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] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- - ------------------------------------------------------------------------------
THE NETWORK CONNECTION, INC.
(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)(4) 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:
THE NETWORK CONNECTION, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JUNE 12, 1997
To the Shareholders of
THE NETWORK CONNECTION, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting
(the "Annual Meeting") of Shareholders of The Network
Connection, Inc. (the "Company" or the "Corporation") will be
held at the corporate offices of the Company, 1324 Union Hill
Road, Alpharetta, Georgia, on Thursday, June 12, 1997, at 10:00
a.m. local time for the following purposes:
1. To elect one (1) director to hold office until
the 2000 Annual Meeting;
2. To ratify the selection of Coopers &
Lybrand L.L.P. as auditors of the Company for the Fiscal
Year ending December 31, 1997;
3. To authorize and ratify an increase of the
number of shares of common stock of the Company,
$.001 par value (the "Common Stock"), underlying and
available for the granting of options under the Company's
1994 Employee Stock Option Plan (the "Employee Plan"),
from 700,000 shares of Common Stock to 1,200,000
shares of Common Stock; and
4. To transact such other business as may
properly come before the meeting or any adjournment or
adjournments thereof.
Only shareholders of record at the close of business on
May 19, 1997 will be entitled to notice of and to vote at the
meeting or any adjournment or adjournments thereof.
By Order of
the Board of Directors
Kevin D.
Sheldon, Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, PLEASE COMPLETE, SIGN AND
RETURN YOUR PROXY CARD PROMPTLY IN THE
ENCLOSED STAMPED ENVELOPE PROVIDED FOR
YOUR USE. IF YOU DO ATTEND THE MEETING AND
DECIDE THAT YOU WISH TO VOTE IN PERSON, YOU
MAY WITHDRAW YOUR PROXY.
THE NETWORK CONNECTION, INC.
1324 Union Hill Road
Alpharetta, Georgia 30201
___________________________________
PROXY STATEMENT
___________________________________
For the Annual Meeting of Shareholders
To be Held on June 12, 1997
GENERAL INFORMATION CONCERNING
SOLICITATION
This proxy statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of
The Network Connection, Inc. (hereinafter referred to as the
"Company" or the "Corporation"), for its Annual Meeting of
Shareholders (the "Meeting") to be held at 10:00 A.M. on
Thursday, June 12, 1997, or any adjournments thereof, at the
corporate offices of the Company, 1324 Union Hill Road,
Alpharetta, Georgia. Shares cannot be voted at the meeting unless
their owner is present in person or represented by proxy. Copies
of this proxy statement and the accompanying form of proxy shall
be mailed to the shareholders of the Company on or about May 21,
1997, accompanied by a copy of the Annual Report of the
Company containing financial statements as of and for the Fiscal
Years ended December 31, 1996 and 1995, together with other
information respecting the Company.
If a proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the
specifications made, or if no specification is made the shares will
be voted to approve each proposition and to elect the nominee for
director identified on the proxy. Any shareholder giving a proxy
has the power to revoke it at any time before it is voted by filing
with the Secretary of the Company a notice in writing revoking it.
A proxy may also be revoked by any shareholder present at the
Meeting who expresses a desire in writing to revoke a previously
delivered proxy and to vote his or her shares in person. The mere
presence at the Meeting of the person appointing a proxy does not
revoke the appointment. In order to revoke a properly executed
and returned proxy, the Company must receive a duly executed
written revocation of that proxy before it is voted. A proxy
received after a vote is taken at the Meeting will not revoke a
proxy received prior to the Meeting; and a subsequently dated
proxy received prior to the vote will revoke a previously dated
proxy.
All expenses in connection with the solicitation of proxies,
including the cost of preparing, handling, printing and mailing the
Notice of Annual Meeting, Proxies and Proxy Statements will be
borne by the Company. Directors, officers and regular employees
of the Company, who will receive no additional compensation
therefor, may solicit proxies by telephone or personal call, the cost
of which will be nominal and will be borne by the Company. In
addition, the Company will reimburse brokerage houses and other
institutions and fiduciaries for their expenses in forwarding proxies
and proxy soliciting material to their principals.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
At the close of business on May 19, 1997, there were
outstanding 4,124,993 shares of Common Stock of the Company
(the "Common Stock"), which constituted all of the issued and
outstanding voting securities of the Company. Each shareholder is
entitled to cast one vote for each share of Common Stock which is
present at the Meeting either in person or by proxy. Only holders
of record of the outstanding shares of the Common Stock at the
close of business on May 19, 1997, will be entitled to vote at the
Meeting. There are no pending legal proceedings to which any
director, nominee for director or officer, or affiliate of the
Company, or any owner of record or beneficially of more than five
percent of the Common Stock, is a party adverse to the Company.
The following table sets forth certain information as of May
19, 1997 with respect to the beneficial ownership of the Common
Stock of the Company by each of the Company's directors,
nominee for director, executive officers and all directors and
executive officers of the Company as a group, and except as noted
to the contrary, as of May 19, 1997 for each beneficial owner of
more than 5% of the total number of outstanding shares of the
Common Stock of the Company other than directors or executive officers.
Number
Shares
Beneficially Percent
Owned (1) Owned
Wilbur Riner Director, Chairman of the Board -0-(2) -0-%
1324 Union Hill Road of Directors and Chief Executive
Alpharetta, GA 30201 Officer
Barbara Riner President 532,443(3) 12.9%
1324 Union Hill Road
Alpharetta, GA 30201
James Riner Director and Vice President of 86,134(4) 2.5%
1324 Union Hill Road Research and Development and
Engineering
Alpharetta, GA 30201
Bryan Carr Director, Vice President and 88,750(5) 2.2%
1324 Union Hill Road Chief Financial Officer
Alpharetta, GA 30201
James Newman Director 1,500(6) *
P.O. Box 1378
Studio City, CA 91614
Marc Doyle Director and Nominee for Director 1000(6) *
P.O. Box 8688
Atlanta, GA 30306
Focus Financial Corp. 627,561(7) 15.2%
9324 Collins Avenue
Bal Harbour, FL 33154
Infinity Fund L.P. 310,337(8) 7.5%
3565 Piedmont Road N.E.
3 Piedmont Center
Atlanta, GA 30305
All directors and 777,940(9) 18.9%
executive officers as a
group (10 persons)
____________________
(1) As used herein, the term beneficial ownership with respect to a security
is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting
of sole or shared voting power (including the power to vote or direct the vote)
and/or sole or shared investment power (including the power to dispose or direct
the disposition of) with respect to the security through any contract,
arrangement, understanding, relationship or otherwise, including a right to
acquire such power(s) within 60 days of May 19, 1997. Unless otherwise noted,
beneficial ownership consists of sole ownership, voting and investment power
with respect to all shares shown as beneficially owned by them.
(2) Does not include 490,120 shares held by Barbara Riner, the wife of
Wilbur Riner. Also does not include options exercisable to purchase an aggregate
of 42,323 shares held by Barbara Riner. Mr. Riner has disclaimed all
beneficial interest in the shares held by his wife.
(3) Includes options exercisable to acquire 42,323 shares. Barbara Riner is
the wife of Wilbur Riner.
(4) Includes options exercisable to acquire 6,848 shares of the Company's
common stock.
(5) Includes options exercisable to acquire 54,750 shares of the
Company's common stock.
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(6) Includes, in the case of Mr. Newman, options exercisable within sixty
days to acquire 500 shares of the Company's common stock. Includes, in the
case of Mr. Doyle, options exercisable within sixty days to acquire 1000
shares of the Company's common stock.
(7) Includes 80,100 shares with sole voting power and 547,461 shares
with shared voting power; and includes 80,100 shares with sole investment
power and 547,461 shares with shared investment power. Share information is
derived from Securities and Exchange Commission filings.
(8) Share information was obtained from Infinity Fund L.P.
(9) Includes options, which are exercisable to acquire 125,171 shares by
officers and directors of the Company.
<R/>
DIRECTORS, NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information with respect to
directors, nominees for directors, executive officers and key
employees of the Company as of May 19, 1997.
Name
Age
Position
Wilbur Riner(2)(3)(4)
68
Chief Executive Office; Chairman of the Board of Directors
since 1986
Barbara Riner
53
President
James Riner(2)
32
Vice President - Research and Development and Engineering;
Director since 1986
Bryan Carr(3)
42
Vice President - Finance and Chief Financial Officer;
Treasurer; Director since 1996
Luther Maners
56
Vice President of Sales and Marketing - Transportation and
Entertainment
Kevin Sheldon
42
Secretary, General Counsel
Marc Doyle(1)(2)(4)
49
Director since 1995 and Nominee for Director
James
Newman(1)(2)(4)
71
Director since 1995
___________
(1) Member of the Employee Stock Option Committee.
(2) Member of the Audit Committee.
(3) Member of the Director Stock Option Committee
(4) Member of the Compensation Committee
Wilbur Riner - Chairman and Chief Executive Officer.
Mr. Riner co-founded the Company with his son, James Riner, in
1986, at which time he became Chairman and Chief Executive
Officer. He is responsible for the overall direction of the Company
and its operating divisions. Prior to joining the Company, from
1984 to 1986, Mr. Riner was the CEO of Asher Technologies,
which was a manufacturer of telecommunications products. Prior
to that, Mr. Riner had served as Executive Vice President for OKI
Telecom's operations in the United States (1981-1984), Vice
President/United States Sales and Marketing for Mitel Corp. (1979
to 1981), and General Manager of ITT North Microsystems for
ITT Telecommunication (1975 to 1979). In all of these positions,
Mr. Riner has combined technical expertise in telecommunications
engineering with sales and marketing business acumen. Mr. Riner
is the husband of Barbara Riner, the father of James Riner and the
father-in-law of Kevin Sheldon.
Barbara Riner - President. Ms. Riner co-founded the
Company in 1986, and has been responsible for overseeing the
purchasing department of the Company as well as its accounting
department since that time. From 1966 to April 1971, Ms. Riner
worked in the accounting office of SCM Corporation. From 1971
to 1986, Ms. Riner was a homemaker. Ms. Riner is the wife of
Wilbur Riner, the step mother of James Riner, and the mother-in-
law of Kevin Sheldon.
James Riner - Vice President - Research and Development
and Engineering and Director. Mr. Riner co-founded the Company
in 1986, joining the Company on a full-time basis as Vice
President - Engineering and Research and Development, Secretary
and Treasurer in 1987. In that capacity he is responsible for all
product technical support, as well as all new product development.
Mr. Riner co-developed the Company's TRIUMPH family of
servers, including the TRAC asymmetric I/O processor to provide
RAID level protection (1992). Mr. Riner is the son of Wilbur
Riner and the step son of Barbara Riner.
Bryan Carr - Vice President - Finance and Chief Financial
Officer, Treasurer and Director. Mr. Carr joined the Company in
July 1995 as Chief Financial Officer and was appointed Vice
President - Finance in November 1995. Mr. Carr was appointed a
director of the Company in April of 1996, and was appointed
Treasurer of the Company in November of 1996. He is responsible
for the Company's overall financial management and policy
making and conduct of the Company's relationship with creditors,
shareholders and the financial community. Prior to joining the
Company, from 1988 to 1995, Mr. Carr was Director of Business
Administration for LXE, Inc., a public company providing
wireless data communications products worldwide. From 1981 to
1988 he was Controller for UTL Corporation, a public company
providing advanced communications systems for Government and
commercial applications internationally. Prior to 1981 he was a
senior auditor with Coopers & Lybrand.
Luther Maners - Vice President of Sales and Marketing -
Transportation and Entertainment. Mr. Maners joined the
Company in January 1996 as Vice President - AirView Sales with
responsibility for sales management and marketing support for the
AirView products of the Company. From 1986 to 1996, Mr.
Maners was Vice President of Sales for Burns Aerospace, a
worldwide supplier of aircraft seats and cabin management system
integration. His responsibilities included overall sales management
and direct account responsibility for selected airline and major
leasing companies. From 1980 to 1986, he held various direct sales
management positions at Burns Aerospace. From 1981 to 1986,
Mr. Maners was Director of Contract Services for World Airways,
a company providing third party contract aircraft maintenance
services worldwide.
Kevin Sheldon - Secretary and General Counsel. Mr.
Sheldon re-joined the Company in August of 1996 as General
Counsel with responsibility for the legal, risk management and
human resource affairs of the Company. Mr. Sheldon was
appointed to the position of Secretary of the Company in
November of 1996. Prior to joining the Company, from 1994 to
1996, Mr. Sheldon was Legal Counsel and Contracts Manager for
LXE, Inc., a public company providing wireless data
communications products worldwide. His responsibilities included
negotiating and drafting a full range of high technology commercial
licenses and various other agreements, as well as managing the
contractual aspects of LXE's distribution channels. He served his
first term with the Company from 1992 to 1994 as its Corporate
Counsel. Prior to that, Mr. Sheldon was in private practice at the
law firm of Brown Raysman and Millstein in New York, New
York, from 1990 to 1992 where he specialized in high technology
commercial transactions. Mr. Sheldon is the son-in-law of Wilbur
Riner and Barbara Riner.
Marc Doyle - Director. Mr. Doyle joined the Company in
July 1995 as a director. Mr. Doyle founded in 1988, and is
currently President of, Doyle & Associates, a program
development and production company for television and industrial
video material. From 1974 to 1988, Mr. Doyle was Director of
Station Operations at WAGA-TV, a CBS affiliate, responsible for
managing program acquisition and development as well as
operational functions such as program production and marketing.
During his tenure at WAGA, Mr. Doyle was a three time Emmy
award winner and produced numerous award winning programs.
James Newman - Director. Mr. Newman joined the
Company in July 1995 as a director. Mr. Newman, a behavioral
scientist, founded and has managed the PACE organization, a
motivational development company, providing tools for increased
success to top executives and sales professionals since 1961. Mr.
Newman is a well recognized author and speaker on human
behavior topics.
Director's Terms
The Company has a classified Board of Directors, and the
term of only one member of the Board of Directors, Marc Doyle,
terminates at the date of the 1997 Annual Meeting of Shareholders.
Mr. Doyle is nominated for election to a three year term, ending
at the 2000 Annual Meeting of Shareholders. Messrs. James Riner
and James Newman currently serve as directors under two-year
terms ending at the date of the 1998 Annual Meeting of
Shareholders. Messrs. Wilbur Riner, and Bryan Carr currently
serve as directors under three-year terms ending at the date of the
1999 Annual Meeting of Shareholders.
Compliance with Section 16(a) of the Securities
Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and officers, and persons who
own beneficially more than ten percent (10%) of the Common
Stock of the Company, to file reports of ownership and changes of
ownership with the Securities and Exchange Commission. Copies
of all reports are required to be furnished to the Company pursuant
to Section 16(a). Based solely on the reports received by the
Company and on written representations from reporting persons,
the Company believes that persons subject to the reporting
requirements complied with all applicable Section 16(a) filing
requirements during the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
The following table sets forth the amount of all
compensation paid by the Company for services rendered during
each of the three (3) Fiscal Years of the Company ended December
31, 1996, 1995 and 1994 to each of the Company's most highly
compensated executive officers and key employees whose total
(salary and bonus) compensation exceeded $100,000, and to the
Chief Executive Officer of the Company during each of those
periods.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Name and
Principal Position
Year
Salary
Bonus
Other Annual
Compensation
Securities
Underlying
Options/SARs (#)
Wilbur Riner, Chairman and
Chief Executive Officer
1996
1995
1994
$101,414
85,000
85,000(1)
- -0-
- -0-
- -0-
$24,375(2)
23,400(2)
6,300(2)
20,000
- -0-
- -0-
(1) Includes $10,229 of accrued salary owed to Wilbur Riner as of
December 31, 1994.
(2) Consists of the following:
Automobile
Allowance
Commissions
Total
Wilbur Riner --- 1996
$5,625
$18,750
$24,375
Wilbur Riner --- 1995
5,400
18,000
23,400
Wilbur Riner --- 1994
5,400
900
6,300
Mr. Riner, from time to time, provided significant assistance to the
Company's sales and marketing staff in effecting sales of the Company's
products, for which sales he received commission compensation.
Option/SAR Grants in Last Fiscal Year
The following table sets forth certain information with
respect to individual grants of stock options and freestanding SARs
made to the named executive officer during the year ended
December 31, 1996.
Individual Grants
Name
Number of
Securities
Underlying
Options/
SARs Granted
% of Total
Options/
SARs
Granted to
Employees
in Fiscal
Year
Exercise
of Base
Price
($/Sh)
Expiration
Date
Wilbur Riner
70,000(1)
12.9%
$8.750
7/23/06
(1) In January of 1997, Mr. Riner elected to release his rights to 50,000 of
the 70,000 options granted to him under the 1994 Employee Stock Option Plan
thereby allowing the grant of such released options to other employees.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-
End Option/SAR Values
The following table sets forth certain information with
respect to the exercise of stock options and freestanding SARs by
each of the named executive officers during the last completed
fiscal year, and the fiscal year-end value of unexercised options and
SARs for the last completed fiscal year.
Name
Shares
Acquired on
Exercise (#)
Value
Realized
($)
Number of
Securities
Underlying
Unexercised
Options/SARs
at FY-End (#)
Exercisable/
Unexercisable
Value of Unexercised
In-the-Money
Options/SARs at FY-
End ($) Exercisable/
Unexercisable
Wilbur Riner
- -0-
- -0-
0 /
70,000
$0 /
$70,000
Compensation of Directors
Directors who are employees of the Company receive no
remuneration for their service as directors of the Company.
Pursuant to the Company's 1995 Stock Option Plan for Non-
Employee Directors, directors who are not employees of the
Company receive for their services, on the date first elected as a
member of the Board and on each anniversary thereafter if they
continue to serve on the Board of Directors, an automatically
granted option to acquire 1,000 shares of the Company's common
stock at its fair market value on the date of grant; such options
become exercisable in two equal annual installments if the
individual continues at that time to serve as a director, and once
exercisable remain so until the fifth anniversary of the date of
grant. The Company reimburses directors for travel and lodging
expenses, if any, in connection with attendance at Board
meetings.
Employment and Consulting Arrangements
All of the Company's executive officers are employed
under contracts approved by the Board of Directors.
Wilbur L. Riner serves as Chief Executive Officer of the
Company pursuant to the terms of a five-year employment
agreement which terminates on October 31, 1998. Mr. Riner
receives an annual base salary of $101,414 per year. The
employment agreement provides for payment of bonuses and for
such other fringe benefits as are paid to other executive officers of
the Company. Such fringe benefits take the form of medical
coverage and an automobile expense allowance of $470 per month,
the aggregate value of which is estimated at approximately $5,640
per year.
Barbara L. Riner serves as President of the Company
pursuant to the terms of a five-year employment agreement which
terminates on October 31, 1998. Ms. Riner receives an annual base
salary of $66,760 per year. The employment agreement provides
for payment of bonuses and for such other fringe benefits as are
paid to other executive officers of the Company. Such fringe
benefits take the form of medical coverage and an automobile
expense allowance of $450 per month, the aggregate value of
which is estimated at approximately $5,400 per year.
James E. Riner serves as Vice President of Research and
Development and Engineering pursuant to the terms of a five-year
employment agreement which terminates on October 31, 1998.
Mr. Riner receives an annual salary of $86,790 per year. The
employment agreement provides for payment of bonuses and for
such other fringe benefits as are paid to other executive officers of
the Company. Such fringe benefits take the form of medical
coverage and an automobile expense allowance of $300 per month,
the aggregate value of which is estimated at approximately $3,600
per year.
Bryan Carr serves as Vice President - Finance and Chief
Financial Officer of the Company pursuant to the terms of an
employment agreement which terminates on October 31, 1998.
Pursuant to the approval of the Board of Directors, Mr. Carr's
annual base salary was increased from $85,000 per year to
$100,000 per year as of April, 1996. Mr. Carr also receives
commissions of .5% for net sales which exceed $500,000 in a
fiscal month. The employment agreement provides for payment of
bonuses and for such other fringe benefits as are paid to other
executive officers of the Company. Such fringe benefits take the
form of medical coverage and an automobile expense allowance of
$400 per month, the aggregate value of which is estimated at
approximately $4,800 per year.
Luther Maners serves as Vice President - AirView Sales
of the Company pursuant to the terms of an employment agreement
which terminates on January 11, 1999. Mr. Maners receives an
annual base salary of $82,000 per year. The employment
agreement provides for payment of bonuses and for such other
fringe benefits as are paid to other executive officers of the
Company. Such fringe benefits take the form of medical coverage
and an automobile expense allowance of $450 per month, the
aggregate value of which is estimated at approximately $5,400 per
year.
Kevin D. Sheldon serves as General Counsel and Secretary
of the Company pursuant to the terms of a three-year employment
agreement which terminates on December 6, 1999. Mr. Sheldon
receives an annual base salary of $70,000 per year. The
employment agreement provides for payment of bonuses and for
such other fringe benefits as are paid to other executive officers of
the Company. Such fringe benefits take the form of medical
coverage and an automobile expense allowance of $400 per month,
the aggregate value of which is estimated at approximately $4,800
per year.
Board Compensation Committee Report on Executive
Compensation
The Board of Directors of the Company has decided that
the best way to attract and retain capable employees on a basis that
will encourage them to perform at increasing levels of effectiveness
and to use their best efforts to promote the growth and profitability
of the Company and its subsidiaries, is to enter into employment
agreements with its senior executive officers. During the fiscal year
ended December 31, 1996, Messrs. Wilbur Riner, James Riner,
Bryan Carr, Luther Maners and Kevin Sheldon and Ms. Barbara
Riner were all under contract with the Company. This enabled the
Board to concentrate on particular employment contracts rather
than on the formulation of more general compensation policies for
all management and other personnel. As of May 19, 1997, all of
the Company's senior members of management were employed
under contracts approved by the full Board of Directors. The
Company believes that its compensation levels as to all of its
employees are comparable to industry standards.
In setting levels of compensation under such employment
contracts, including that of Mr. Wilbur Riner as Chairman and
Chief Executive Officer, and in approving management's
compensation of all other Company employees, the Board of
Directors evaluates the Company's overall revenue levels, the
contribution of particular individuals to Company performance and
industry compensation standards. Applying those standards, the
Company's Compensation Committee in 1996 approved a fifteen
percent increase in the compensation to Messrs. Wilbur Riner and
James Riner and Ms. Barbara Riner. The members of the
Company's Board of Directors Compensation Committee are
Messrs. Bryan Carr, Mark Doyle and James Newman.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
In March 1996, Barron Chase, the lead underwriter of its
May 1995 initial public offering released certain "lock-up"
restrictions on the holders of the Company's common stock, by (I)
immediately releasing transfer restrictions on approximately 58,000
shares of common stock underlying stock options granted to
members of management in January 1995 under the Company's
employee stock option plan, (II) effective January 1, 1997,
releasing transfer restrictions on another approximately 58,000
shares of common stock underlying stock options granted to
members of management in January 1995 under the employee
stock option plan, and (III) effective May 11, 1996, releasing
transfer restrictions on shares of common stock purchased by all
shareholders prior to the date of the Company's May 1995 initial
public offering other than the shares held by management and
members of the immediate family of Wilbur Riner, the Chairman
and Chief Executive Officer of the Company.
The Company purchased property and equipment in the
amount of $89,668, on May 26, 1995, from Wilbur Riner,
Chairman and Chief Executive Officer of the Company. Mr.
Riner acquired the property in 1990 for approximately $115,000.
Prior to its purchase by the Company, the acquired property had
been used in the Company's business operations.
ACTION TO BE TAKEN UNDER THE PROXY
Unless otherwise directed by the grantor of the proxy, the
persons acting under the accompanying proxy will vote the shares
represented thereby: (a) for the election of the persons named in the
next succeeding table as nominees for directors of the Company;
(b) for the proposal to ratify the appointment of Coopers &
Lybrand, L.L.P. as the Company's auditors for the current fiscal
year; (c) for authorization and ratification of an increase in the
number of shares of Common Stock underlying and available for
the granting of options under the Company's 1994 Employee Stock
Option Plan (the "Employee's Plan") from 700,000 shares of
Common Stock to 1,200,000 shares of Common Stock; and (d) in
connection with the transaction of such other business that may be
brought before the Meeting, in accordance with the judgment of the
person or persons voting the proxy.
I. ELECTION OF DIRECTORS
Nominees
At the Meeting one director is to be elected to hold office
until the 2000 Annual Meeting of Shareholders or until his or her
successor shall be elected and shall qualify. The name of the
nominee for election as a director, who is now serving as a director
of the Company and whose current term as a director terminates at
the date of the 1997 Annual Shareholders Meeting, and certain
information furnished to the Company by such nominee with
respect to him, as of May 19, 1997, are set forth below. Unless
authority to vote for the nominee is withheld, it is intended that
shares represented by proxies in the accompanying form will be
voted for the election of the following nominee. In the event the
nominee may become unable or unwilling to accept nomination or
election, it is intended that the proxies will be voted for the election
in his stead of such person as the Board of Directors may
recommend, but the Board does not know of any reason why the
nominee will be unable or unwilling to serve if elected.
Director
Name
Age
Since
Principal Occupation
During Last
Five Years
Marc Doyle
48
*
*
* See "Directors, Nominees for Director and Executive Officers of the Company"
on pages 4 through 6.
The Board of Directors of the Company recommends
that shareholders vote IN FAVOR OF the nominee for director.
Committees and Meetings of the Board
The Company has Audit, Compensation, Employee Stock
Option, and Director Stock Option Committees of its Board of
Directors. Messrs. Wilbur Riner, James Riner, Doyle and
Newman are members of the Audit Committee; and Messrs.
Doyle, Newman and Carr are members of the Compensation
Committee; Messrs. Doyle and Newman are members of the
Employee Stock Option Committee; and Messrs. Wilbur Riner and
Carr ar members of the Director Stock Option Committee. During
the 1996 fiscal year, there was one meeting held by the Audit
Committee, and one meeting held by the Compensation
Committee. The function of the Audit Committee is to review the
Company's financial statements and its ongoing results of
operations on a quarterly basis, and to discuss and evaluate the
financial controls that the Company has in place in order to assess
the integrity of the Company's operations and its accounting and
financial management practices. The function of the Compensation
Committee is to evaluate management's decisions with respect to
overall compensation levels for Company personnel, to make
decisions with respect to the compensation of the Company's senior
management, and to administer the Company's 1994 Employee
Stock Option Plan. The Company's Board of Directors held four
full meetings during the 1996 fiscal year. No director attended
fewer than 75% of the meetings of the full Board of Directors
during any periods in which such person served as a director in
1996, and no director attended fewer than 75% of the meetings of
any committee of the Board of Directors on which such person
served during the period in which he served.
II. RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997
At the Meeting a vote will be taken on a proposal to ratify
the appointment by the Board of Directors of Coopers & Lybrand,
L.L.P. independent certified public accountants, as the independent
auditors of the Company for the fiscal year ending December 31,
1997. Coopers & Lybrand, L.L.P. has no interest in or any
relationship with the Company except as its auditors.
During the Company's fiscal years ended December 31,
1996, there were no disagreements with Coopers & Lybrand,
L.L.P. on matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which if not
resolved to the satisfaction of Coopers & Lybrand, L.L.P., would
have caused Coopers & Lybrand, L.L.P. to make reference to the
matter in their report.
Management believes the appointment to be in the best interest
of the Company and recommends that it be ratified.
A representative of Coopers & Lybrand, L.L.P. will be
present at the Annual Meeting of Shareholders of the Company and
will be given an opportunity to make a statement to the
shareholders if he so desires. The representative will be available
to respond to questions from shareholders.
III. AUTHORIZATION AND RATIFICATION OF
THE INCREASE IN THE NUMBER OF
SHARES OF COMMON STOCK
UNDERLYING THE 1994 EMPLOYEE STOCK
OPTION PLAN
At the Annual Meeting a vote will be taken on a proposal to
approve the Amendment to the Company's 1994 Employee Stock
Option Plan (the "1994 Plan"), which increases the number of
shares of Common Stock underlying stock options available for
grant thereunder from the existing 700,000 shares of Common
Stock to 1,200,000 shares of Common Stock. A copy of the
Amendment to the 1994 Plan is annexed as Exhibit A. As of May
19, 1997, stock options to purchase 644,629 shares of Common
Stock have been granted, and not expired or otherwise terminated,
to the Company's employees and directors. That number of options
constitutes 92.1% of the number of shares currently available for
the granting of options under the 1994 Plan as currently approved
by Company stockholders.
<R/>
The 1994 Plan was authorized and adopted by the
stockholders and the directors of the Company in 1994. The
purpose of the 1994 Plan is to provide additional incentive to the
directors, officers, employees and consultants of the Company who
are primarily responsible for the management and growth of the
Company. Each option granted pursuant to the 1994 Plan shall be
designated at the time of grant as either an "incentive stock option"
or as a "non-qualified stock option."
Administration of the Plan. The 1994 Plan is administered
by the Employee Stock Option Committee, which determines whom among
those eligible will be granted options, the time or times at which
options will be granted, the number of shares to be subject to
options, the duration of options, any conditions to the exercise of
options and the manner in and price at which options may be
exercised. The Employee Stock Option Committee is authorized to amend,
suspend or terminate the 1994 Plan, except that it is not authorized
without stockholder approval (except with regard to adjustments
resulting from changes in capitalization) to (i) increase the
maximum number of shares that may be issued pursuant to the
exercise of options granted under the 1994 Plan; (ii) permit the
grant of a stock option under the 1994 Plan with an option exercise
price less than 85% of the fair market value of the shares at the
time such option is granted; (iii) change the eligibility requirements
for participation in the 1994 Plan; (iv) extend the term of any
option or the period during which any option may be granted under
the 1994 Plan; or (v) decrease an option exercise price (although an
option may be canceled and a new option granted at a lower
exercise price).
Shares Subject to the Plan. The 1994 Plan currently
provides that options may be granted with respect to a total of
700,000 shares of Common Stock, subject to adjustment upon
certain changes in capitalization without receipt of consideration by
the Company. In addition, if the Company is involved in a
merger, consolidation, dissolution or liquidation, the options
granted under the 1994 Plan will be adjusted or, under certain
conditions, will terminate, subject to the right of the option holder
to exercise his option or a comparable option substituted at the
discretion of the Company prior to such event. If any option
expires or terminates for any reason, without having been exercised
in full, the unpurchased shares subject to such option will be
available again for the purposes of the 1994 Plan.
Participation. Any employee, consultant or representative
of the Company is eligible to receive incentive stock options or
non-qualified stock options granted under the 1994 Plan. Non-
employee directors may only receive non-qualified stock options.
Option Price. The exercise price of each option shall be
determined by the Stock Option Committee. However, the
exercise price of each option on the date the option is granted may
not be less than (i) 100% of the fair market value of the shares of
Common Stock covered by an incentive stock option, or (ii) 85%
of the fair market value of the shares of Common Stock covered by
a non-qualified stock option. If an incentive stock option is to be
granted to an employee who owns over 10% of the total combined
voting power of all classes of the Company's stock, then the
exercise price may not be less than 110% of the fair market value
of the Common Stock covered by the option on the date the option
is granted.
Terms of Options. The Compensation Committee shall, in
its discretion, fix the term of each option, provided that the
maximum term of each option shall be 10 years. Incentive options
granted to an employee who owns over 10% of the total combined
voting power of all classes of stock of the Company shall expire
not more than five years after the date of grant. The 1994 Plan
will provide for the earlier expiration of options of a participant in
the event of certain terminations of employment.
Restrictions on Grant and Exercise. An Option may not be
transferred other than by will or the laws of descent and
distribution and, during the lifetime of the option holder, may be
exercised solely by the option holder. The aggregate fair market
value (determined at the time the option is granted) of the shares as
to which an employee may first exercise incentive stock options in
any one calendar year may not exceed $100,000. The
Compensation Committee may impose other conditions to exercise
as it deems appropriate.
Option Grants. As of May 19, 1997, the Company has
granted an aggregate of 797,129 Options under the 1994 Plan, of
which 152,500 options previously granted have either expired or
terminated.
<R/>
Termination. The 1994 Plan, unless sooner terminated by
the Board of Directors or Compensation Committee, will terminate
on October 1, 2004.
Tax Treatment of Options. The Federal income tax
treatment of non-qualified stock options under the 1994 Plan is
generally less favorable to employees than the treatment accorded
incentive stock options under the 1994 Plan. The option grantee
realizes taxable income, if any, upon his exercise of a non-qualified
stock option, not only upon sale of the shares acquired upon option
exercise as would be the case for incentive stock options granted
under the 1994 Plan. The tax treatment of non-qualified stock
options is more favorable to the Company than the treatment
accorded to the Company with respect to incentive stock options,
because the Company is entitled to a tax deduction with respect to
the grant of a non-qualified stock option. With respect to granting
a non-qualified stock option, the Company would be entitled to a
tax deduction and the optionee would realize taxable income upon
being granted a non-qualified stock option, equal to the difference
between the option exercise price and the fair market value of the
underlying stock on the date of grant.
The Company currently has no obligation to grant
additional options under the 1994 Plan to any person, including any
members of the Company's management.
Subject to the shareholder approval to increase the number of
shares of Common Stock underlying stock options available for grant
under the 1994 Plan, in April 1997, the Employee Stock Option Committee
has granted stock options to certain executive officers of the Company
as follows:
Wilbur Riner, Chairman and Chief Executive Officer, 100,000 options;
Bryan Carr, Vice President and Chief Financial Officer, 30,000 options;
Kevin Sheldon,Secretary, 10,000 options. The exercise price for all
such options is $6.50 per share; equal to fair market value on the
date of grant.
As of the close of business on May 19, 1997, the market
value of the shares of Common Stock underlying all options
outstanding under the 1994 Plan was approximately
$5,499,780.
As of May 19, 1997, the persons or groups listed below
hold outstanding stock options granted under the 1994 Plan to
acquire shares of Common Stock, as follows:
Wilbur Riner
20,000 shares;
Barbara Riner
42,323 shares;
James Riner
31,848 shares;
Bryan Carr
117,000 shares;
Luther Maners
25,000 shares;
Kevin Sheldon
36,000 shares;
All current executive officers and directors of
the Company as a group
274,171 shares(1);
All directors and nominees for directors as a
group
170,848 shares; and
All employees who are not executive officers of
the Company, as a group
277,808 shares(1)
<R/>
(1) Does not include options which have expired, been exercised or terminated.
Management believes approval of the Amendment of the
Company's 1994 Stock Option Plan is in the best interest of the
Company and recommends that it be authorized and ratified.
OTHER BUSINESS
While management of the Company does not know of any
matters which may be brought before the Meeting other than as set
forth in the Notice of Meeting, the proxy confers discretionary
authority with respect to the transaction of any other business. It is
expected that the proxies will be voted in support of management
on any question which may properly be submitted to the meeting.
INCLUSION OF SHAREHOLDER PROPOSALS
IN THE COMPANY'S PROXY STATEMENT
If any shareholder desires to put forth a proposal to be
voted on at the 1998 Annual Meeting of Shareholders and wishes
that proposal to be included in the Company's Proxy Statement to
be delivered to shareholders in connection with such meeting, that
shareholder must cause such proposal to be received by the
Company at its principal executive office no later than February 1,
1998. Any request for such a proposal, should be accompanied by
a written representation that the person making the request is a
record or beneficial owner of the lesser of at least 1% of the
outstanding shares of the Company's Common Stock or $1,000 in
market value of the Company's common shares and has held such
shares for a least one year as required by the Proxy Rules of the
Securities and Exchange Commission.
AVAILABILITY OF FORM 10-K
The Company will provide, without charge, to any shareholder,
upon written request of such shareholder, a copy of the Annual
Report on Form 10-KSB for the Fiscal Year ended December
31, 1996 as filed with the Securities and Exchange Commission.
Any request for a copy of the Form 10-KSB should include
a representation that the person making the request was the
beneficial owner, as of the record date, of securities entitled to vote
at the Annual Meeting of Stockholders. Such request should be
addressed to: The Network Connection, Inc., 1324 Union Hill
Road, Alpharetta, Georgia 30201; Attention: Secretary.
______________________________________________________
___________
PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED FOR SUCH
PURPOSE
______________________________________________________
___________
EXHIBIT A
AMENDMENT TO
THE NETWORK CONNECTION, INC.
1994 EMPLOYEE STOCK OPTION AGREEMENT
1. AMENDMENT.
Section 5 of The Network Connection, Inc. 1994 Employee
Stock Option Plan (the "Plan") is hereby amended (the
"Amendment") to increase the number of shares of Common Stock
of the Network Connection, Inc. available for the grant of options
under the Plan from 700,000 shares to 1,200,000 shares by
deleting existing Section 5(a) in its entirety and substituting the
following therefor:
"5. OPTION SHARES
The shares subject to Options granted under
this Plan shall be shares of Common Stock and,
except as otherwise required or permitted by Section
5(b) below, the aggregate number of shares with
respect to which Options may be granted shall not
exceed 1,200,000 shares. If an Option expires,
terminates or is otherwise surrendered, in whole or
in part, the shares allocable to the unexercised
portion of such Option shall again become available
for grants of Options hereunder. As determined
from time to time by the Board of Directors, the
shares available under this Plan for grants of
Options may consist either in whole or in part of
authorized but unissued shares of Common Stock or
shares of Common Stock which have been
reacquired by the Company or a subsidiary
following original issuance."
2. EFFECTIVE DATE
Upon approval by the holders of a majority of the
outstanding shares of Common Stock of the Company, the
Amendment will become effective on the date upon which
such approval is obtained (the "Effective Date").
3. EFFECT OF AMENDMENT
Except as amended by the specific terms of this
Amendment, the remaining terms and conditions of the Plan
shall remain in full force and effect.
Wilbur Riner, Chairman
Date: ___________________
THE NETWORK CONNECTION, INC.
Proxy-Annual Meeting of Shareholders
June 12, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE ANNUAL
MEETING OF SHAREHOLDERS OF THE NETWORK CONNECTION, INC. TO BE HELD ON
JUNE 12, 1997. THE SHAREHOLDER HAS THE RIGHT TO APPOINT AS HIS PROXY A
PERSON (WHO NEED NOT BE A SHAREHOLDER) OTHER THAN ANY PERSON DESIGNATED
BELOW, BY INSERTING THE NAME OF SUCH OTHER PERSON IN ANOTHER PROPER FORM OF
PROXY.
The undersigned, a shareholder of The Network Connection, Inc.
(the "Corporation"), hereby revoking any proxy hereinbefore given, does
hereby appoint Wilbur Riner and Barbara Riner, or either of them, as his
proxy with full power of substitution, for and in the name of the undersigned
to attend the Annual Meeting of the Shareholders to be held on June 12, 1997
at 1324 Union Hill Road, Alpharetta, Georgia, at 10:00 a.m., local time, and
at any adjournments thereof, and to vote upon all matters specified in the
notice of said meeting, as set forth herein, and upon such other business as
may properly come before the meeting, all shares of stock of said Corporation
which the undersigned would be entitled to vote if personally present at the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL
BE VOTED FOR ALL NOMINEES FOR DIRECTOR IDENTIFIED BELOW AND FOR ALL PROPOSALS.
1. The Election of Directors
Election of the following proposed director to hold office until the year
2000 Annual Meeting of Shareholders or until his successor shall be elected
and shall qualify: Marc Doyle.
FOR NOMINEE WITHHOLD NOMINEE
( ) ( )
2. Ratify the Appointment of Coopers & Lybrand, L.L.P. as independent auditors
for the Corporation for the fiscal year ending
December 31, 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Approve the increase of the number of available shares underlying the
Corporation's Stock Option Plan from 700,000 shares of Common Stock to
1,200,000 shares of Common Stock;
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
( ) FOR ( ) AGAINST ( ) ABSTAIN
Dated: ______________________, 1997 __________________________ ______________
Signature Print Name
__________________________ ______________________
Signature, if Jointly Held Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREIN, if signing as attorney,
executor, administrator, trustee or guardian, indicate such capacity. All joint
tenants must sign. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
The Board of Directors requests that you fill in the date and sign the
Proxy and return it in the enclosed envelope.
IF THE PROXY IS NOT DATED IN THE ABOVE SPACE, IT IS DEEMED TO BE DATED ON
THE DAY ON WHICH IT WAS MAILED BY THE CORPORATION.
