______________________
(1) Mr. Zaino is employed under an employment agreement pursuant to which as of
January 1, 2000, he is paid a base salary of $275,000. As of January 1,
1999, Mr. Zaino received a base salary of $163,000, and effective upon
signing of his employment agreement, as of June 7, 1999, he received a base
salary of $225,000. See "Compensation of Directors and Executive Officers
-- Employment and Related Agreements." Mr. Zaino received a bonus approved
by the Board in January 2000 of $545,902, the net proceeds of which were
used to repay the loan from the Company. The bonus was accrued in 1999.
(2) Ms. Fredette is employed under an employment agreement pursuant to which
she is paid a base salary of $225,000. See "Compensation of Directors and
Executive Officers -- Employment and Related Agreements." Ms. Fredette
received a bonus of $50,000 in January 2000, which was accrued in 1999.
(3) Options to purchase 600,000 shares, issued to Mr. Zaino in 1995 under the
Company's 1992 Incentive and Nonqualified Stock Option Plan ("the Plan"),
were canceled in December 1997 and replaced by options to purchase 600,000
shares at a lower exercise price. None of Mr. Zaino's options have been
exercised and 600,000 are vested as of December 31, 1999. Options to
purchase 70,000 shares granted to Mr. Skelton in 1996 and 1997 under the
Plan were canceled in December 1997 and replaced by options to purchase
70,000 shares at a lower exercise price. None of Mr. Skelton's options
have been exercised and 70,000 shares are vested as of December 31, 1999.
<PAGE>
Aggregated Option Exercises and Fiscal Year-end Option Values
Number of Securities
<TABLE>
<CAPTION>
Underlying Value of Unexercised In-The-Money
Unexercised Options at Options at
December 31, 1999(1) December 31, 1999($)(1)
Name --------------------- -----------------------
---- Exercisable/ Exercisable/ Unexercisable
------------ ------------ -------------
Unexercisable
-------------
<S> <C> <C> <C> <C>
Gene Zaino 615,000 7,500 $6,209,550 $ 62,100
Pamela Fredette 25,000 340,000 $ 203,250 $3,138,350
Robert Skelton 70,000 15,000 $ 711,200 $ 149,700
Walton E. Bell III 33,333 76,667 $ 326,184 $ 752,178
</TABLE>
______________
(1) At December 31, 1999 the closing price of the Company's Common Stock on the
Nasdaq SmallCap Market was $11.13.
Employment and Related Agreements
Mr. Zaino is employed under an employment agreement through June 2002
pursuant to which he is currently paid a base salary of $275,000 per annum. Mr.
Zaino is also entitled to receive an annual bonus based on the financial and
operating performance of the Company. The Board approved and determined to
grant Mr. Zaino additional compensation in the form of annual cash incentive
compensation. In January 2000, Mr. Zaino received annual cash incentive
compensation of $545,902. This bonus was accrued in 1999. In addition,
pursuant to his employment agreement, Mr. Zaino may also receive an annual bonus
at the sole discretion of the Board, based upon the financial and operating
performance of the Company, which shall not exceed 60% of base salary.
The Company has and is the beneficiary under a key-person life insurance
policy for $2 million on Mr. Zaino.
Ms. Fredette is employed under an employment agreement through May 2002
pursuant to which she is currently paid a base salary of $225,000 per annum.
Ms. Fredette is also entitled to receive an annual bonus based on the financial
and operating performance of the Company. In addition, pursuant to her
employment agreement, Ms. Fredette may also receive an annual bonus at the sole
discretion of the Board.
The Company has and is the beneficiary under a key-person life insurance
policy for $1 million on Ms. Fredette.
Report Of The Compensation Committee
Overall Policy
The Board of Directors of the Company establishes the overall goals
and objectives of the Company and the policies to be followed in pursuing those
goals and objectives, including the selection of necessary key management
personnel, and auditing the performance of those personnel. The major
responsibility for assisting in satisfying the compensatory aspect of the
overall supervisory duty of the Board rests with the
<PAGE>
Compensation Committee. The membership of the Compensation Committee
(collectively the "Committee") is composed of independent non-employee directors
who do not participate in any executive compensation plan. In order to achieve
the overall goals and objectives of the Company, and recognizing the interest of
the shareholders in that achievement, the Committee has developed and maintains
an executive compensation policy based on a philosophy that links executive
compensation to individual and corporate performance, and return to
shareholders. This policy enables the Company to attract and retain highly
motivated executive personnel of outstanding ability and initiative, and creates
an identity of interests between executives and the Company's shareholders. The
Company's executive compensation plan consists of basic cash compensation, the
opportunity for annual cash incentive compensation, based on individual and
corporate performance, and continuing stock-based compensation, geared to
corporate performance. The Committee administers the Company's cash incentive
compensation policy and also comprises the Company's Stock Option Committee,
which administers the provisions of the stock-based compensation plan. The
Committee takes various factors into consideration when establishing and
reviewing executive compensation. There follows an explanation of general
principles governing basic cash compensation, annual cash incentive
compensation, stock-based incentive compensation and the factors considered in
establishing basic cash compensation for 1999.
Basic Cash Compensation
The Committee, in determining basic cash compensation of the executive
officers of the Company, considers corporate profitability, financial condition
and the planned compensation budget for the Company. The Committee also
considers the performance and compensation levels of other companies as more
fully set forth under the caption "1999 Compensation". The Committee does not
consider these factors by any formula and does not assign specific weight to any
given factor. Instead, the Committee applies its collective business judgment
to reach a consensus on compensation fair to the Company, its shareholders and
its executive officers. Under an executive employment agreement, the basic cash
compensation of Mr. Zaino and Ms. Fredette is no less than $275,000 and $225,000
per year.
Annual Cash Incentive Compensation
In addition to basic cash compensation, the Committee, has developed an
informal annual cash incentive compensation policy, which is based on corporate
profitability, financial condition, the planned compensation budget for the
Company and subjective appraisal by the Committee, with the advice of the
President, of the executive officer's performance. The Committee does not
consider these factors by any formula and does not assign specific weight to any
given factor. Instead, the Committee applies its collective business judgment
to reach a consensus on incentive compensation that is fair to the Company, its
shareholders and its executive officers. All four of the current executive
officers of the Company are considered by the Committee to have responsibilities
that directly affect corporate performance and profitability and, accordingly,
are currently eligible to receive cash incentive compensation. Specific
<PAGE>
awards are chosen annually by the Committee. To date, the Committee has not
awarded cash incentive compensation, except as set forth above. Cash incentive
compensation paid to those executive officers named in the Summary Compensation
Table is reflected in the Table under the caption "Salary."
Stock-Based Incentive Compensation
The 1992 Incentive and Nonqualified Stock Option Plan and the 1995 Stock
Option Plan for Consultants are designed to create a common interest between key
employees, including executive officers, consultants and shareholders on a long-
term basis. Its purpose is to encourage participants to maintain and increase
their proprietary interests as shareholders in the Company and to benefit from
the long-term performance of the Company. The Committee believes that a close
linking of shareholder and key employee interests through the grant of stock
options is important to the continuing success of the Company because stock
options have no realizable value unless the price of the Common Stock increases.
The exercise price of the stock options equals the market price of the Common
Stock on the date of grant and the options have a ten year life. The Plan is
administered by the Committee, which comprises the Company's Stock Option
Committee. The Committee employs the same principles with respect to stock-
based incentive compensation as it does with respect to grants of cash incentive
compensation.
1999 Compensation
The Committee, in determining the 1999 basic cash compensation of the
executive officers of the Company, considered the factors described in this
Report. Gene Zaino is Chairman of the Board and Chief Executive Officer of the
Company and, as such, has the ultimate management responsibility for the
strategic direction, performance, operating results and financial condition of
the Company, and the execution of corporate policies and procedures. In 1998,
Ms. Fredette served as President, Robert M. Skelton served as Vice President--
Corporate Development, General Counsel and Secretary and Walton E. Bell, III
served as Chief Financial Officer and Treasurer. As of January 1, 1999, the
1999 basic cash compensation of Mr. Zaino was $163,000 pursuant to his
employment agreement with the Company. Effective upon signing of a new
employment agreement, as of June 7, 1999, Mr. Zaino's basic cash compensation
was increased to $225,000, and as of January 1, 2000, pursuant to his employment
agreement, Mr. Zaino receives a base salary of $275,000. In determining the
basic cash compensation of Messrs. Zaino, Skelton and Bell and Ms. Fredette, the
Committee considered the Company's earnings and other indicia of the Company's
financial performance and comparable information for other companies in the
Company's peer group. Further, the Committee was aware that no cash incentive
compensation payments to such executive officers would be made in 1999
attributable to 1998 performance under the Committee's annual cash incentive
compensation policy and of the extent to which outstanding performance-based
options under the 1992 Incentive and Nonqualified Stock Option Plan would become
exercisable in 1999. In determining the 1999 cash and stock-based incentive
compensation for Messrs. Zaino, Skelton and Bell and Ms. Fredette, the
<PAGE>
Committee considered the 1999 earnings of the Company, other indicia of the
Company's financial performance and comparable information for other companies
in the Company's peer group. The Committee did not award any cash or stock-based
incentive compensation to executive officers for 1999 performance, except as
noted above.
/s/ THE COMPENSATION COMMITTEE
Richard Goldstein
Steven Hanau
Performance Graph
<TABLE>
<CAPTION>
Per $100
ntpl nasdaq h&p tech NTPL Nasdaq Chase H&Q Tech.
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-94 4.25 751.96 538.63 Dec-94 $100.00 $100.00 $100.00
Dec-95 2.625 1052.13 803.01 Dec-95 $ 61.76 $139.92 $149.08
Dec-96 3.25 1291.03 996.67 Dec-96 $ 76.47 $171.69 $185.04
Dec-97 0.9375 1570.35 1164.75 Dec-97 $ 22.06 $208.83 $216.24
Dec-98 1.0625 2192.69 1809.97 Dec-98 $ 25.00 $291.60 $336.03
----------------------
Dec-99 11.125 4069.31 4034.92 Dec-99 $261.76 $541.16 $749.11
----------------------
multiplier 23.52941 0.132986 0.185656
</TABLE>
The above graph demonstrates a comparison of cumulative total returns based upon
an initial investment of $100.00 in the Company's Common Stock as compared with
the Chase Hambrecht & Quist Technology Index and the Nasdaq Stock Market-U.S.
Index. The stock price performance shown on the graph below is not necessarily
indicative of future price performance and only reflects the Company's relative
stock price on December 30, 1994, December 29, 1995, December 31, 1996, December
31, 1997, December 31, 1998, and December 31, 1999.
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO
BE 'SOLICITING MATERIAL' OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION
BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OR
THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES IT
BY REFERENCE INTO SUCH FILING.
<PAGE>
Auditors
For the year ending December 31, 1999, Grant Thornton LLP, independent
certified public accountants, examined the financial statements of the Company.
The Company is proposing that the shareholders ratify the selection of Grant
Thornton LLP as the Company's auditors for the year ending December 31, 1999,
and that the shareholders approve the appointment of Grant Thornton LLP as the
Company's auditors for the year ending December 31, 2000.
During 1999, there were no disagreements between the Company and Grant
Thornton LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. A representative of
Grant Thornton LLP is expected to be present at the Annual Meeting and will be
provided with an opportunity to make a statement and to respond to appropriate
questions from shareholders.
As reported on the Company's Form 8-K filed May 21, 1999, on May 14, 1999,
KPMG LLP resigned as the Company's independent accountants. According to the
Form 8-K, the reports of KPMG LLP on the financial statements for each of the
Company's fiscal years ended December 31, 1998 and 1997 did not contain adverse
opinions or disclaimers of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. Additionally, the Form 8-K
stated that in connection with the audits of the Company's consolidated
financial statements for each of the two fiscal years ended December 31, 1998
and 1997, and in the interim period subsequent to December 31, 1998, preceding
the date of KPMG's resignation, there were no "disagreements" with KPMG on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which "disagreement" if not resolved to the
satisfaction of KPMG would have caused KPMG to make reference to the matter in
their report.
As provided by the Company's Form 8-K filed June 2, 1999 (and exhibits
thereto), by letter purported to be dated May 13, 1999, delivered to the
Company's audit committee by facsimile on May 21, 1999, KPMG advised the Company
that KPMG believed that there was a matter involving the Company's internal
control structure and its operation that KPMG considered to be a reportable
condition under standards established by The American Institute of Certified
Public Accountants ("reportable condition"). In the letter dated May 13, 1999,
and an ensuing letter addressed to the Securities and Exchange Commission in
response to the Company's Item 4 disclosures set forth in the Form 8-K filed May
21, 1999 (such letters filed as Exhibits 16.1 and 16.2, respectively, to the
Form 8-K filed June 2, 1999), KPMG stated that the matter referred to a lack of
an adequate system of financial reporting, and more specifically, indicated
that: (i) during KPMG's audit of the Company's 1998 financial statements KPMG
noted that the Company had to seek extensions on several of its required filings
with the Securities and Exchange Commission and that the Company had to amend
the Forms 10-Q previously filed for the first three quarters of 1998; (ii) KPMG
believed that the Company's system of financial reporting was not adequate to
enable the Company to report accurate and timely financial information; (iii)
KPMG believed that the Company's process for accumulating financial data did not
provide management with
<PAGE>
sufficient time to evaluate the data in an effort to ensure accurate financial
reporting, nor to enable the Company to meet financial reporting deadlines in a
timely manner; and (iv) KPMG believed that the Company's system of financial
reporting did not include a periodic process of evaluating the Company's
financial reporting policies in light of significant events or changes in
circumstances which might impact those policies.
As set forth in the Company's Form 8-K filed June 2, 1999, the Company
disagreed with KPMG's assertion of a "reportable condition" and furthermore, the
Company was of the view that the "reportable condition" described in KPMG's
letter did not rise to the level of a "reportable event" as defined in Item 304
of Regulation S-K. Because KPMG resigned before the Company received either
letter, neither the Company or its audit committee had an opportunity to discuss
the matters with KPMG.
The reports of the Company's principal accountants on the financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with its audits for the two
most recent fiscal years, there have been no disagreements with the Company's
principal accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the Company's principal
accountants would have caused them to make reference thereto in their report on
the financial statements for such years.
The Company engaged the firm of Grant Thornton, LLP, as of November
13, 1999, to act as the Company's independent accountants. The engagement of
Grant Thornton, LLP was approved by the Company's audit committee and Board of
Directors. The Company authorized KPMG LLP to respond fully to any inquiries of
Grant Thornton, LLP. The Company has not consulted with Grant Thornton LLP
regarding the application of accounting principles as to a specified transaction
or the type of opinion that might be rendered on the Company's financial
statements or any matter that was either the subject of a disagreement or a
reportable event prior to their engagement as the Company's independent
accountants.
<PAGE>
PROPOSAL I - ELECTION OF TWO (2) MEMBERS OF THE BOARD OF DIRECTORS TO SERVE FOR
THREE YEAR TERMS AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED.
At the Meeting, two of the six directors of the Company will be elected by
the shareholders to serve for three year terms, or until their successors are
duly elected and qualify. Unless otherwise specified, all Proxies received will
be voted in favor of the election of J. Alan Lindauer, and Pamela Fredette.
Management has no reason to believe that any of the nominees will be unable or
unwilling to serve as a director, if elected. Should any of the nominees not
remain a candidate for election at the date of the Meeting, no substitute
candidate will be selected and the Proxies will be voted only in favor of those
nominees still standing for election. The following table sets forth the ages
of the nominees for director and the positions they currently hold with the
Company:
<TABLE>
<CAPTION>
Name Age Class Position Director Since
- ---- --- ----- -------- --------------
<S> <C> <C> <C> <C>
J. Alan Lindauer* 60 Director 1998
Pamela Fredette 48 President and Director 1999
</TABLE>
________________________
* Mr. Lindauer has been nominated pursuant to the 1998 Private Placement
Agreement with Waterside Capital Corporation.
J. Alan Lindauer became a director of the Company in November 1998. Mr.
Lindauer has also been serving as a director of Waterside Capital Corporation
since July 1993 and was named as its President and Chief Executive Officer in
March 1994. Mr. Lindauer has also served as President of JTL, Inc., since 1986.
Also since 1986, Mr. Lindauer has served as a director of Commerce Bank of
Virginia. In 1963, Mr. Lindauer started Minute-Man Fuels and managed the
Company until 1985. Mr. Lindauer holds a Bachelor of Business Administration in
Accounting and a Master of Business Administration from Old Dominion University.
He is a Certified Management Consultant.
Pamela Fredette is currently the President of the Company and became a
director of the Company in 1999. Ms. Fredette was the President of Computer
Horizon's solutions group, Horizon Consulting, Inc. from December 1995 through
January 1999. Ms. Fredette joined Horizons Consulting in 1993 as a practice
director, and was soon promoted to Vice President and then Senior Vice President
of Solutions Operations. Prior thereto, Ms. Fredette was the founder and owner
of two consulting companies, and she has also held management positions for
International Paper Company and Prudential Insurance Company. Ms. Fredette
received a bachelor's degree in Liberal Arts from
<PAGE>
Rutgers University and a master's degree in Computer Science from New Jersey
Institute of Technology.
Vote Required
Directors shall be elected by a plurality of the votes cast, in person or
by proxy, at the Meeting. Broker non-votes and proxies marked "abstain" will be
counted towards a quorum but are not considered votes cast in the election of
directors.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
PROPOSAL II - TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 40,000,000 SHARES
TO 100,000,000 SHARES.
The Board of Directors is requesting stockholder approval of an amendment
to Article Fourth of the Company's Articles of Incorporation to increase the
number of shares of Common Stock authorized for issuance by the Company from
40,000,000 to 100,000,000 shares (the "Charter Amendment"). As of the Record
Date, ________ shares of the Company's Common Stock were issued and outstanding.
In addition, the Company has reserved for issuance (i) ________ shares of the
Company's Common Stock, all of which shares have been reserved pursuant to the
1992 Incentive and Nonqualified Stock Option Plan, and (ii) 800,000 shares of
the Company's Common Stock, all of which shares have been reserved pursuant to
the 1995 Stock Option Plan for Consultants. The Board of Directors has
determined that it is advisable and in the best interests of the Company to have
additional shares of Common Stock available for issuance. The Board of
Directors believes that the proposed increase in the number of shares of Common
Stock authorized for issuance is desirable because such an increase will enhance
the Company's flexibility in connection with possible future actions by the
Company, such as stock splits, stock dividends, financings, acquisitions or
actions for other corporate purposes. The Board of Directors does not have any
current plans or proposals to issue any portion of the shares to be authorized
pursuant to the Charter Amendment. The Board of Directors has approved the
adoption of the Charter Amendment, subject to stockholder approval at the
Meeting.
If the Charter Amendment is adopted, the additional shares of Common Stock
authorized for issuance as a result of such amendment may be issued by direction
of the Board of Directors at such times, in such amounts, for such
consideration, and upon such terms as the Board of Directors may determine,
without further approval of the stockholders, unless in any specific instances
such approval is expressly required by regulatory agencies or otherwise.
Approval of the Charter Amendment by the stockholders could have an anti-
takeover effect, because additional shares of Common
<PAGE>
Stock could be issued (within the limits imposed by applicable law) in one or
more transactions that could make a change in control or takeover of the Company
more difficult. While it may be deemed to have potential anti-takeover effects,
the proposed Charter Amendment is not prompted by any specific effort or
takeover threat currently perceived by management, and management does not
presently intend to propose other anti-takeover measures. Additional shares
could be issued by the Company to persons who might side with the Board of
Directors in opposing a takeover bid that the Board determines is not in the
best interests of the Company and its stockholders. Such an issuance could
diminish the voting power of existing stockholders who favor a change in
control, and the ability to issue the shares could discourage an attempt by
another person or entity to acquire control of the Company since the issuance of
new shares of Common Stock could be used to dilute the stock ownership of such
person or entity. The Board of Directors believes that the Charter Amendment
would enable the Board of Directors to use its discretion to protect stockholder
value.
In addition, the issuance of additional shares of Common Stock would dilute
the existing stockholders' equity interest in the Company. Stockholders of the
Company have no preemptive rights to purchase additional shares. The Board of
Directors would carefully consider the potential benefits and detriments should
it contemplate any dilutive issuance of stock.
Vote Required
The affirmative vote of at least a majority of the shares of Common Stock
entitled to vote on this proposal at the Meeting cast, in person or by proxy, is
required for approval of the Charter Amendment. 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 OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE INCREASE IN THE NUMBER OF AUTHORIZED COMMON STOCK FROM 40,000,000 SHARES TO
100,000,000 SHARES.
PROPOSAL III -- TO RATIFY THE SELECTION OF GRANT THORNTON LLP AS THE COMPANY'S
AUDITORS FOR THE YEAR ENDED DECEMBER 31, 1999, AND TO APPROVE THE SELECTION OF
GRANT THORNTON LLP AS THE COMPANY'S AUDITORS FOR THE YEAR ENDING DECEMBER 31,
2000.
The management of the Company selected Grant Thornton LLP as the Company's
independent auditors to audit the books, records and accounts of the Company for
the fiscal year ended December 31, 1999. In addition, the Company has
<PAGE>
selected Grant Thornton LLP as the Company's independent auditors for the fiscal
year ending December 31, 2000.
The affirmative vote of the holders of a majority of the Company's Common
Stock represented and voting at the Meeting will ratify the selection of Grant
Thornton LLP for the fiscal year ended December 31, 1999 and approve and ratify
the selection of Grant Thornton LLP for the fiscal year ending December 31,
2000.
A representative of Grant Thornton LLP is expected to be present at the
Meeting. The representative will have the opportunity to make a statement and
will be available to answer questions from stockholders.
Vote Required
The affirmative vote of a majority of the votes cast, in person or by
proxy, is required for the ratification and approval of Grant Thornton LLP as
the Company's independent auditors for the fiscal years ending December 31, 1999
and 2000. 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 RATIFICATION OF GRANT
THORNTON LLP AS THE COMPANY'S AUDITORS FOR THE YEAR ENDED DECEMBER 31, 1999 AND
APPROVING AND RATIFYING THE SELECTION OF GRANT THORNTON LLP AS THE COMPANY'S
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000.
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.
<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 January 23, 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 9, 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.
ANNUAL REPORT
All shareholders of record as of May 12, 2000 have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999. The Form 10-K contains
certified consolidated financial statements of the Company and its subsidiaries
for the fiscal year ended December 31, 1999.
By Order of the Board of Directors,
Robert M. Skelton
Secretary
Dated: May 19, 2000
<PAGE>
FORM OF PROXY CARD
------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR
DIRECTORS LISTED BELOW AND "FOR" PROPOSALS 2 THROUGH 4
1. The election of two (2) members of the Board of Directors of the persons
listed below to serve for three year terms or until their successors have
been duly elected and qualified:
FOR all nominees listed WITHHOLD AUTHORITY
Below (except as marked to vote for all nominees
To the contrary below) listed below
Nominees:,
Pamela Fredette and J. Alan Lindauer
(Instruction: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
2. To approve an amendment to the Articles of Incorporation of the Company, as
previously amended, to increase the number of authorized shares of common stock
of the Company, par value $.001 per share from 40,000,000 shares to 100,000,000
shares;
3. To ratify the selection of Grant Thorton LLP as our auditors for the year
ending December 31, 1999 and to approve the selection of Grant Thorton LLP as
our auditors for the year ending December 31, 2000;
4. 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.
<PAGE>
REVOCABLE PROXY - THE NETPLEX GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Gene Zaino and Robert Skelton, 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 Annual Meeting of Shareholders (the
"Annual Meeting") and any adjournment thereof. The Annual Meeting will be held
at The Executive Conference Center, 8201 Greensboro Drive, Conference Room 3,
McLean, Virginia 22102, on June 30, 2000, at 10:00a.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" THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL 1, "FOR" PROPOSALS 2
AND 3 AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS PRESENTED AT
THE ANNUAL MEETING. At the present time, the Board of Directors knows of no
other business to be presented at the Annual 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.
