<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
e-NET, 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:
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<PAGE>
[e-Net, Inc. letterhead]
November 10, 1999
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of e-Net,
Inc. (the "Company"), which will be held on Friday, December 10, 1999 at 10:00
a.m., at the offices of Williams & Connolly, located at 725 12th Street, N.W.,
Washington, D.C.
The proposals before the meeting for the election of seven directors,
ratification of the e-Net, Inc. 1999 Stock Compensation Plan and ratification of
the Company's appointment of independent auditors are described more fully in
the Proxy Statement and are deemed by management and the Board of Directors to
be in the best interests of the Company. We believe they deserve your support.
We ask that you complete, sign and date the accompanying proxy card and
return it as soon as possible in the postage-paid envelope provided. Please do
so even if you intend to be at the meeting.
Thank you very much for your loyal support of our past efforts. We look
forward to sharing the benefits with you as a shareholder of the Company.
/s/ Alonzo E. Short
---------------------------------------
ALONZO E. SHORT
CHAIRMAN OF THE BOARD
/s/ Robert A. Veschi
---------------------------------------
ROBERT A. VESCHI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of e-Net, Inc.:
The Annual Meeting of Shareholders of e-Net, Inc., a Delaware
corporation (the "Company"), will be held on Friday, December 10, 1999, at
10:00 a.m., at the offices of Williams & Connolly, located at 725 12th Street,
N.W., Washington, D.C., for the following purposes:
1. To elect seven directors of the Company, each to serve until the next
Annual Meeting of Shareholders and his or her successor has been elected
and qualified or until his or her earlier resignation or removal;
2. To approve the e-Net, Inc. 1999 Stock Compensation Plan, which provides for
the issuance of up to 1,000,000 shares of the Company's common stock, par
value $0.01 per share;
3. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for fiscal year 2000; and
4. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Your attention is directed to the accompanying Proxy Statement for
further information with respect to the matters to be acted upon at the meeting.
The record date for determining shareholders entitled to notice of, and
to vote at, the Annual Meeting has been fixed by the Board of Directors as the
close of business on November 8, 1999.
This notice and the accompanying Proxy Statement and proxy card are
sent to you by order of the Board of Directors.
/s/ Donald J. Shoff
---------------------------------------
DONALD J. SHOFF
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL
OFFICER AND SECRETARY
November 10, 1999
You are cordially invited to attend the Annual Meeting. It is important that
your shares be represented regardless of the number you own. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. If you attend this meeting, you may vote
either in person or by your proxy. Any proxy given may be revoked by you in
writing or in person at any time prior to the exercise thereof.
<PAGE>
e-NET, INC.
12800 MIDDLEBROOK ROAD, SUITE 200
GERMANTOWN, MARYLAND 20874
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 10, 1999
GENERAL INFORMATION
The following information is being furnished in connection with the
Annual Meeting of Shareholders of e-Net, Inc., a Delaware corporation (the
"Company"), to be held at 10:00 A.M. on Friday, December 10, 1999 at the offices
of Williams & Connolly, located at 725 12th Street, N.W., Washington, D.C. (the
"Annual Meeting"). It is contemplated that this Proxy Statement and the enclosed
form of proxy will be first sent to shareholders on or about November 12, 1999.
Only holders of record of the Company's common stock, par value $0.01
per share ("Common Stock") at the close of business on November 8, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting or any
adjournment thereof. On such date, there were 8,456,987 shares of Common Stock
outstanding. The holders of a majority of the Company's outstanding shares of
Common Stock, present in person or by proxy, are required for a quorum at the
meeting. If a share is represented for any purpose at the meeting, it is deemed
to be present for quorum purposes for all other matters as well. Abstentions and
shares held of record by a broker or its nominee ("Broker Shares") that are
voted in any matter are included in determining the number of votes present or
represented at the meeting. Broker Shares that are not voted on any matter at
the meeting will not be included in determining whether a quorum is present.
Each share of Common Stock is entitled to one vote on all matters to come before
the meeting. The election of directors requires the affirmative vote of holders
of a plurality of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote. The approval of the e-Net,
Inc. 1999 Stock Compensation Plan requires the affirmative vote of holders of a
majority of the shares of Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote. Votes that are withheld and Broker
Shares that are not voted as to any such matter will not be included in
determining the number of votes cast.
The enclosed proxy for the Annual Meeting is being solicited by the
Board of Directors of the Company and is revocable at any time before it is
exercised. All properly executed proxies delivered pursuant to this solicitation
will be voted at the meeting in accordance with instructions, if any. In the
absence of instructions, properly executed proxies will be voted for the
nominees to the Board set forth below and for the other proposals described
below. If any other matters are properly brought before the Annual Meeting the
proxies will be voted in the discretion of the proxy holders. The cost of this
solicitation will be borne by the Company. In addition to the use of the mail,
directors, officers and employees of the Company may solicit proxies by
telephone, fax, or personal interview. Such persons will receive no additional
<PAGE>
compensation for any solicitation activities. The Company also has retained the
services of D.F. King & Co., Inc. to aid in the solicitation of proxies in
person, by mail, telephone or telegram at a fee of approximately $5,000 plus
expenses. Banks, brokerage houses and other institutions, nominees and
fiduciaries will be requested to forward the soliciting materials to beneficial
owners and to obtain authorization for the execution of proxies. The Company
will, upon request, reimburse such parties for their reasonable expenses in
forwarding proxy material to beneficial owners.
ELECTION OF DIRECTORS
DIRECTORS
Seven directors are to be elected at the 1999 Annual Meeting, each for
a term running until the 2000 Annual Meeting of Shareholders and his or her
successor has been elected and qualified, or his or her earlier resignation or
removal. It is the intention of the persons named as proxies in the accompanying
form of proxy to vote for the election of the five named nominees of the Board
of Directors unless authorization is withheld. Each nominee has agreed to serve
if elected. In the event any nominee shall unexpectedly be unable to serve, the
Board may reduce its size or nominate an alternative candidate for whom the
proxies may vote.
The name, principal occupation and selected biographical information of
each nominee are set forth below. All nominees (other than Messrs. Viren and
Shoff) currently are directors of the Company.
ALONZO E. SHORT, JR., Lt. Gen., USA (ret.), 58, has been chairman of
the board since January 1996. General Short has more than 30 years experience in
executive management, operations and the engineering, design and development of
large-scale telecommunications and data systems. General Short retired from the
service in 1994 following a career that included serving as deputy commanding
general (1988-1990) and commanding general (1990-1991) of the U.S. Army
Information Systems Command, a major information technology organization, which
was responsible for all telecommunications during the Desert Shield/Desert Storm
operation, among other responsibilities. From 1991 to 1994, General Short was
director of the Defense Information Systems Agency, a major information
technology organization which is responsible for telecommunications and related
services to the President of the United States, Secret Service, Joint Chiefs of
Staff, Secretary of Defense, among other high level federal entities. From
1994-1997, General Short was president and chief executive officer of MICAH
Systems, Inc., a Washington, D.C. metropolitan area based information,
technologies management and consulting firm. In September 1997, General Short
joined Lockheed Martin, an aerospace, defense, and information technology
company, as a Vice-President. Since January 1996, General Short has been
instrumental in the organization and development of the Company's business.
ROBERT A. VESCHI, 37, has been the Company's president, chief executive
officer, and a director since January 1995. Mr. Veschi founded the Company,
which began its operations in June 1995. Mr. Veschi has significant experience
in executive management, operations and the engineering, design and development
of telecommunications and computer products and systems. From 1986 to 1990,
Mr. Veschi was manager of systems engineering for International Telemanagement,
Inc., a Washington, D.C. metropolitan area based information, data and network
2
<PAGE>
systems firm. From 1990 to 1994, Mr. Veschi was a group president of I-Net,
Inc., a Washington, D.C. metropolitan area based information, data and network
systems firm. From December 1994 to May 1995, for approximately six months, Mr.
Veschi was president and chief executive officer of Octacom, Inc., a Washington,
D.C. metropolitan area based information, data and network systems firm, and a
wholly-owned subsidiary of Octagon, Inc., an Orlando, Florida metropolitan area
based publicly held technical services firm. From July 1994 to May 1995, for
approximately nine months, Mr. Veschi was a vice president of telecommunications
for Octagon, Inc., and from January 1995 to May 1995, for approximately four
months, Mr. Veschi was a member of the board of directors of that company. Since
June 1995, Mr. Veschi has been instrumental in the Company's organization,
development and promotion.
WILLIAM W. ROGERS, JR., 57, has been a director since January 1997.
Mr. Rogers has substantial senior management, operations and technical and
engineering services experience. From 1972 to 1987, Mr. Rogers was a general
manager engaged in operations, technical and engineering services for Boeing
Computer Services, Inc. From 1987 to 1989, Mr. Rogers was president and chief
executive officer of International Telemanagement, Inc., a McLean, Virginia
based telecommunications and systems engineering and services company. From
1989 to 1991, Mr. Rogers was a vice president of Fluor-Daniel, where he was
responsible for telecommunications and systems integration services. From
1991 through 1998, Mr. Rogers was a vice president with Computer Sciences
Corporation, a McLean, Virginia based technology products, systems and
services company, where he is responsible for systems integration and related
technical services. From 1998 to 1999, Mr. Rogers was a senior vice president
of CACI, Inc., a Washington, D.C. based information technology company. Since
October 1999, Mr. Rogers has been Director-Sales of Advanced Communication
Systems, Inc., a Washington, D.C. based information technology company. Since
January 1997, Mr. Rogers has been instrumental in the Company's organization
and development. Mr. Rogers holds a B.A. degree from West Virginia University.
WILLIAM L. HOOTON, 47, has been a director since January 1996.
Mr. Hooton has substantial experience in the management, design, operation,
marketing and sales of image conversion systems, electronic imaging system
integration, data automation and high performance data storage subsystems. From
1990 to 1993, Mr. Hooton was vice president of operations and technical and
business development of the Electronic Information Systems Group of I-Net, Inc.,
a Washington, D.C. metropolitan area based information, data and network systems
firm. From 1993 to 1998, Mr. Hooton was president and chief executive officer of
Q Corp., a Washington, D.C. metropolitan area high technology consulting firm
specializing in digital imaging systems and other complex imagery in media. In
September 1998, Mr. Hooton became chief executive officer of Tower Software
Corporation, a Northern Virginia based digital imaging software company. Since
January 1996, Mr. Hooton has been a director of the Company and has been
instrumental in its organization and development. Mr. Hooton holds a B.B.A.
degree from the University of Texas.
CLIVE G. WHITTENBURY, Ph.D., 66, has been a director since June 1996.
Dr. Whittenbury has substantial senior management, operations and technical
advisory experience. From 1972 to 1979, Dr. Whittenbury was a senior vice
president and, from 1976 to 1986, a director of Science Applications
International Corporation ("SAIC"), a La Jolla, California based major
international systems engineering firm with current annual revenues of
approximately $4.7 billion. Since 1979, Dr. Whittenbury has been executive vice
president and a director of the Erickson Group, Inc., a major international
diversified products firm.
3
<PAGE>
Dr. Whittenbury is a member of the International Advisory Board for the
British Columbia Advanced Systems Institute, which manages commercialization
programs in technology at the three major Vancouver/Victoria universities, a
member of the Advisory Board of Compass Technology Partners, an investment
fund, and is chairman of the Advisory Board (Laser Directorate) for the
Lawrence Livermore National Laboratory. Dr. Whittenbury has also served as a
technical advisor to three U.S. Congressional Committees, the Grace
Commission and numerous major U.S. and foreign companies. Since June 1996,
Dr. Whittenbury has been instrumental in the Company's organization and
development. Dr. Whittenbury holds a B.S. degree (physics) from Manchester
University (England) and a Ph.D. degree (aeronautical engineering) from the
University of Illinois.
MICHAEL A. VIREN, Ph.D, 57, is being nominated as a director of
the Company for the first time. Dr. Viren has over 35 years of experience as
an engineer, economist and executive in the electric utilities and
telecommunications industries. From 1991 to 1998, Dr. Viren served as the
Director of Product Development, Vice President of Product Development and
Information Services and Senior Vice President of Engineering, IS and
Strategic Planning for Intermedia Communications, Inc., an interexchange and
internet company located in Florida. In 1998, Dr. Viren, along with several
Intermedia employees, founded 2nd Century Communications, a
telecommunications service provider located in Tampa, Florida. In July 1999,
Dr. Viren resigned from his position with 2nd Century, though he currently
serves on its board of directors. Dr. Viren currently is a Principal with
Intellysis Group, Inc., a Tampa, Florida based investment and advisory
company. Dr. Viren received a Bachelor of Science in Mechanical Engineering
from California State University, Long Beach and a Ph.D. in Economics from
the University of Kansas in December 1970.
DONALD J. SHOFF, CPA, 44, is being nominated as a director for the
first time. Mr. Shoff has been vice president of finance and chief financial
officer since November 1997 and secretary since February 1999. Prior to that,
Mr. Shoff was director of finance and assisted the Company as a consultant prior
to employment. Mr. Shoff has 21 years of significant experience in both public
accounting firms and with high technology companies, both public and private.
From 1977 to 1981, Mr. Shoff was a staff accountant and senior accountant on the
staff of local Washington, D.C. public accounting firms. From 1982 to 1986,
Mr. Shoff was the corporate cost accounting manager and a group controller for
Science Applications International Corporation, a high technology products and
professional services public corporation, where he was responsible for the
corporate cost accounting functions and controllership of a high technology
services operation group. From 1987 to 1992 and from 1993 to 1996, Mr. Shoff
consulted independently and as a Senior Manager of Grant Thornton LLP, a major
accounting and management consulting firm, with public and privately held high
technology companies doing business with the Federal government. From 1992 to
1993 Mr. Shoff was vice president of finance and administration for Comsis
Corporation, a Washington, D.C. based privately held engineering and technology
company doing business with the Federal and various state governments. Mr. Shoff
holds a B.B.A. degree from the Pennsylvania State University and is a certified
public accountant.
The Board of Directors recommends a vote "FOR" the election to the
Board of Directors of the nominees set forth above.
4
<PAGE>
EXECUTIVE OFFICERS
The name, principal occupation and selected biographical information of
the executive officers of the Company (other than Messrs. Veschi and Shoff) are
set forth below:
CHRISTINA L. SWISHER, 34, has been vice president of operations since
December 1996 and was e-Net's secretary from February 1997 through January 1999.
Ms. Swisher has significant experience in the computer networking management,
systems and operations. From 1991 to 1993, Ms. Swisher was a technical and
graphics specialist with the Air Force Association, a Washington, DC area based
national services organization, where she was responsible for technical and
statistical analyses. From 1993 to 1995, Ms. Swisher was the manager for
computer networks for computer network systems and operations for I-Net, Inc., a
Washington, DC metropolitan area based information, data and network systems
firm. Since 1995, Ms. Swisher has been director of technical services with
e-Net, becoming vice president of operations in December 1996. Since June 1995,
Ms. Swisher has been instrumental in the organization and development of the
Company's business.
INDEBTEDNESS AND OTHER TRANSACTIONS
During the past two years, none of the Company's directors or executive
officers, or any member of their immediate families, has or had any material
interest in any transaction to which the Company is or was a party outside of
the ordinary course of the Company's business, except as follows.
The Company rents an aircraft for business purposes from an entity
owned by Robert A. Veschi, the Company's President and Chief Executive Officer.
For the years ended March 31, 1999 and 1998, the Company paid $199,060 and
$62,936, respectively for the rental of the aircraft.
On April 16, 1997, the Company entered into a consulting agreement with
Alonzo E. Short, Jr., Lt. Gen., USA (ret.), the Chairman of the Board, to
provide services for a fixed monthly amount of $1,000. The amounts paid to him
under that agreement totaled $12,000 for the the years ended March 31, 1999 and
1998, respectively.
All ongoing and future transactions between the Company and any
affiliate will be entered into on terms at least as favorable as could be
obtained from unaffiliated, independent third parties.
MEETINGS AND COMMITTEES
During the Company's fiscal year ended March 31, 1999, the Board of
Directors held fifteen meetings. Each director of the Company attended 75% or
more of all meetings of the Board of Directors. The Board has a standing
audit committee composed of Gen. Short, Mr. Rogers and Dr. Whittenbury, a
standing compensation committee composed of Messrs. Hooton, Rogers and
Veschi, and a standing
5
<PAGE>
executive committee composed of Gen. Short and Messrs. Hooton and Veschi. During
the Company's fiscal year ended March 31, 1999, the audit committee held one
meeting, the compensation committee held no meetings and the executive committee
held no meetings. The Board has no standing nominating committee at this time.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the beneficial ownership of Common Stock as
of November 10, 1999 by all directors, the Chief Executive Officer and the other
executive officer of the Company (determined at the end of the last fiscal year)
whose annual salary and bonus as so determined was at least $100,000 (such
officers, the "Named Officers"), and all directors and executive officers of the
Company as a group, and each person who is known by the Company to beneficially
own more than five percent of the issued and outstanding shares of Common Stock.
With regard to five percent beneficial owners who are not also directors or
officers of the Company, the information set forth below reflects the most
recent reliable information available to the Company. Unless otherwise indicated
and subject to applicable community property and similar statutes, all persons
listed below have sole voting and investment power over all shares of Common
Stock beneficially owned. Share ownership has been computed in accordance with
the Securities and Exchange Commission ("SEC") rules and does not necessarily
indicate beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS POSITION WITH COMPANY OF SHARES PERCENTAGE OF SHARES
- ---------------- --------------------- --------- --------------------
<S> <S> <C> <C>
Alonzo E. Short, Jr., Lt. Gen., Chairman of the Board 100,000 1.18
USA (ret.) (1)
Robert A. Veschi (2) President, Chief Executive 1,508,334 17.56
Officer, Director
Christina L. Swisher (3) Vice President, Operations 105,000 1.23
Donald J. Shoff (4) Vice President, Chief 122,750 1.44
Financial Officer and Secretary, and Nominee
David W. Wells (5) General Counsel (Former) 4,000 0.05
William L. Hooton (6) Director 60,000 0.71
Clive W. Whittenbury, Ph.D. (7) Director 60,000 0.71
William W. Rogers, Jr. (8) Director 15,000 0.18
Michael A. Viren (9) Nominee -0- 0.00
All Executive Officers and Directors 1,971,084 23.31
as a Group (8 persons) (10)
</TABLE>
- ---------------
(1) c/o Lockheed Martin, 5203 Leesburg Pike, Suite 1501, Falls Church, Virginia
22041. Includes vested options to purchase 10,000 shares of Common Stock.
(2) c/o e-Net, Inc., 12800 Middlebrook Road, Germantown, Maryland 20874.
Includes vested options to purchase 133,334 shares of Common Stock.
(3) c/o e-Net, Inc., 12800 Middlebrook Road, Germantown, Maryland 20874.
Includes vested options to purchase 60,000 shares of Common Stock.
(4) c/o e-Net, Inc., 12800 Middlebrook Road, Germantown, Maryland 20874.
Includes vested options to purchase 72,750 shares of Common Stock.
(5) 31 Solitaire Court, Gaithersburg, Maryland 20878.
(6) 11490 Commerce Park Drive, Suite 120, Reston, Virginia. Includes vested
options to purchase 10,000 shares of Common Stock.
6
<PAGE>
(7) 511 Trinity Avenue, Yuba City, California 95991. Includes vested options
to purchase 10,000 shares of Common Stock.
(8) c/o Advanced Communication Systems, Inc., 10889 Lee Highway, Fairfax,
Virginia 22030. Includes vested options to purchase 10,000 shares of
Common Stock.
(9) 505 South River Hills Dr., Temple Terrace, Florida 33617.
(10) Includes vested options to purchase 356,084 shares of Common Stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
fiscal years ended March 31, 1997, 1998 and 1999 with regard to the Named
Officers:
<TABLE>
<CAPTION>
SECURITIES
OTHER ANNUAL UNDERLYING
NAME OF INDIVIDUAL POSITION WITH COMPANY YEAR SALARY BONUS COMPENSATION(1) OPTIONS
- ------------------ --------------------- ---- ------ ----- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Veschi President, Chief Executive 1999 $175,000 $190,000(2) -- 200,000
Officer, Director 1998 175,000 87,500 -- --
1997 -- 87,500 -- --
Christina L. Swisher Vice President, Operations 1999 125,329 16,500 -- 60,000
1998 88,333 21,000 -- --
1997 66,251 5,607 -- --
David W. Wells General Counsel (Former) 1999 125,329 16,500 -- 30,000
1998 116,059 7,688 -- --
1997 33,319 -- --
Donald J. Shoff Vice President, Finance, 1999 125,329 16,500 -- 72,750
Chief Financial Officer 1998 95,512 -- -- --
Officer and Secretary 1997 22,962 -- -- --
</TABLE>
- --------------
(1) The officers of the Company may receive remuneration as part of an overall
group insurance plan providing health, life and disability insurance
benefits for employees of the Company. The amount allocable to each Named
Officer cannot be specifically ascertained, but, in any event, did not in
any reported fiscal year exceed the lesser of $50,000 and such Named
Officer's combined salary and bonus. The Company has purchased key-man term
life insurance on Mr. Veschi in the amount of $2 million, which designates
the Company as the owner and beneficiary of the policy.
DIRECTOR COMPENSATION
The directors of the Company, with the exception of Mr. Veschi, are
entitled to annual remuneration of $24,000 pursuant to oral agreements between
them and the Company. In addition, General Short receives $1,000 per month under
a consulting services agreement for his additional specific business services on
behalf of the Company.
Each outside director of the Company is entitled to receive reasonable
expenses incurred in attending meetings of the Board of Directors of the
Company. The members of the Board of
7
<PAGE>
Directors intend to meet at least quarterly during the Company's fiscal year,
and at such other times as duly called. The Company presently has four outside
directors.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information related to the
options granted to the Named Officers during the fiscal year ended March 31,
1999:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN
NAME GRANTED FISCAL YEAR EXERCISE PRICE EXPIRATION DATE
---- ----------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Robert A. Veschi............. 200,000(1) 34% $7.5063(2) April 7, 2006
Christina L. Swisher......... 60,000(3) 10% 4.1375(4) September 30, 2005
David W. Wells............... 30,000(5) 5% 4.1375(4) September 30, 2005
Donald J. Shoff.............. 72,750(6) 12% 4.1375(4) September 30, 2005
</TABLE>
- -------------
(1) 33,334 vested on December 18, 1998 (date of grant), 33,333 vested on
April 7, 1999 and 33,333 will vest on April 7, 2000.
(2) The Company agreed to grant on April 7, 1998 but did not actually grant
until December 18, 1998. Exercise price was set based on date the Company
agreed to grant.
(3) 40,000 vested on December 18, 1998 (date of grant) and 20,000 vested on
September 30, 1999.
(4) The Company agreed to grant on September 30, 1998 but did not actually
grant until December 18, 1998. Exercise price was set based on date the
Company agreed to grant.
(5) 20,000 vested on December 18, 1998 (date of grant) and 10,000 vested on
September 30, 1999.
(6) 52,750 vested on December 18, 1998 (date of grant) and 20,000 will vest on
September 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
The following table sets forth certain information related to option
exercises by the Named Officers during the fiscal year ended March 31, 1999 and
the value of their unexercised options at March 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END(#) FISCAL YEAR END ($)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Veschi................... --- --- 133,334/66,666 (1)
Christina L. Swisher............... --- --- 40,000/20,000 (1)
David W.Wells...................... --- --- 20,000/10,000 (1)
Donald J. Shoff.................... --- --- 52,750/20,000 (1)
</TABLE>
- --------------
(1) None of the options held by the Named Officers was in-the-money at
March 31, 1999.
8
<PAGE>
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement (the "Agreement")
with Robert A. Veschi, the president and chief executive officer of the Company,
dated as of April 1, 1996. The Agreement will expire on March 31, 2001. The
current annual salary under the Agreement is $175,000, which may be increased to
reflect annual cost of living increases and may be supplemented by discretionary
merit and performance increases as determined by the Board of Directors of the
Company. Mr. Veschi is entitled to an annual bonus equal to 50 percent of the
salary provided under this Agreement, which is not subject to any performance
criteria.
The Agreement provides, among other things, for participation in an
equitable manner in any profit-sharing or retirement plan for employees or
executives and for participation in other employee benefits applicable to
employees and executives of the Company. The Agreement provides for the use of
an automobile, payment of club dues and other fringe benefits commensurate with
his duties and responsibilities. The Agreement also provides for benefits in the
event of disability. The Agreement also contains non-compete provisions which
are limited in geographical scope to the Washington, D.C. metropolitan area.
Pursuant to the Agreement, Mr. Veschi's employment may be terminated by
the Company with cause or by Mr. Veschi with or without good reason. Termination
by the Company without cause, or by Mr. Veschi for good reason, would subject
the Company to liability for liquidated damages in an amount equal to Mr.
Veschi's current salary and a PRO RATA portion of his bonus for the remaining
term of the Agreement, payable in a lump sum cash payment, without any set-off
for compensation received from any new employment. In addition, Mr. Veschi would
be entitled to continue to participate in and accrue benefits under all employee
benefit plans and to receive supplemental retirement benefits to replace
benefits under any qualified plan for the remaining term of the Agreement to the
extent permitted by law.
e-NET, INC. 1999 STOCK COMPENSATION PLAN
On October 26, 1999, the Company's Board of Directors voted to adopt
the e-Net, Inc. 1999 Stock Compensation Plan (the "Plan"), effective as of that
date. Under the Plan, directors, employees and independent contractors of the
Company and its subsidiaries are participants and may be granted options to
purchase in the aggregate up to 1,000,000 shares of Common Stock. On November 3,
1999 bid and asked prices for Common Stock were reported on Nasdaq at $4.188 and
$4.50 per share, respectively. The effectiveness of the Plan is subject to
approval by the holders of a majority of the shares of Common Stock present in
person or represented by proxy at a meeting of the stockholders of the Company
held within twelve (12) months of October 26, 1999.
GENERALLY
The following is a summary of the material provisions of the Plan. This
summary is qualified in its entirety by reference to the complete text of the
Plan. The Company will provide promptly, upon request and without charge, a copy
of the full text of the Plan to each person to whom a copy of this proxy
statement is delivered. Requests should be directed to Donald J. Shoff, Vice
President, Finance, Chief Financial Officer and Secretary of the Company, 12800
Middlebrook Road, Germantown, Maryland 20874.
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Management believes that the Plan will advance the interests of the
Company by providing eligible individuals an opportunity to acquire or increase
their proprietary interest in the Company, which thereby will create a stronger
incentive to expend maximum effort for the growth and success of the Company and
its subsidiaries and will encourage such eligible individuals to continue to
serve the Company.
Options granted under the Plan are intended to be non-qualified stock
options, not incentive stock options ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan is not a
qualified deferred compensation plan within the meaning of Section 401(a) of the
Code nor is it subject to the provisions of the Employee Retirement Income
Security Act of 1964, as amended.
ADMINISTRATION OF THE PLAN
With respect to insiders (officers, directors and beneficial owners of
ten percent (10%) or more of the Company's Common Stock), the Plan is
administered by, and awards to Insiders are authorized by, members of the Board
of Directors of the Company who are not officers or employees of the Company or
a subsidiary (the "Outside Board"). With respect to all other participants, the
Plan is administered by, and awards are authorized by, the Board of Directors of
the Company (the "Board"). No director may participate in a decision to grant an
award to himself or herself.
TOTAL NUMBER OF OPTIONS AND TERMS OF OPTIONS
As noted above, the total number of shares of Common Stock which may be
issued under the Plan from time to time is 1,000,000 in the aggregate, as may be
adjusted in accordance with the terms of the Plan. Shares may be issued under
the Plan out of authorized but unissued Common Stock, shares of Common Stock
held as treasury shares, and shares of Common Stock purchased by the Company on
the open market. In the event that an option expires or is terminated before it
is exercised, the shares subject to the portion of option not exercised may
again be subject to an option.
The option price is as set forth in the option agreement with the
participant. The exercise price for each option granted under the Plan is
determined by the Board or the Outside Board, as the case may be.
Each option will have a ten year term from its grant date, subject to
certain limitations.
TRANSFERABILITY AND TERMINATION OF OPTIONS
No option is assignable or transferable by the participant to whom it
is granted, other than by will or the laws of descent and distribution, by a
qualified domestic relations order, or by other exception to transfer
restrictions under Rule 16b-3. Unless otherwise provided by the Board or Outside
Board, options will expire at the earliest of (1) the end of a specified award
period, which will not exceed ten years, (2) twelve months after an employee or
director's
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termination of employment or service due to retirement, total disability or
death, (3) three months after an employee or director's termination of
employment or service for any other reason, and (4) three months after the
termination of an independent contractor's contract with the Company for any
reason. The vesting schedule will be determined by the Board or Outside Board at
the time of the award and may be accelerated by the Board or Outside Board.
Unless otherwise provided by the Board or Outside Board, options will become
immediately exercisable and fully vested upon the termination of the
participant's employment, service or contract due to retirement, total
disability or death. Options will also become immediately exercisable and fully
vested in the event of certain changes in control of the Company. Options that
have not fully vested will be forfeited upon the termination of the
participant's employment, service or contract for any other reason.
OPTION EXERCISE
Upon the approval of the Plan by the shareholders and subject to
certain limitations on exercise, pursuant to the terms of each participant's
option agreement with the Company, any portion of an option may be exercised
during the option term (subject to the vesting schedule set forth in the option
agreement) by completing, executing and delivering to the Company a notice of
exercise in the form supplied by the Company. Payment to the Company of the
exercise price must be made at the time of exercise by cash, good check, the
delivery of shares of Common Stock already owned by the participant, or as
otherwise provided in the stock option agreement, which may permit payment of
the exercise price by a loan from the Company.
The Board may offer to buy out options previously granted for a payment
in cash or Common Stock, and also may accept the surrender of options in
satisfaction of specified obligations of the participant.
EXPIRATION OF PLAN AND AMENDMENTS
No option may be granted pursuant to the Plan after October 26, 2009.
The Board may at any time amend, suspend or terminate the Plan in whole or in
part, except as follows. First, any amendment, suspension or termination that
(i) materially changes the eligibility requirements; (ii) materially increases
the number of shares of Common Stock available under the plan; or (iii)
materially increases the benefits accruing under the Plan, must be approved by
the Company's shareholders. Second, no amendment, suspension or termination of
the Plan shall adversely affect any option previously granted without the
written consent of the participant.
COMPETITION BY PARTICIPANT
If a participant, within a period of time specified in the option
agreement, engages in certain acts of competition with the Company (I.E., (i)
recruiting, hiring, assisting in the recruiting or hiring, discussing employment
with, or referring to others an employee, or anyone who within the past 12
months was an employee, of the Company or a subsidiary; (ii) competes with the
Company or subsidiary in a business and territory of the Company or a subsidiary
specified in the option agreement; (iii) uses methods, information or systems
developed by the Company or a
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subsidiary in competition with the Company, a subsidiary, or customer of the
Company within such specified business and territory; or (iv) calls upon,
solicits, accepts employment with, sells or endeavors to sell to, within such
specified business and territory, any customer, prospective customer or former
customer of the Company or a subsidiary) then the following shall occur: (a) any
outstanding options will expire and no longer be exercisable, and (b) the
participant will be required to sell to the Company all shares of stock awarded
under the Plan and still held by the participant at the price per share paid by
the participant, and the participant will be required to pay to the Company a
cash amount with respect to each share of stock awarded under the Plan but not
still held by the participant equal to the fair market value of such share on
the first date on which such share is not still held by the participant less the
price paid by the participant for the share.
FEDERAL INCOME TAX CONSEQUENCES
The following is only a summary of the more significant federal income
tax considerations, and does not purport to be a complete description of all
applicable rules regarding the federal income tax treatment of options. In
particular, the summary does not apply to dispositions by participants of Common
Stock other than through sales (such as through gifts), and does not discuss in
detail any potential consequences of alternative minimum tax, state, local and
foreign taxes and the effect of gift, estate and inheritance taxes. For more
detailed information, reference should be made to the Code and the regulations
relating thereto (the "Regulations").
As noted above, options granted under the Plan will be nonqualified
stock options. A participant who receives a nonqualified option which does not
have a readily ascertainable value at the time of grant will recognize no income
for federal income tax purposes upon the grant of such an option. Ordinarily, an
option which is not publicly traded will not be considered to have a readily
ascertainable value on the date of grant.
A participant who receives shares of stock upon exercise of a
nonqualified option will be required to recognize ordinary income equal to the
excess of the fair market value of the shares received over the exercise price.
The taxable year in which this income is reportable, and the date for
determining the value of the shares received, depends on whether the shares
received upon exercise of the option are subject to a substantial risk of
forfeiture (or are transferable free of such risk of forfeiture), as described
below. Generally, only shares received by directors, executive officers or
holders of more than 10% of the Common Stock upon the exercise of a nonqualified
option within six months of the grant of such option will be subject to a
substantial risk of forfeiture as a result of the applicability of Section 16 of
the Securities Exchange Act of 1934.
If the shares received upon exercise of a nonqualified option are not
subject to a substantial risk of forfeiture or are transferable free of any
existing restrictions which would impose a substantial risk of forfeiture, the
participant will recognize ordinary income in the year of exercise. The amount
of income recognized on exercise of the option will be the excess of the fair
market value of the shares as of the date of exercise over the amount paid for
the shares.
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If the shares received upon exercise of a nonqualified option are
subject to restrictions which create a substantial risk of forfeiture, and may
not be transferred to another person free of such restrictions, a participant
will not recognize income solely by reason of such exercise, unless the
participant voluntarily elects under Section 83(b) of the Code to recognize
income as if the stock were not subject to such restrictions. If "restricted"
shares are received on the exercise of a nonqualified option and an election is
not made under Section 83(b) of the Code, a participant will recognize ordinary
income only upon the earlier of (i) the date of lapse of the restrictions which
cause the stock to be considered to be subject to a substantial risk of
forfeiture when received (restrictions on resale pursuant to Section 16 of the
Securities Exchange Act of 1934 would generally lapse six months after the grant
of the option), or (ii) the date on which such stock is sold to a third party.
The amount of ordinary income recognized upon the lapse of restrictions will be
the excess of the value of the shares at the time such restrictions lapse over
the amount paid for the shares upon exercise of the option. In the event of a
sale of shares prior to the lapse of the restrictions causing the risk of
forfeiture, the entire amount of gain on such sale would be treated as ordinary
income to the participant in the year of sale.
If an election under Section 83(b) is made with respect to shares which
are subject to a substantial risk of forfeiture, a participant will recognize
ordinary income in the year of the exercise of the option equal to the excess of
the value of the shares received over the exercise price paid. The value of the
shares will be determined as of the date of exercise and without regard to the
effect of any restrictions other than restrictions which by their terms will
never lapse. An election under Section 83(b) can only be made within 30 days of
the exercise of the option.
Upon the sale of shares acquired upon exercise of a nonqualified
option, a participant would recognize capital gain or loss equal to the
difference between the sales proceeds and his basis in the shares. The basis in
shares acquired under a nonqualified option would be the amount paid for the
shares, plus any amount required to be reported as ordinary income prior to or
as a result of the sale (as described above). If income has been reported by a
participant pursuant to an election under Section 83(b), however, under certain
circumstances the amount of such income may not be included in the basis of the
shares for purposes of computing any loss on the sale. Any capital gain or loss
recognized upon a sale of shares acquired upon exercise of a nonqualified option
would be long or short-term gain or loss depending on the time period elapsed
since the exercise of the option (if the shares purchased were unrestricted or a
Section 83(b) election were made) or the date that income became reportable by
reason of lapse of restrictions. Under current law, the required holding period
to cause a gain to qualify as a long term capital gain is one year.
Ordinary income currently is subject to a federal tax rate ranging from
15 to 39.6 percent. The federal tax rate on most long-term capital gains is 20
percent, subject to certain adjustments. The marginal tax rates for ordinary
income and long-term capital gains may be higher than 39.6 percent and 20
percent, respectively, since under current law, at certain levels of adjusted
gross income, certain itemized deductions may be limited and certain personal
exemptions may be phased out. Federal tax rates on ordinary income and long-term
capital gains may change in the future.
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The Company generally will receive a compensation deduction equal to
the amount reportable as ordinary income by the participant under the rules
described above. This deduction may be subject to certain limitations imposed by
the Code and the Regulations, such as a $1 million annual deductibility cap and
certain capitalization rules. To secure a deduction, the Company will need to
comply with applicable reporting requirements.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has reappointed Grant Thornton LLP as
independent auditors to audit the consolidated financial statements of the
Company and its subsidiaries for fiscal year 2000. This appointment is subject
to ratification by the shareholders. Grant Thornton LLP has served as
independent auditors for the Company since its incorporation in 1995.
Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting, where they will have the opportunity to make a statement, if
they desire to do so, and be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON, L.L.P. AS INDEPENDENT AUDITORS FOR 2000.
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for
action at the meeting other than those listed in the Notice of Meeting and
referred to in this Proxy Statement. The enclosed proxy confers discretionary
authority, however, with respect to the transaction of any other matters that
may properly come before the meeting, and it is the intention of the persons
named in the proxy to vote in accordance with their judgment on any such matter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports and changes in ownership of
such securities with e-Net and with the SEC. The following information is based
solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to the
Company pursuant to Rule 16a-3(e) under the Securties and Exchange Act of 1934,
as amended, and other information provided to the Company, with respect to the
Company's fiscal year ended March 31, 1999, to the best of the Company's
knowledge and information.
Each of Alonzo E. Short, Robert A. Veschi, Donald J. Shoff, Christina
Swisher, William W. Rogers, Jr., Clive Whittenbury, Ph.D. and William L. Hooton
was granted stock options on December 18, 1998, and those grants should have
been reported on Form 4 or Form 5 no later than February 15, 1998. Each of them
filed a Form 4 reporting the grant of his or her options on June 29, 1999.
David W. Wells, while not an officer of e-Net under Delaware law, was
granted sufficient additional authority in an internal reorganization effective
January 1, 1999 that he may be deemed
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to have become an "officer" (as defined in Rule 16a-1 under the Exchange Act) at
that time. (Mr. Wells subsequently left the Company's employ.) He did not file a
Form 3 until June 29, 1999.
Based solely on the most recent information provided to the Company
verbally by Edward Ratkovich, Maj. Gen. USA (ret.): Gen. Ratkovich beneficially
owned significantly more than ten percent of the issued and outstanding shares
of Common Stock for a period during the Company's fiscal year ended March 31,
1999. On or about September 30, 1998 he filed delinquent Forms 3 and 4 covering
his transactions to date in Common Stock and reflecting beneficial ownership at
that time of just over ten percent of the issued and outstanding shares of
Common Stock. Shortly thereafter, Gen. Ratkovich sold enough additional shares
of Common Stock to bring his beneficial ownership below ten percent of the
issued and outstanding shares. He did not file a Form 4 or Form 5 to reflect
that transaction, which remains unreported.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2000 Annual
Meeting and included in the Company's 2000 Notice of Meeting and Proxy Statement
must be received by the Company no later than July 15, 2000. Director-nominees
and shareholder proposals should be directed to the Secretary of the Company at
its principal office located at 12800 Middlebrook Road, Germantown, Maryland
20874. Shareholder proposals must comply with the proxy rules of the Securities
and Exchange Commission in order to be included in the Proxy Statement.
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WITHOUT EXHIBITS,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1999, ARE
AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST IN WRITING DIRECTLY TO
DONALD J. SHOFF, VICE PRESIDENT, FINANCE, CHIEF FINANCIAL OFFICER AND SECRETARY
OF THE COMPANY, AT 12800 MIDDLEBROOK ROAD, GERMANTOWN, MARYLAND 20874.
By order of the Board of Directors.
/s/ Donald J. Shoff
------------------------------------------
DONALD J. SHOFF
VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL
OFFICER AND SECRETARY
November 10, 1999
<PAGE>
E-NET, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert A. Veschi, Donald J. Shoff and
Christina L. Swisher, and each of them, with full power of substitution, the
proxies of the undersigned to vote all shares of common stock, par value $0.01
per share ("Common Stock") of e-Net, Inc. (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of the Company to be
held at the offices of Williams & Connolly, 725 12th St., N.W., Washington, D.C.
20005, on December 10, 1998, at 10:00 A.M. and at any adjournments or
postponements thereof, with the same force and effect as the undersigned might
or could do if personally present thereat:
1. ELECTION OF DIRECTORS.
/ / FOR all nominees listed below
(except as marked to the contrary below)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below
(The Board of Directors recommends a vote FOR.)
A. Short, R. Veschi, W. Rogers, Jr., W. Hooton,
C. Whittenbury, M. Viren, D. Shoff
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL
NOMINEES, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. PROPOSAL TO APPROVE THE E-NET, INC. 1999 STOCK COMPENSATION PLAN, which
provides for the issuance of up to 1,000,000 shares of Common Stock.
(The Board of Directors recommends a vote FOR.)
/ / FOR
/ / AGAINST
/ / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2000. (The Board of Directors
recommends a vote FOR.)
/ / FOR
/ / AGAINST
/ / ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof as to which discretionary authority may be
granted.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. THIS PROXY ALSO CONFERS
DISCRETIONARY AUTHORITY WITH RESPECT TO ANY BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF AS TO WHICH DISCRETIONARY
AUTHORITY MAY BE GRANTED.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
_________________________ DATED: ________________ ____, 1999
Signature
_________________________
Signature if held jointly
Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
person. If a partnership, please sign in full partnership name by authorized
person. If a limited liability company, please sign in full limited liability
company name by manager or other authorized person.
