<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
TELEMATE.NET SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
TELEMATE.NET SOFTWARE, INC.
4250 PERIMETER PARK SOUTH, SUITE 200
ATLANTA, GEORGIA 30341
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2000
To our Shareholders:
The Annual Meeting of Shareholders of Telemate.Net Software, Inc., a
Georgia corporation, will be held at 4200 Perimeter Park South, Suite 103,
Atlanta, Georgia 30341 on May 31, 2000, at 9:00 a.m., for the following
purposes:
1. to elect one person to serve on the Board of Directors for a three
year term;
2. to confirm the appointment of KPMG LLP, independent auditors, as
our auditors for the year ending December 31, 2000;
3. to ratify and approve the Telemate.Net Software, Inc. Employee
Stock Purchase Plan;
4. to ratify and approve the amendment of the Telemate.Net Software,
Inc. 1999 Stock Incentive Plan to increase the number of shares of common
stock reserved for issuance under such plan; and
5. to transact such other business as may properly come before the
meeting.
Our Board of Directors has fixed the close of business on April 13, 2000 as
the record date for determining holders of our common stock entitled to notice
of and to vote at the meeting.
All shareholders are cordially invited to attend.
By Order of the Board of Directors,
/s/ RICHARD L. MAURO
Richard L. Mauro
President and Chief Executive Officer
Atlanta, Georgia
April 28, 2000
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING, KINDLY SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED STAMPED
ENVELOPE. IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES
ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT
THE MEETING, YOU MUST OBTAIN FROM THE RECORD OWNER A PROXY IN YOUR NAME.
<PAGE> 3
TELEMATE.NET SOFTWARE, INC.
4250 PERIMETER PARK SOUTH, SUITE 200, ATLANTA, GEORGIA 30341
------------------------
PROXY STATEMENT
------------------------
MAY 31, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
SHAREHOLDERS MEETING
This Proxy Statement and the enclosed proxy card are furnished on behalf of
the Board of Directors of Telemate.Net Software, Inc., a Georgia corporation,
for use at the Annual Meeting of Shareholders to be held on May 31, 2000 at 9:00
a.m., Atlanta, Georgia time, or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at 4200 Perimeter Park South, Suite 103,
Atlanta, Georgia 30341. We intend to mail this Proxy Statement and the
accompanying proxy card on or about April 28, 2000, to all shareholders entitled
to vote at the Annual Meeting.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of Telemate.Net Software's common stock, par value
$.01 per share, at the close of business on April 13, 2000 will be entitled to
notice of and to vote at the Annual Meeting. At the close of business on April
13, 2000, we had outstanding and entitled to vote 7,709,867 shares of common
stock. Each holder of record of common stock on such date will be entitled to
one vote for each share held on all matters to be voted upon at the Annual
Meeting. Any shareholder who signs and returns a proxy has the power to revoke
it at any time before it is exercised by providing written notice of revocation
to Telemate.Net Software's Secretary or by filing with the Secretary a proxy
bearing a later date. The holders of one-third of the total shares of common
stock outstanding on the record date, whether present at the Annual Meeting in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The shares held by each shareholder who signs
and returns the enclosed proxy will be counted for the purposes of determining
the presence of a quorum at the meeting, whether or not the shareholder abstains
on all or any matter to be acted on at the meeting. Abstentions and broker
non-votes both will be counted toward fulfillment of quorum requirements. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner.
COUNTING OF VOTES
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement. The enclosed proxy card provides a means for a shareholder
to vote upon all of the matters listed in the accompanying Notice of Annual
Meeting and described in the Proxy Statement. The enclosed proxy also provides a
means for a shareholder to vote for the nominee for director listed thereon or
to withhold authority to vote for one such nominee. The Company's Bylaws provide
that directors are elected by a plurality of the votes cast. Plurality means
that more votes must be cast in favor of the election of a director than those
cast against election of such director. Accordingly, the withholding of
authority by a shareholder (including broker non-votes) will
<PAGE> 4
not be counted in computing a plurality and thus will have no effect on the
results of the election of such nominees.
The accompanying proxy also provides a means for a shareholder to vote for,
against or abstain from voting on each of the other matters to be acted upon at
the Annual Meeting. Each proxy will be voted in accordance with the
shareholder's directions. Each of Proposals 2 through 4 described in this Proxy
Statement will be approved by the shareholders if the number of votes cast in
favor of the respective proposal exceed the number of votes cast opposing the
proposal. Abstentions with respect to Proposal 2 will have the same effect as a
vote against this proposal.
PROXIES
When the enclosed proxy is properly signed and returned, the shares which
it represents will be voted at the Annual Meeting in accordance with the
instructions noted thereon. In the absence of such instructions, the shares
represented by a signed proxy will be voted in favor of the nominee for election
to the Board of Directors, and in favor of the approval of Proposals 2 through
4.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of our common stock as of April 13, 2000 by: (a) each person named in
the Summary Compensation Table under the heading "Executive Compensation": (b)
each of our directors and the director nominee; (c) each person known to us to
be a "beneficial owner" of more than 5% of the outstanding shares of our common
stock; and (d) all of our executive officers and directors as a group. Except as
set forth herein, the street address of the named beneficial owner is c/o
Telemate.Net Software, Inc., 4250 Perimeter Park South, Suite 200, Atlanta,
Georgia 30341.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
-------------------------
NUMBER OF
SHARES OF PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK OF CLASS
- ------------------------ ------------ ----------
<S> <C> <C>
David H. Couchman(2)........................................ 1,916,718 24.8%
Melanie Noble-Couchman(3)................................... 1,916,718 24.8
Richard L. Mauro(4)......................................... 790,500 9.4
James A. Kranzusch(5)....................................... 180,000 2.3
Dean D. Rau(6).............................................. 195,000 2.5
L. Mark Newton(7)........................................... 365,000 4.6
Richard J. Post(8).......................................... 60,000 *
Murali Anantharaman(9)...................................... 460,000 6.0
James C. Davis(10).......................................... 85,000 1.1
J. Lawrence Bradner(11)..................................... 10,000 *
Raphael McAbee-Reher(12).................................... 430,000 5.5
LiveOak Equity Partners, L.P(13)............................ 460,000 6.0
Noro-Moseley Partners IV, L.P(14)........................... 450,000 5.8
Noro-Moseley Partners IV-B, L.P(15)......................... 450,000 5.8
All executive officers and directors as a group (11
persons).................................................. 4,037,518 44.2
</TABLE>
- ---------------
* Less than 1% of the outstanding common stock.
(1) For purposes of calculating the percentage beneficially owned, the number
of shares of common stock deemed outstanding includes (a) 7,709,867 shares
outstanding as of April 13, 2000 and (b) shares issuable by us pursuant to
options held by the respective person or group which may be exercised
within 60 days following April 13, 2000. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission that
deem shares to be beneficially owned by any person or group who has or
shares voting and investment power with respect to such shares. Presently
exercisable options are considered to be outstanding and to be beneficially
owned by the person or group holding such options for the purpose of
computing the percentage ownership of such person or group but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person or group.
(2) Includes 144,488 shares held by Melanie Noble-Couchman, Mr. Couchman's
spouse, 528,000 shares held by The Melanie J. Noble-Couchman Family Trust
and 528,000 shares held by The David Hall Couchman Family Trust, with
respect to each of which Mr. Couchman disclaims beneficial ownership. Also
includes 10,000 shares issuable upon the exercise of presently exercisable
options.
(3) Includes 706,230 shares held by David H. Couchman, Ms. Noble-Couchman's
spouse, 10,000 shares issuable upon the exercise of presently exercisable
options held by Mr. Couchman, 528,000 shares held by The Melanie J.
Noble-Couchman Family Trust and 528,000 shares held by The David Hall
Couchman Family Trust, with respect to each of which Ms. Noble-Couchman
disclaims beneficial ownership.
(4) Includes 1,500 shares held by The Andrew Mauro Minors Trust, as to which
Mr. Mauro disclaims beneficial ownership. Also includes 705,955 shares
issuable upon the exercise of presently exercisable options.
(5) Includes 171,444 shares issuable upon the exercise of presently exercisable
options.
3
<PAGE> 6
(6) Includes 193,380 shares issuable upon the exercise of presently exercisable
options.
(7) Includes 282,315 shares issuable upon the exercise of presently exercisable
options.
(8) Includes 60,000 shares issuable upon the exercise of presently exercisable
options.
(9) Includes 450,000 shares held by LiveOak Equity Partners, of which Mr.
Anantharaman is a general partner. Also includes 10,000 shares issuable
upon the exercise of presently exercisable options held by LiveOak Equity
Partners.
(10) Includes 10,000 shares issuable upon the exercise of presently exercisable
options.
(11) Includes 10,000 shares issuable upon the exercise of presently exercisable
options.
(12) Includes 170,445 shares issuable upon the exercise of presently exercisable
options.
(13) Includes 10,000 shares issuable upon the exercise of presently exercisable
options. The mailing address for LiveOak Equity Partners is 2500 North
Winds Parkway, Suite 325, Alpharetta, Georgia 30004.
(14) Includes 75,000 shares held by Noro-Moseley Partners IV-B, an entity
affiliated with Noro-Moseley Partners IV. The mailing address for
Noro-Moseley Partners is 4200 Northside Parkway, NW, Nine North Parkway
Square, Atlanta, Georgia 30327.
(15) Includes 375,000 shares held by Noro-Moseley Partners IV, an entity
affiliated with Noro-Moseley Partners IV-B.
4
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
INTRODUCTION
At the Annual Meeting, one director is to be elected for the term described
below. The Board of Directors is divided into three classes, each of whose
members serve for staggered three-year terms. The Board is currently comprised
of one Class I director (Mr. Davis), two Class II directors (Mr. Mauro and Mr.
Bradner) and two Class III directors (Mr. Couchman and Mr. Anantharaman). At
each annual meeting of shareholders, a class of directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. The terms of the Class I directors, Class II directors and Class III
directors will expire upon the election and qualification of successor directors
at the 2000, 2001 and 2002 annual meeting of shareholders, respectively. There
are no family relationships among any of the directors or director nominees of
the Company.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the nominee named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as the Board of Directors may select. The person nominated for election
has agreed to serve if elected, and management has no reason to believe that the
nominee will be unable to serve.
The Board of Directors recommends a vote FOR the named nominee.
NOMINEE TO SERVE AS A CLASS I DIRECTOR
The name and age, principal occupation or employment, and other data
regarding the nominee, based on information received from the nominee, is set
forth below:
JAMES C. DAVIS, age 47, has served as a director of Telemate.Net Software
since October 1999. Mr. Davis has served as a principal with Buckskull Partners,
an investment and advisory services firm, since March 1999. Mr. Davis previously
served in a number of roles with Harbinger Corporation, an e-commerce company,
including Group Executive -- Business Development from October 1998 until
December 1998, President and Chief Executive Officer from March 1997 until
October 1998, President of Group Operations from January 1995 until March 1997,
President from January 1989 until December 1993, and Senior Vice President of
Harbinger Computer Services, Inc. from May 1984 until December 1988. From
January 1994 until January 1995, Mr. Davis served as a principal with Davis &
Associates, an Atlanta consulting firm. Mr. Davis currently serves on the board
of directors of StoreSearch, an Internet services company. Mr. Davis holds a
bachelor's degree in Engineering from Mississippi State University and an MBA
from the Harvard Business School where he was a Baker Scholar.
CURRENT DIRECTORS
The directors continuing in office as Class II directors, elected to serve
until the 2001 Annual Meeting, are as follows:
RICHARD L. MAURO, age 57, has served as our Chief Executive Officer and
President since December, 1996. He has served as a director of Telemate.Net
Software since June 1999. He was President and Chief Operating Officer from
March 1994, when he joined Telemate.Net Software, until December 1996. Mr. Mauro
has 36 years of general management and sales, marketing, and engineering
management experience. Prior to joining Telemate.Net Software, Mr. Mauro served
as Chief Executive Officer and President of Insight Marketing Partners, Inc., a
marketing and management consulting company he founded that focused on assisting
early-stage software companies, from March 1990 until March 1994. From January
1986 until March 1990, Mr. Mauro was Vice President-Marketing for INFORUM, a
technology center in Atlanta. He began his career with the IBM Corporation in
June 1964 where he held a variety of engineering, sales and product marketing
management positions. During his last eight years at IBM, he focused on PC-
related products, including leading the PC merchandising function for IBM's
retail product centers.
5
<PAGE> 8
Mr. Mauro holds a bachelor's degree in Electronic Engineering from Manhattan
College and a master's degree in Industrial Administration from Union College.
J. LAWRENCE BRADNER, age 49, has served as a director of Telemate.Net
Software since October 1999. Mr. Bradner is Corporate Vice President,
Scientific-Atlanta and President of their new business sector, World Wide
Services. He has served in this role since September 1999. Previously, Mr.
Bradner served as Chairman and Chief Executive Officer of Syntellect, Inc., a
provider of enterprise call center systems and outsourced call center services,
from March 1996 until May 1999. Mr. Bradner also served as President of
Syntellect from March 1998 to May 1999. From 1991 until March 1996, Mr. Bradner
was Chairman and Chief Executive Officer of Pinnacle Investment Associates and
Telecorp Systems, Inc., a wholly owned subsidiary of Pinnacle, a provider of
call center systems and outsourced pay-per-view ordering services for the cable
and satellite television industries. From 1977 until 1990, Mr. Bradner was
employed by Scientific-Atlanta, Inc., a provider of satellite, cable television
and other telecommunications products based in Atlanta, Georgia. Mr. Bradner
holds a bachelor's degree in Industrial and Systems Engineering from the Georgia
Institute of Technology and an MBA from the Harvard Business School.
The directors of the Company continuing in office as Class III directors;
elected to serve until the 2002 Annual Meeting, are as follows:
DAVID H. COUCHMAN, age 54, is our founder and has served as Chairman of our
Board of Directors since our inception in January 1986. Mr. Couchman served as
our Chief Executive Officer from January 1986 until December 1996. Mr. Couchman
has 30 years of computer sales and product management experience. Before
founding Telemate.Net Software, Mr. Couchman held a number of executive systems,
sales and marketing positions in several large corporations and startup
companies, including Burroughs Corporation, a computer products company, (now
Unisys) and On-Line Software International, an applications software company
(acquired by Computer Associates). Mr. Couchman holds a bachelor's degree in
Business Administration and Industrial Relations from the University of
Maryland.
MURALI ANANTHARAMAN, age 43, has served as a director of Telemate.Net
Software since October 1999. Mr. Anantharaman has served as a General Partner
with LiveOak Equity Partners, L.P., a venture capital firm that makes equity
investments in emerging growth companies in the information technology and
healthcare sectors, since he co-founded LiveOak in July 1998. From May 1987 to
June 1998, Mr. Anantharaman was a partner in EGL Holdings, an Atlanta-based
equity investment firm. Previously, Mr. Anantharaman was a Vice President with
CSP International in New York, a management strategy consulting firm focused on
information technology and communications companies. Mr. Anantharaman has served
as a director of Simione Central Holdings, Inc., a developer of healthcare
software, since October 1996. Mr. Anantharaman received a Bachelor's degree in
Engineering from the University of Madras, a Master of Science degree in
Operations Research from Case Western Reserve University and an MBA from the
Harvard Business School.
BOARD OF DIRECTORS MEETINGS, COMMITTEES AND COMPENSATION
During 1999, the Board of Directors held three meetings. All of the
incumbent directors attended at least 75% of the aggregate total number of
meetings of the Board of Directors and meetings of committees of the Board of
Directors on which they served.
Messrs. Mauro and Couchman served as members of the Executive Committee in
1999. The Executive Committee is empowered to exercise all authority of the
Board of Directors, except as limited by the Georgia Business Corporation Code
("GBCC"). Under the GBCC, an Executive Committee may not, among other things,
approve or propose to shareholders actions required to be approved by
shareholders, fill vacancies on the Board of Directors or any of its committees,
amend or repeal the bylaws, or approve a plan of merger not requiring
shareholder approval. Messrs. Bradner and Davis served as members of the
Compensation Committee in 1999. The Compensation Committee is responsible for
reviewing and recommending salaries, bonuses and other compensation for our
officers. The Compensation Committee is also responsible for administering our
stock option plans and for establishing the terms and conditions of all stock
options granted under the plans. Messrs. Bradner, Anantharaman and Davis served
as members of the Audit Committee in 1999. The Audit Committee is responsible
for recommending independent auditors, reviewing with the
6
<PAGE> 9
independent auditors the scope and results of the audit engagement, monitoring
our financial policies and internal control procedures, and reviewing and
monitoring the provisions of non-audit services by our auditors.
We reimburse each of our directors for reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors and any of its
committees. We also compensate directors who are not employed by us in the
amount of $2,500 per fiscal quarter for service on the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 1999, 1998
and 1997, the total compensation paid to or accrued by our Chief Executive
Officer and the four other executive officers with the next highest total annual
salary and bonus that exceeded $100,000 in 1999 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES ALL
-------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- --------------------------- ---- --------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Richard L. Mauro......................... 1999 $180,000 $63,750 75,000 --
Chief Executive Officer and President 1998 180,000 70,200 -- --
1997 148,000 42,203 -- --
James A. Kranzusch(2).................... 1999 162,960 23,065 45,000 --
Senior Vice President -- Sales 1998 96,846 18,644 180,000 --
1997 -- -- -- --
L. Mark Newton........................... 1999 100,000 18,233 -- --
Senior Vice President -- Information 1998 100,000 25,750 -- --
Systems 1997 95,000 18,203 -- --
Dean D. Rau.............................. 1999 95,000 20,922 -- --
Senior Vice President -- Technology 1998 95,000 26,963 -- --
1997 85,000 20,050 -- --
Richard J. Post(3)....................... 1999 92,212 9,320 150,000 --
Former Senior Vice President -- Finance 1998 -- -- -- --
and Operations, Chief Financial 1997 -- -- -- --
Officer, Secretary and Treasurer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation received in the form of perquisites and other personal
benefits has been omitted because such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total
annual salary and bonus for the Named Executive Officer for such year.
(2) Mr. Kranzusch joined the Company in March 1998.
(3) Mr. Post served as the Company's Senior Vice President -- Finance and
Operations, Chief Financial Officer, Secretary and Treasurer from June 1999
until April 2000.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all individual grants of stock options
during the year ended December 31, 1999, to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
NUMBER VALUE AT ASSUMED
OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE OR PRICE APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR (1) DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Mauro.............. 75,000 5.4% $11.50 8/26/09 $1,404,922 $2,237,103
James A. Kranzusch............ 45,000 3.2 11.50 8/26/09 842,953 1,342,262
L. Mark Newton................ -- -- -- -- --
Richard J. Post............... 150,000 10.7 6.67 6/22/09 1,629,709 2,595,039
</TABLE>
- ---------------
(1) All options were granted with exercise prices equal to or in excess of the
fair market value of the common stock on the date of grant as determined by
the Board of Directors.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on the fair market value per share on the date of grant and
assumed rates of stock price appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date.
These assumptions are mandated by the rules of the Securities and Exchange
Commission and are not intended to forecast future appreciation of our stock
price. The potential realizable value computation is net of the applicable
exercise price, but does not take into account federal or state income tax
consequences and other expenses of option exercises or sales of appreciated
stock. Actual gains, if any, are dependent upon the timing of such exercise
and the future performance of our common stock. There can be no assurance
that the rates of appreciation in this table can be achieved. This table
does not take into account any appreciation in the price of our common stock
to date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table summarizes the number of shares and value realized by
each of the Named Executive Officers upon the exercise of options and the value
of the outstanding options held by the Named Executive Officers at December 31,
1999:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Mauro.......... 20,000 $256,650 705,955 75,000 $10,956,422 $356,250
James A. Kranzusch........ 8,556 48,855 171,444 45,000 2,621,379 213,750
L Mark Newton............. -- -- 282,315 -- 4,397,049 --
Dean D. Rau............... -- -- 193,380 -- 2,974,184 --
Richard J. Post........... -- -- 60,000 90,000 574,800 862,200
</TABLE>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually received by
the Named Executive Officers but are calculated based on the difference
between the fair market value on the date of exercise of the options and the
exercise price of the options. The Named Executive Officers will receive
cash only if and when they sell the common stock issued upon exercise of the
options, and the amount of cash received by such individuals is dependent on
the price of our common stock at the time of such sale.
(2) Based on the fair market value of our common stock as of December 31, 1999
of $16.25 per share as reported on the Nasdaq Stock Market, less the
exercise price payable upon exercise of such options, in accordance with SEC
regulations. As of April 13, 1999, the fair market value of our common stock
was $5.00 per share as reported on the Nasdaq Stock Market.
8
<PAGE> 11
EMPLOYMENT AGREEMENTS
Both Messrs. Couchman and Mauro have signed agreements with us restricting
their ability to compete with us or to solicit our customers or employees during
their employment with us and for a period of two years thereafter. Mr. Couchman,
who serves as Chairman of the Board of Directors, was employed by us as a
consultant until June 1999. All of our principal employees, including other
executive officers, are required to sign an agreement with us restricting the
ability of the employee to compete with us or to solicit our customers or
employees during his or her employment and for a period of one year thereafter.
The agreement also provides for our ownership of the work product of the
employee, an assignment to us of intellectual property, and a prohibition from
the disclosure of our trade secrets and confidential information.
STOCK OPTION PLANS
Stock Incentive Plan. Our Stock Incentive Plan became effective on
December 29, 1994. The purpose of the plan is to provide incentives for our key
employees, officers, consultants and directors and to promote our success,
thereby benefiting shareholders and aligning the economic interests of the
participants with those of the shareholders. The plan is administered by the
Compensation Committee of the Board of Directors, which determines eligible
participants, performance goals, measurement criteria, performance ratings and
amount and timing of payments. As of April 13, 2000, options to purchase
2,909,665 shares of our common stock were outstanding under the plan at a
weighted average exercise price of $2.08 per share, and 747,449 shares had been
issued upon exercise of options granted under the plan. No additional options
will be granted under our Stock Incentive Plan. Effective November 22, 1999, the
Board of Directors approved the cancellation of the remaining shares available
for grant under this Plan.
1999 Stock Incentive Plan. Our 1999 Stock Incentive Plan was approved by
our shareholders on June 14, 1999. Effective November 22, 1999, the Board of
Directors approved the amendment to the 1999 Stock Incentive Plan, subject to
shareholder approval, to increase the number of shares of our common stock
reserved for issuance under the plan to 1,187,386 shares. On January 1, 2000,
the number of shares of common stock available for issuance under the 1999 Stock
Incentive Plan was automatically increased 367,998 shares to 1,555,384 shares
pursuant to a provision of the plan that annually adjusts the number of shares
reserved by a number of shares equal to 5% of the total number of shares of our
common stock outstanding on the last day of the preceding fiscal year, unless
the Board of Directors determines to limit or forego this increase. Effective
April 19, 2000, the Board of Directors approved a further amendment to the 1999
Stock Incentive Plan, subject to shareholder approval, to reserve an aggregate
of 2,055,384 shares of common stock for issuance under the plan. The 1999 Stock
Incentive Plan was adopted to provide incentives for key employees, officers,
consultants and directors to promote our success. Awards granted under the 1999
Stock Incentive Plan may be either restricted stock or options intended to
qualify as "incentive stock options" or nonqualified stock options. As of April
13, 2000, 953,500 shares of our common stock were subject to outstanding options
under the 1999 Stock Incentive Plan at a weighted average exercise price of
$10.87 per share, and no shares of our common stock had been issued upon
exercise of options granted under the plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Amended and Restated Articles of Incorporation provide that the
liability of our directors for monetary damages shall be limited to the fullest
extent permissible under Georgia law and that we may indemnify our officers,
employees and agents to the fullest extent permitted under Georgia law.
Our Amended and Restated Bylaws provide that we must indemnify our
directors against all liabilities to the fullest extent permitted under Georgia
law and that we must advance all reasonable expenses incurred in a proceeding
where the director was either a party or a witness because he or she was a
director. In addition, we have entered into indemnification agreements with our
directors and certain of our officers providing indemnification to the fullest
extent permitted by applicable law and also setting forth procedures, including
the advancement of expenses, that apply in the event of a claim for
indemnification.
We currently maintain a directors' and officers' liability insurance policy
in the amount of $5.0 million. Our Articles of Incorporation provide that the
liability of the directors to the shareholders for monetary
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<PAGE> 12
damages shall be limited to the fullest extent permissible under Georgia law.
This limitation of liability does not affect the availability of injunctive
relief or other equitable remedies.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors were the members of the Compensation
Committee of the Board of Directors during 1999: J. Lawrence Bradner and James
C. Davis.
On June 21, 1999, we issued and sold 75,000 shares of common stock to James
C. Davis for an aggregate price of $500,000. We later added Mr. Davis to our
Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than 10%
of the Company's common stock to file reports of ownership and changes in
ownership of such stock with the Securities and Exchange Commission. Such
persons are required by SEC regulations to furnish us with copies of all Section
16(a) forms they file. Based solely on our review of the copies of such forms
furnished to us and written representations from our executive officers,
directors and 10% shareholders, we believe that all applicable Section 16(a)
filing requirements were met during 1999 except that each of Messrs.
Anantharaman, Bradner and Davis filed an initial report after the filing date
set forth in Section 16(a) and Messrs. Mauro and Newton each filed a report of
changes in ownership after the filing date set forth in Section 16(a).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Company's Board of Directors has
furnished the following report on Executive Compensation in accordance with the
rules and regulations of the Securities and Exchange Commission. This report
outlines the duties of the Committee with respect to executive compensation, the
various components of the Company's compensation program for executive officers
and other key employees, and the basis on which the 1999 compensation was
determined for the executive officers of the Company, with particular detail
given to the 1999 compensation for the Company's Chief Executive Officer.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing compensation levels for the executive officers of
the Company, including the annual bonus plan for executive officers and for
administering the Company's stock option plans. The Committee is comprised of
two non-employee directors: Messrs. Bradner and Davis. The Committee's overall
objective is to establish a compensation policy that will (i) attract, retain
and reward executives who contribute to achieving the Company's business
objectives; (ii) motivate executives to obtain these objectives; and (iii) align
the interests of executives with those of the Company's long-term investors. The
Company compensates executive officers with a combination of salary and
incentives designed to focus their efforts on maximizing both the near-term and
long-term financial performance of the Company. In addition, the Company's
compensation program rewards individual performance that furthers Company goals.
The executive compensation program includes the following: (i) base salary; (ii)
incentive bonuses; (iii) long-term equity incentive awards in the form of stock
option grants; and (iv) other benefits. Each executive officer's compensation
package is designed to
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<PAGE> 13
provide an appropriately weighted mix of these elements, which cumulatively
provide a level of compensation roughly equivalent to that paid by companies of
similar size and complexity.
Base Salary. Base Salary levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within a
range of base salaries that the Committee believes are paid to similar executive
officers at companies deemed comparable based on the similarity in revenue
level, industry segment and competitive employment market to the Company. In
addition, the Committee generally takes into account the Company's past
financial performance and future expectations, as well as the performance of the
executives and changes in the executives' responsibilities.
Incentive Bonuses. The Committee recommends the payment of bonuses to
provide an incentive to executive officers to be productive over the course of
each fiscal year. These bonuses are awarded only if the Company achieves or
exceeds certain corporate performance objectives. The incentive bonus to each
executive officer is based on the individual executive's performance as it
relates to the Company's performance.
Equity Incentives. Stock options are used by the Company for payment of
long-term compensation to provide a stock-based incentive to improve the
Company's financial performance and to assist in the recruitment, retention and
motivation of professional, managerial and other personnel. Generally, stock
options are granted to executive officers from time to time based primarily upon
the individual's actual and/or potential contributions to the Company and the
Company's financial performance. Stock options are designed to align the
interests of the Company's executive officers with those of its shareholders by
encouraging executive officers to enhance the value of the Company, the price of
the common stock, and hence, the shareholder's return. In addition, the vesting
of stock options over a period of time is designed to create an incentive for
the individual to remain with the Company. The Company has granted options to
the executives on an ongoing basis to provide continuing incentives to the
executives to meet future performance goals and to remain with the Company.
During the fiscal year ended December 1999, options to purchase an aggregate of
470,000 shares of common stock were granted to the Company's executive officers.
Other Benefits. Benefits offered to the Company's executive officers are
provided to serve as a safety net of protection against the financial
catastrophes that can result from illness, disability, or death. Benefits
offered to the Company's executive officers are substantially the same as those
offered to all of the Company's regular employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee annually reviews the performance and compensation of the
Chief Executive Officer based on the assessment of his past performance and its
expectation of his future contributions to the Company's performance. Richard L.
Mauro has served as our Chief Executive Officer since 1996. In 1999, Mr. Mauro's
base salary was set at $180,000, which the Committee believes was reasonable.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code imposes a limit on tax
deductions for annual compensation (other than performance-based compensation)
in excess of $1,000,000 paid by a corporation to its Chief Executive Officer and
the other four most highly compensated executive officers of a corporation. The
Company has not established a policy with regard to Section 162(m) of the Code,
since the Company has not and does not currently anticipate paying cash
compensation in excess of $1,000,000 per annum to any employee. None of the
compensation paid by the Company in 1999 was subject to the limitations on
deductibility. The Board of Directors will continue to assess the impact of
Section 162(m) on its compensation practices and determine what further action,
if any, is appropriate.
Compensation Committee
J. Lawrence Bradner
James C. Davis
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<PAGE> 14
STOCK PERFORMANCE GRAPH
The following line-graph provides a comparison of the cumulative total
shareholder return on our common stock for the period from the date of our
initial public offering in September 1999 through December 31, 1999, against the
cumulative shareholder return during such period achieved by The Russell 2000
Index and the S&P Computer Software & Services index. The graph assumes that
$100 was invested on September 29, 1999 in our common stock and on September 30,
1999 in each of the comparison indices, and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
S & P COMPUTER SOFTWARE
TELEMATE.NET SOFTWARE, INC. RUSSELL 2000 & SERVICES
--------------------------- ------------ -----------------------
<S> <C> <C> <C>
9/29/99 100.00 100.00 100.00
12/31/99 116.07 101.53 141.24
</TABLE>
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (collectively, the "Acts"), except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
CERTAIN TRANSACTIONS
On June 16, 1999, we issued and sold 150,000 shares of Series A Preferred
Stock in a private placement to LiveOak Equity Partners, L.P. for an aggregate
price of $3.0 million. We later added Murali Anantharaman, a principal of
LiveOak, to our Board of Directors. The shares of Series A Preferred Stock held
by LiveOak automatically converted into 450,000 shares of our common stock
concurrently with our initial public offering. The private placement is
described more fully below.
Also on June 16, 1999, Telemate.Net Software redeemed an aggregate of
600,000 shares of common stock held by David H. Couchman, our Chairman and a
principal shareholder, and his spouse for $4.0 million. The redemption was
funded from our proceeds from the sale of Series A Preferred Stock in a the
private placement. The private placement is described more fully below.
In the past, we have loaned money to our shareholders for such purposes as
providing funds for the exercise of vested stock options in accordance with our
Stock Incentive Plan and reconciling an S corporation distribution error.
However, as of December 31, 1999, all executive officer loans had been repaid in
full.
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<PAGE> 15
Our Board of Directors has adopted a resolution whereby all future
transactions with related parties, including any loans from us to our officers,
directors, principal shareholders or affiliates, must be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors, if required by law, or a
majority of the disinterested shareholders and must be on terms no less
favorable to us than could be obtained from unaffiliated third parties.
S CORPORATION DISTRIBUTION AND TERMINATION OF S CORPORATION STATUS
On June 16, 1999, we terminated our S corporation status for federal and
state income tax purposes. We made distributions of $270,000 to those persons
who were shareholders on the date the S corporation status was terminated,
including an aggregate of $214,000 to our executive officers and directors;
$265,000 of the overall amount reduced existing loans outstanding and $5,000 was
paid in cash. As a result of our S corporation termination, we reclassified
accumulated deficit (limited to the amount of paid in capital) of $296,000 to
additional paid-in capital.
PRIVATE PLACEMENT OF SERIES A PREFERRED STOCK
On June 16, 1999, we completed the private placement of 300,000 shares of
our Series A Preferred Stock to three institutional investors. The private
placement resulted in gross proceeds to us of $6.0 million and net proceeds of
approximately $5.9 million after payment of expenses related to the private
placement. Of these proceeds, $4.0 million was used to redeem 600,000 shares of
common stock held by David Couchman and his spouse. The remaining proceeds were
designated for use to fund working capital. The Series A Preferred Stock
converted into 900,000 shares of common stock concurrently with our initial
public offering.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On April 19, 2000, the Board of Directors appointed the accounting firm of
KPMG LLP to serve as our independent auditors for the fiscal year ending
December 31, 2000. The appointment of this firm was recommended to the Board by
its Audit Committee. A proposal to ratify that appointment will be presented at
the Annual Meeting, and representatives of KPMG LLP are expected to be present
at the meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
shareholders.
The Board of Directors recommends a vote FOR ratification of selection of
independent auditors.
PROPOSAL 3
APPROVAL OF TELEMATE.NET SOFTWARE, INC. EMPLOYEE STOCK PURCHASE PLAN
Effective November 22, 1999, the Board of Directors approved the
Telemate.Net Software, Inc. Employee Stock Purchase Plan, which is intended to
qualify under Section 423 of the Internal Revenue Code. Our Stock Purchase Plan
allows employees to purchase common stock through payroll deductions for 85% of
the fair market value of the common stock. Participation in the Plan is
voluntary. Employees may become participants in the Plan by authorizing payroll
deductions of one to ten percent of their base pay or a set dollar amount for
each purchase period. At the end of each three-month purchase period, each
participant in our Stock Purchase Plan will receive an amount of our common
stock equal to the sum of that participant's payroll deductions during the
calendar quarter multiplied by 85% of the lower of the fair market value of our
common stock at the beginning of the calendar quarter, or the fair market value
of our common stock at the end of the quarter. Participants may sell shares
purchased pursuant to the Plan only in compliance with certain restrictions.
These restrictions include compliance with our insider trading policy and our
right to ensure compliance by preventing the transfer of shares purchased
pursuant to the Plan. No employee may participate in the Plan to the extent that
such employee owns or would own 5% or more of the voting power of all classes of
our stock. The Plan calls for 500,000 shares of our common stock to be reserved
for issuance under the Plan.
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<PAGE> 16
We are permitted under the Plan to purchase shares of our common stock on the
open market for the purpose of reselling the shares to participants in the Stock
Purchase Plan.
The shareholders are being requested to approve the Telemate.Net Software,
Inc. Employee Stock Purchase Plan as approved by the Board of Directors. We
believe that allowing employees to purchase shares of our common stock through
the Plan motivates high levels of performance and provides an effective means of
encouraging employee commitment to our success. We believe that this policy is
of great value in recruiting and retaining new employees, aligning employees'
interests with those of our shareholders and allowing existing employees to
participate in our success. The Board of Directors believes that the ability to
grant participation in the Plan will be important to our future success.
The Board of Directors recommends a vote FOR ratification and approval of
the Telemate.Net Software, Inc. Employee Stock Purchase Plan.
PROPOSAL 4
APPROVAL OF AMENDMENTS OF THE TELEMATE.NET SOFTWARE, INC.
1999 STOCK INCENTIVE PLAN
Effective November 22, 1999, the Board of Directors amended the 1999 Stock
Incentive Plan to increase the number of shares of common stock reserved for
issuance under the plan from 1,000,000 shares to 1,187,386 shares. At the same
time, the Board of Directors cancelled the 187,386 shares that remained
available for grant under the 1994 Stock Incentive Plan. On January 1, 2000, the
number of shares of common stock available for issuance under the 1999 Stock
Incentive Plan automatically increased 367,998 shares to 1,555,384 shares
pursuant to a provision of the plan that annually adjusts the number of shares
reserved under such plan. Effective April 19, 2000, the Board of Directors
further amended the 1999 Stock Incentive Plan to reserve an additional 500,000
shares under the plan, resulting in an aggregate of 2,055,384 shares of common
stock being reserved for issuance under the plan. The features of this plan are
discussed elsewhere in this proxy statement under the caption "Stock Option
Plans."
The shareholders are being requested to approve the amendments approved by
the Board of Directors to the Telemate.Net Software, Inc. 1999 Stock Incentive
Plan to increase the number of shares reserved for issuance thereunder to
2,055,384 shares, of which options to purchase 1,101,884 shares would be
available for future grants under the plan. The amendment to increase the number
of shares reserved under the 1999 Stock Incentive Plan is proposed in order to
give the Board of Directors greater flexibility to grant stock options to
Telemate.Net Software's employees. We believe that granting stock options
motivates high levels of performance and provides an effective means of
recognizing employee contributions to Telemate.Net Software's success. We
believe that this policy is of great value in recruiting and retaining highly
qualified personnel who are in great demand as well as rewarding current
employees. The Board of Directors believes that the ability to grant additional
stock options to our employees will be important to our future success
The Board of Directors recommends a vote FOR ratification and approval of
the amendments of the Telemate.Net Software, Inc. 1999 Stock Incentive Plan.
SHAREHOLDER PROPOSALS
Rules of the Securities and Exchange Commission require that any proposal
by a shareholder of Telemate.Net Software for consideration at the 2001 Annual
Meeting of Shareholders must be received by us no later than December 28, 2000
if any such proposal is to be eligible for inclusion in our proxy materials for
our 2001 Annual Meeting. Under such rules, we are not required to include
shareholder proposals in its proxy materials unless certain other conditions
specified in such rules are met.
In order for a shareholder to bring any business or nominations before the
Annual Meeting of Shareholders, certain conditions set forth in Section 3.8 of
our Bylaws must be complied with, including, but not limited to, delivery of
notice to us not less than 60 days prior to the meeting as originally scheduled.
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<PAGE> 17
OTHER MATTERS
Management is not aware of any other matter to be presented for action at
the Annual Meeting other than those mentioned in the Notice of Annual Meeting of
Shareholders and referred to in this Proxy Statement. However, should any other
matter requiring a vote of the shareholders arise, the representatives named on
the accompanying proxy will vote in accordance with their best judgment as to
the interests of Telemate.Net Software and shareholders.
VOTING OF PROXIES
The Board of Directors recommends an affirmative vote on each of the
proposals specified. Proxies will be voted as specified. If signed proxies are
returned without specifying an affirmative or negative vote on any proposal, the
shares represented by such proxies will be voted in favor of the proposal in
accordance with the Board of Directors' recommendation.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ RICHARD L. MAURO
Richard L. Mauro,
Chief Executive Officer and President
15
<PAGE> 18
Telemate.Net Software, Inc.
4250 Perimeter Park South, Suite 200
Atlanta, Georgia 30341
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard L. Mauro with full power of
substitution, as Proxy, to represent and vote all the shares of common stock of
Telemate.Net Software, Inc. held of record by the undersigned on April 13,
2000, at the annual meeting of stockholders to be held on May 31, 2000 or any
adjournment thereof, as designated on the reverse side hereof and in his
discretion as to other matters.
Please sign exactly as name appears on the reverse side. When shares
are held by joint tenants, both should sign. When signing as attorney, as
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 officer. If a partnership, please sign in partnership name by
authorized person.
(Please date and sign on reverse)
(Continued on reverse side)
<PAGE> 19
The shares represented by this proxy will be voted as directed by the
Stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" nominee in Proposal 1 and "FOR" Proposals 2, 3
and 4.
I PLAN TO ATTEND
MEETING
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" NOMINEE IN PROPOSAL 1 AND "FOR"
PROPOSALS 2, 3 AND 4.
Proposal 1 -- Election of the following Nominee as Director:
<TABLE>
<S> <C>
[ ] FOR Nominee listed [ ] WITHHELD for Nominee
at right listed at right
</TABLE>
NOMINEE: JAMES C. DAVIS
Proposal 2 -- Approval of the Employee Stock Purchase Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3 -- Approval of an amendment to the 1999 Stock Incentive Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4 -- Approval of the appointment of KPMG LLP as independent auditors
of the Company for the fiscal year ending December 31, 2000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE MARK YOUR CHOICE LIKE THIS X IN BLUE OR BLACK INK.
Date
-----------------------------------
Signature
------------------------------
Signature if held jointly
--------------
Please mark, date and sign as your name
appears above and return in the enclosed
envelope
