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DYNAMICWEB ENTERPRISES, INC.
271 Route 46 West, Building F, Suite 209
Fairfield, New Jersey 07004
July 6, 1998
Dear Shareholder:
We are pleased to invite you to the 1998 Annual Meeting of
Shareholders of DynamicWeb Enterprises, Inc. to be held on
Tuesday, July 28, 1998 at 2:30 p.m., at the Ramada Inn, located
at 38 Two Bridges Road, Fairfield, New Jersey 07004.
The Notice of the Annual Meeting and the Proxy Statement on
the following pages address the formal business of the Annual
Meeting, which consists of the election of the Class I directors,
an amendment to the Corporation's 1997 Stock Option Plan to add
100,000 shares to that plan, and the ratification of the
selection of auditors for the year ending September 30, 1998.
Also, at the Annual Meeting, the Corporation's management will
address other corporate matters which may be of interest to you
and will be available to respond to your questions.
The Corporation's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997 is included in this document
immediately following the Information Statement and serves as the
Corporation's annual report to shareholders.
It is requested that you promptly execute the enclosed proxy
and return it in the enclosed postpaid envelope.
Sincerely,
Steven L. Vanechanos, Jr.
Chairman
__________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, JULY 28, 1998
__________________________________
TO THE SHAREHOLDERS OF DYNAMICWEB ENTERPRISES, INC.:
Notice is hereby given that the Annual Meeting of
Shareholders of DYNAMICWEB ENTERPRISES, INC. (the "Corporation")
will be held at 2:30 p.m., on Tuesday, July 28, 1998 at the
Ramada Inn, 38 Two Bridges Road, Fairfield, New Jersey, for the
following purposes:
1. To elect the three members of Class I of the Board
of Directors, to serve until their successors are elected
and qualified;
2. To amend the Corporation's 1997 Employee Stock
Option Plan to increase the number of shares reserved for
issuance thereunder by 100,000 shares.
3. To ratify the selection of Richard A. Eisner &
Company, LLP, New York, New York, Certified Public
Accountants, as the Corporation's independent auditors for
the year ending September 30, 1998; and
4. To transact such other business as may properly
come before the Annual Meeting and any adjournment or
postponement thereof.
In accordance with the By-laws of the Corporation and action
of the Board of Directors, only those shareholders of record at
the close of business on June 29, 1998 will be entitled to notice
of and to vote at the Annual Meeting.
By Order of the Board of Directors,
Steve Vanechanos, Sr.
Secretary
July 6, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. PLEASE PROMPTLY DATE, SIGN, AND RETURN YOUR PROXY IN
THE ENVELOPE WHICH ACCOMPANIES THIS PROXY STATEMENT.
PROXY STATEMENT
= = = = = = = = = = = = = = = = = = = =
Dated and to be Mailed July 6, 1998
= = = = = = = = = = = = = = = = = = = =
DYNAMICWEB ENTERPRISES, INC.
271 ROUTE 46 WEST
BUILDING F, SUITE 209
FAIRFIELD, NEW JERSEY 07004
(973) 244-1000
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 28, 1998
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION........................................... 1
INFORMATION CONCERNING ELECTION OF DIRECTORS.................. 2
EXECUTIVE COMPENSATION AND RELATED MATTERS.................... 9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 13
AMENDMENT TO THE 1997 EMPLOYEE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER.............................. 15
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS................ 20
ANNUAL REPORT................................................. 21
DYNAMICWEB ENTERPRISES, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JULY 28, 1998
GENERAL INFORMATION
Introduction
This Proxy Statement is being furnished in connection with
the Annual Meeting of Shareholders (the "Annual Meeting") of
DynamicWeb Enterprises, Inc. (the "Corporation") to be held on
Tuesday, July 28, 1998 at 2:30 p.m., at the Ramada Inn, 38 Two
Bridges Road, Fairfield, New Jersey, and at any adjournment or
postponement of the Annual Meeting.
The telephone number for the Corporation is (973) 244-1000.
All inquiries should be directed to Steven L. Vanechanos, Jr.,
Chairman of the Board of Directors of the Corporation.
Voting Securities and Record Date
At the close of business on June 29, 1998, the Corporation
had outstanding 2,245,947 shares of Common Stock, $.0001 par
value per share (the "Common Stock"). Only holders of Common
Stock of record at the close of business on June 29, 1998 will be
entitled to notice of and to vote at the Annual Meeting.
Cumulative voting rights do not exist with respect to the
election of directors. On all matters to come before the Annual
Meeting, each share of Common Stock is entitled to one vote and,
accordingly, holders of Common Stock are entitled to cast a total
of 2,245,947 votes at the Annual Meeting.
Quorum and Voting of Shares
Pursuant to Article III, Section 9, of the By-laws of the
Corporation, the presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all
shareholders are entitled to cast shall constitute a quorum.
Abstentions and broker non-votes will not constitute or be
counted as "votes" cast for purposes of the Annual Meeting but
will be used for purposes of determining whether a quorum exists
at the Annual Meeting.
Purpose of Meeting
The shareholders will be asked to consider the following
matters at the meeting: (i) to elect the three Class I
Directors, (ii) to amend the Company's 1997 Employee Stock Option
Plan (the "1997 Employee Plan") to increase the number of shares
reserved for issuance thereunder by 100,000 shares, (iii) to
ratify the selection of Richard A. Eisner & Co., LLP as
independent auditors for the year ended September 30, 1998, and
(iv) to consider and vote upon such other business as may be
properly brought before the meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies, in the accompanying form, by the Board
of Directors of the Corporation for use at the Annual Meeting,
and any adjournments thereof.
The expense of soliciting proxies will be the Corporation.
In addition to the use of the mails, directors, officers and
employees of the Corporation, without additional compensation,
solicit proxies personally or by telephone.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the meeting and to vote in
person. Any proxy given pursuant to this solicitation may be
revoked by delivering written notice of revocation to Steven L.
Vanechanos, Jr., Chief Executive Officer of the Corporation, at
any time before the proxy is voted at the meeting. Unless
revoked, any proxy given pursuant to this solicitation will be
voted at the meeting in accordance with the instructions thereon
of the shareholder giving the proxy. In the absence of
instructions, all proxies will be voted FOR the election of the
three nominees identified in this Proxy Statement, FOR the
Amendment to the Corporation's 1997 Employee Plan, and FOR the
ratification of Richard A. Eisner & Co., LLP, as independent
auditors for the year ended September 30, 1998. Although the
Board of Directors knows of no other business to be presented, in
the event that any other matters are brought before the meeting,
any proxy given pursuant to this solicitation will be voted in
accordance with the recommendations of the management of the
Corporation.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote
FOR the election of the three nominees identified in this Proxy
Statement, FOR the Amendment to the Company's 1997 Employee Plan,
FOR the ratification of Richard A. Eisner & Co., LLP, as
independent auditors for the year ended September 30, 1998
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Certificate of Incorporation of the Corporation provides
that the Board of Directors shall consist of not less than five
nor more than 25 persons, as fixed by the Board of Directors from
time to time. The directors shall be divided into three classes:
Class I, Class II, and Class III. Each Class shall consist as
nearly as possible of one-third of the number of the whole Board
of Directors. The Bylaws further provide that the directors of
each class shall be elected for a term of three years, except
that the Class I Directors who were elected in 1997 have an
initial term expiring in 1998 and the Class II Directors who also
were elected in 1997 have an initial term expiring in 1999.
At each annual meeting the successors to the class of
directors whose term shall expire that year shall be elected to
hold office for a term of three years, so that the term of office
of one class of directors shall expire in each year. Unless
waived by the Board of Directors, in order to qualify for
election as a director of the Corporation, a person must have
been a shareholder of record of the Corporation for a period of
time equal to the lesser of three years, or the time elapsed
since March 26, 1996.
A majority of the Board of Directors may increase the number
of directors between meetings of the shareholders. Any vacancy
occurring in the Board of Directors, whether due to an increase
in the number of directors, resignation, retirement, death or any
other reason, may be filled by appointment by the remaining
directors. Any director who is appointed to fill a vacancy shall
hold office for the unexpired term in respect of which the
vacancy occurred.
The Board of Directors has fixed the number of directors at
seven. Of these seven directors, there are three directors whose
terms of office will expire at the 1998 Annual Meeting and four
continuing directors whose terms of office will expire at the
1999 or 2000 Annual Meeting, respectively. The Board of
Directors does not have a standing nominating committee to
nominate candidates for the Board of Directors. Rather, the
Board of Directors performs such function. The Board of
Directors unanimously nominated the following persons for
election as directors at the 1998 Annual Meeting for the term
specified below. Each of such persons is currently serving as a
director of the Corporation.
Class I
For a Term of
Three Years
F. Patrick Ahearn, Jr.
Denis Clark
Frank T. DiPalma
In the event that any of the foregoing nominees is unable to
accept nomination or election, any proxy given pursuant to this
solicitation will be voted in favor of such other persons as the
management of the Corporation may recommend. However, the Board
of Directors has no reason to believe that any of its nominees
will be unable to accept nomination or to serve as a director, if
elected.
Information About the Beneficial Ownership of the Company's
Securities By Nominees, Continuing Directors and Executive
Officers and Certain Others
Information concerning the three persons to be nominated for
election to the Board of Directors of the Corporation at the 1998
Annual Meeting and concerning the four continuing directors is
set forth below. The following table also includes information
concerning shares of the Common Stock owned beneficially by
executive officers who are named in the Summary Compensation
Table appearing elsewhere herein, by all directors and executive
officers as a group, and by each person who owns of record or is
known by the Board of Directors to be the owner of more than five
percent (5%) of the Corporation's Common Stock.
Unless otherwise indicated in a footnote, each of the following
persons holds sole voting and investment power over the shares
listed as beneficially owned.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership (1)(2) Class (3)
Steven L. Vanechanos, Jr. 276,203 12.29%
92 Clarken Drive
West Orange, New Jersey 07052
Steve Vanechanos, Sr.(4) 273,288 12.16%
96 Union Avenue
Rutherford, New Jersey 07070
Kenneth R. Konikowski(5) 134,598 5.99%
36 Pinebrook Road
Towco, New Jersey 07082
James D. Conners 45,648 2.02%
5506 Carnoustie Court
Dublin, Ohio 43017
F. Patrick Ahearn, Jr. 6,067(7) 0.27%
107 Maple Street
Rutherford, New Jersey 07070
Frank T. DiPalma 10,697(7)(8) 0.47%
179 Claremont Road
Ridgewood, New Jersey 07450
Robert Droste 6,067(7) 0.27%
24 Summit Road
Clifton, New Jersey 07012
Denis Clark 3,912(7) 0.17%
8417 Greenside Drive
Dublin, Ohio 43017
All directors and executive 756,480 33.45%
officers as a group (8 in
number)
____________________
(1) The securities "beneficially owned" by an individual are
determined in accordance with the definitions of "beneficial
ownership" set forth in the General Rules and Regulations of
the Securities and Exchange Commission ("SEC") and may
include securities owned by or for the individual's spouse
and minor children and any other relative who has the same
home, as well as securities to which the individual has or
shares voting or investment power or has the right to
acquire beneficial ownership within sixty (60) days after
July 6, 1998. Beneficial ownership may be disclaimed as to
certain of the securities.
(2) Information furnished by the directors and executive
officers of the Company.
(3) Percentages based upon a total of (a) 2,245,947 shares
outstanding on June 29, 1998, plus (b) an additional 15,648
shares issuable within 60 days of that date to the named
outside directors under the 1997 Director Plan.
(4) All of such shares re held jointly by Mr. Vanechanos, Sr.
and his wife.
(5) Does not include additional shares of Common Stock that may
be issuable in connection with the prior acquisition of
Software Associates. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS -- Acquisition of Software Associates and
Megascore."
(6) Mr. Conners has been granted options to purchase 104,338
shares on September 11, 1997 under the 1997 Employee Plan,
of which 45,648 can be acquired within 60 days of the record
date for this 1998 Annual Meeting.
(7) Includes options to purchase 3,912 shares granted in 1997
under the 1997 Director Plan. Does not include 3,912
additional shares that will be granted automatically at the
time of the 1998 Annual Meeting under the 1997 Director
Plan.
(8) All of such shares are held jointly by Mr. DiPalma and his
spouse.
Information About Nominees, Continuing Directors and Executive
Officers.
The following table contains certain information with
respect to the nominees for the Board of Directors, the other
directors, and the executive officers of the Corporation.
Name Age Position
Steven L. Vanechanos, Jr.(1) 44 Chairman of the Board and
Chief Executive Officer
James D. Conners 59 President and Chief Operating
Officer
Steve Vanechanos, Sr.(1) 68 Director, Vice President, Treasurer
and Secretary
Kenneth R. Konikowski 51 Director and Executive Vice
President
F. Patrick Ahearn, Jr.(2) 50 Director
Denis Clark 54 Director
Frank DiPalma(3) 53 Director
Robert Droste(2)(3) 45 Director
__________________
(1) Steve Vanechanos, Sr. is the father of Steven L.
Vanechanos, Jr.
(2) Member of the Audit Committee of the Board of Directors.
The Audit Committee recommends an outside auditor for the
year and reviews the financial statements and progress of
the Corporation. This Committee was formed in 1997.
(3) Member of the Compensation Committee. The Compensation
Committee meets on an as-needed basis between meetings of
the Board of Directors to discuss compensation related
matters. This Committee was formed in 1997.
Steven L. Vanechanos, Jr. became President and Chairman of
the Board of Directors of the Corporation on March 26, 1996. He
has been President of DynamicWeb Transaction Systems, Inc.
("DWTS"), a wholly-owned subsidiary of the Corporation, since its
incorporation in October 1995. He also was a co-founder of
Megascore, Inc. ("Megascore"), a wholly-owned subsidiary of the
Corporation, in 1981 and has served as its President since April
1985. He has a Bachelor of Science Degree in Finance and
Economics from Fairleigh Dickinson University, Rutherford Campus.
James D. Conners became President and Chief Operating
Officer of the Company on August 26, 1997. Prior to joining the
Company, Mr. Conners served as the Vice President of Strategic
Planning of Sterling Commerce in 1996 and the Vice President of
its Internet Business Unit in 1997. Prior to joining Sterling
Commerce, Mr. Conners spent 15 years at General Electric
Information Services (GEIS) in various sales and marketing
positions, most recently as the General Manager in charge of the
Ameritech Alliance. Mr. Conners graduated from the University of
Detroit with a BS degree in Mathematics with a minor in Physics.
Steve Vanechanos, Sr. became Vice President, Secretary,
Treasurer and a director of the Corporation on March 26, 1996.
He was a co-founder of Megascore in 1981 and DWTS in 1995. He
has served as a Vice President of Megascore since April 1985 and
of DWTS since October 1995. He attended Newark College of
Engineering in Newark for two years. He continued his education
with certifications from PSI Programming Institute in New York
City and with courses in principles of accounting at ABA
Institute, Hudson County Chapter.
Kenneth R. Konikowski became the Executive Vice President
and a director of the Corporation on December 1, 1996. Prior to
that date, Mr. Konikowski was President of Software Associates,
which he founded in 1985. Software Associates, Inc. is a
subsidiary of the Company.
F. Patrick Ahearn, Jr. became a director of the Corporation
on March 26, 1996. Mr. Ahearn has served as a director of
Megascore since 1985 and of DWTS since February 1996. Since
1993, Mr. Ahearn has served as the Chairman of the Board of
E.C.M. Group, Inc., White Plains, New York. From 1992 to 1995,
Mr. Ahearn served as Managing Director for Continental Bank and
the President of 22 of its subsidiaries. He is also a Colonel in
the United States Marine Corps. Mr. Ahearn has a Bachelor of
Arts Degree from the College of Holy Cross.
Denis Clark has served as Vice President of Sterling
Commerce, Inc. from 1993 to 1996 and was employed by
IBM Corporation as a Director of Consulting from 1991 to 1992 and
as a Director of Software Marketing from 1989 to 1991. Mr. Clark
is currently employed by Candle Corp. as Vice President of
Application Management.
Frank T. DiPalma became a director of the Corporation on
March 26, 1996. Since January 1997, Mr. DiPalma has been
employed as Vice President of Operations and Engineering for
Energy Corporation of America, Mountaineer Gas Division. Prior
to that time, and during the past five years, he held various
management positions for Public Service Electric and Gas, a
public utility located in Newark, New Jersey. In 1995 and 1996,
he was the owner of Palmer Associates, a management consulting
company. Mr. DiPalma graduated from New Jersey Institute of
Technology with a Bachelor of Science in Mechanical Engineering;
Fairleigh Dickinson University with a Masters in Business
Administration; and the University of Michigan's Executive
Development Program.
Robert Droste became a director of the Corporation on
March 26, 1996. Mr. Droste has served as a director of Megascore
since 1985 and of DWTS since February 1996. During the past five
years, Mr. Droste has been the Director of Administration and
Manager of Internal Audit for Russ Berrie & Co., Inc., Oakland,
New Jersey. He has a Bachelor of Science Degree in Accounting
from Fairleigh Dickinson University, Rutherford, New Jersey.
Board and Committee Meetings
During the year ended September 30, 1997, the Corporation's
Board of Directors held four board meetings. Actions by the
Board of Directors other than at such meetings were taken by
unanimous written consent.
The Board of Directors has a standing Compensation
Committee, which is composed of Frank DiPalma and Robert Droste.
The Compensation Committee administers the Corporation's stock
option plans and is responsible for establishing the compensation
of the Corporation's executive officers. The Compensation
Committee met two times in the fiscal year ended September 30,
1997, including actions taken by unanimous written consent.
The Board of Directors has a standing Audit Committee, which
is composed of F. Patrick Ahearn, Jr. and Robert Droste. The
Audit Committee recommends an outside auditor for the year and
reviews the financial statements and progress of the Corporation.
The Audit Committee did not meet during the fiscal year ended
September 30, 1997.
The Board of Directors does not have a standing nominating
committee.
All directors attended 75% or more of the aggregate number
of meetings of the Board of Directors and of the various
committees of the Board of Directors on which they served.
Directors' Compensation
The non-employee directors and the employee directors do not
receive a fee for attending meetings or other fees or retainers
for serving on the board.
The non-employee directors are eligible to receive shares of
the Corporation's common stock under the 1997 Stock Option Plan
for Outside Directors (the "1997 Director Plan"). Each
person who is a director of the Company and who is not, as of the
grant date, an employee of the Company is entitled to participate
in the 1997 Director Plan. On September 30, 1997, the four non-
employee directors (Messrs. Ahearn, Clark, DiPalma and Droste)
were each granted an option to purchase 3,912 shares of the
Corporation's common stock. Further, on the date of each
succeeding annual meeting of shareholders at which directors are
elected, each non-employee director will automatically be granted
an option to purchase 3,912 shares of the common stock. Future
directors elected by the Board to fill a vacancy will also
receive such a grant on the date of such initial election as a
director.
In addition to the automatic grants described above, the
1997 Director Plan further authorizes the Compensation Committee
to grant non-qualified stock options for the purchase of an
aggregate amount up to 78,254 shares of the Common Stock. Any
shares as to which an option expires, lapses unexercised, or is
terminated or canceled may be subject to a new option. To date
there have been no such grants.
Compliance With Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's officers and directors and persons who
own more than ten percent of a registered class of the
Corporation's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Corporation with copies
of all Section 16(a) forms they file. The rules of the SEC
regarding the filing of such statements require that "late
filings" of such statement be disclosed in this Information
Statement.
Based solely on review of the copies of such forms furnished
to the Corporation, the Corporation believes that, during the
fiscal year ended September 30, 1997, its officers, directors,
and greater than ten-percent beneficial owners complied with
applicable Section 16(a) filing requirements, except that
(i) F. Patrick Ahearn, Jr., Frank DiPalma, Robert Droste and
Denis Clark each inadvertently failed to file a Form 5 to report
stock options for 3,912 of common stock received under the 1997
Director Plan; (ii) Steven Vanechanos, Jr. and Steve Vanechanos,
Sr. each inadvertently failed to file a Form 5 to report their
contribution of 33,330 shares of Common Stock of the Corporation
in connection with a financing transaction of the Corporation in
August 1997; and (iii) James Connors inadvertently failed to file
a Form 3 when he became an officer of the Corporation, and a
Form 5 to report stock options for 104,388 of common stock he
received from the Corporation.
EXECUTIVE COMPENSATION AND RELATED MATTERS
Summary Compensation Table
There were no executive officers of the Corporation or any
of its subsidiaries whose salary and bonus exceeded $100,000 for
the fiscal year ended September 30, 1997. The following table
sets forth the compensation paid to Steven L. Vanechanos, Jr.,
the Corporation's Chief Executive Officer during all of fiscal
1997. (Mr. Vanechanos, Jr. also served as President from
March 26, 1996 to August 26, 1997, when he continued in the role
of Chief Executive Officer, and James Conners became President.)
Jonathan B. Lassers served as the Company's President and Chief
Executive Officer from May 1995 until March 26, 1996.
Summary Compensation Table
Name and All Other
Principal Position Year Salary Compensation
Steven L. Vanechanos, Jr. 1997 $ 61,980 $ 4,750(1)
Chief Executive Officer 1996(2) $ 58,762(3) $11,400(4)
Kenneth R. Konikowski 1997 $101,700 $ 5,265(5)
Executive Vice President 1996 $108,000(6) $10,800(7)
Jonathan B. Lassers 1996(8) $ 0(9) $ 0(9)
Former President and
Chief Executive Officer
_______________
(1) Consists of lease payments totalling $4,750 made by the
Corporation for an automobile used by Mr. Vanechanos, Jr.
(2) Mr. Vanechanos, Jr. commenced his employment with the
Corporation on March 26, 1996, the date upon which Seahawk
Oil International, Inc. acquired DynamicWeb Transaction
Systems, Inc. and changed its name to DynamicWeb
Enterprises, Inc. Prior to such time, he had been President
of DynamicWeb Transaction Systems, Inc.
(3) This amount includes salary paid by Megascore during the
year ended September 30, 1996. Megascore was acquired by
the Corporation on September 30, 1996.
(4) Consists of (a) lease payments totaling $4,300 made by the
Corporation for an automobile used by Mr. Vanechanos, Jr.,
and (b) travel and entertainment expenses of approximately
$7,100 paid by the Corporation. Mr. Vanechanos, Jr. did not
receive any long-term compensation.
(5) Consists of lease payments made by the Corporation for an
automobile used by Mr. Konikowski.
(6) Mr. Konikowski commenced his employment with the Company on
November 30, 1996, the date upon which the Company acquired
Software Associates, Inc. Prior to that time, he had been
President of Software Associates, Inc. This amount consists
of salary paid during the year ended September 30, 1996, by
Software Associates, Inc.
(7) Consists of (a) lease payments of $7,200 made by Software
Associates, Inc. for an automobile used by Mr. Konikowski,
and (b) reimbursement of $3,600 of automobile insurance
premiums for coverage of that automobile.
(8) Mr. Lassers terminated his employment with the Corporation
on March 26, 1996, the date upon which Seahawk Oil
International, Inc. acquired DynamicWeb Transaction Systems,
Inc. and changed its name to DynamicWeb Enterprises, Inc.
(9) Based upon present management's review of documents and
financial statements filed with the Securities and Exchange
Commission relating to that period.
Stock Options
None of the executive officers of the Corporation or any of
its subsidiaries named in the Summary Compensation Table above
received or exercised stock options, stock appreciation rights or
other stock awards from the Corporation during the two fiscal
years ended September 30, 1997. On June 12, 1997, the
shareholders of the Corporation approved the 1997 Employee Stock
Option Plan and the 1997 Stock Option Plan for Outside Directors.
Employment Agreements
On December 1, 1996, Kenneth R. Konikowski, Executive Vice
President of the Corporation, entered into an Employment
Agreement with the Corporation (the "Konikowski Agreement").
Under the terms of the Konikowski Agreement, Mr. Konikowski
serves as Executive Vice President and a member of the
Corporation's Board of Directors and is entitled to an annual
salary of $135,600. The Konikowski Agreement provides that this
amount may be increased based on annual performance reviews
pursuant to the Corporation's policies and practices.
Mr. Konikowski is also eligible to be paid an annual bonus based
on the Corporation's to-be-established incentive bonus plan.
Mr. Konikowski also receives certain employee benefits, including
$500,000 of life insurance, disability and health insurance,
vacation days, and use of an automobile. He is also eligible to
participate in the Corporation's 1997 Employee Stock Option Plan.
The Konikowski Agreement provides that if Mr. Konikowski's
employment is terminated by the Corporation other than for
"Cause," "Disability" or "Material Breach," each as defined
therein, or if he terminates his employment for "Good Reason," as
defined therein. Mr. Konikowski is entitled to a lump sum amount
equal to the commuted value of his base salary in effect or
authorized at the time of termination for the period remaining
until November 30, 2001 (determined by discounting all payments
at a rate equal to the bond equivalent yield of the latest two-
year Treasury Bill auction). The Corporation is also required to
maintain in full force and effect certain of Mr. Konikowski's
employee benefits.
On August 26, 1997, the Corporation hired James D. Connors
as President, and the Corporation and Mr. Connors entered into an
Employment Agreement (the "Connors Agreement"). The Connors
Agreement provides that he shall serve as president of the
Corporation for a term of 3 years, with automatic renewal unless
either party gives timely notice of its intent not to renew. The
Connors Agreement provides for a base salary of $160,000, and
obligates the Corporation to grant options to purchase 104,338
shares of the Corporation's Common Stock during his employment
period for a price of $3.83 per share, 45,648 of such shares to
vest at August 25, 1998, 32,606 to vest at August 25, 1999, and
the remaining 26,084 to vest at August 25, 2000. On
September 11, 1997, Mr. Connors was granted 104,338 options under
the 1997 Employee Plan. Further, Mr. Connors is entitled to a
$1,000 per month housing allowance and a $500 per month leased
automobile allowance. He is eligible to participate in the 1997
Employee Plan and the Corporation's other employee benefit plans
as may be implemented from time to time.
The Connors Agreement provides that if Mr. Connors'
employment is terminated other than for "Cause" as defined
therein, Mr. Connors is entitled to receive his base salary,
incentive compensation and options for the balance of his
employment period.
On March 1, 1998, Steven L. Vanechanos, Jr., Chief Executive
Officer, Chairman and Director of the Corporation, entered into
an Employment Agreement with the Corporation (the "Vanechanos
Agreement"). Under the terms of the Vanechanos Agreement,
Mr. Vanechanos serves as Chief Executive Officer and Chairman of
the Board and is entitled to an annual salary of $108,000 through
February 1999, $120,000 through February 2000 or such larger sum
as the Corporation may from time to time determine in connection
with annual performance reviews, as well as annual bonus
payments. Mr. Vanechanos also receives certain employee
benefits, including $500,000 of life insurance, disability and
health insurance, vacation days, and use of an automobile. He is
also eligible to participate in the Corporation's 1997 Employee
Stock Option Plan.
The Vanechanos Agreement provides that if Mr. Vanechanos's
employment is terminated by the Corporation other than for
"Cause," "Disability" or "Material Breach," each as defined
therein, or if he terminates his employment for "Good Reason," as
defined therein, Mr. Vanechanos is entitled to a lump sum amount
equal to the commuted value of this base salary in effect or
authorized at the time of termination for the balance of his
employment period.
On March 1, 1998, Steve Vanechanos, Sr., Vice President and
Treasurer of the Corporation, entered into an Employment
Agreement with the Corporation (the "Vanechanos Sr. Agreement").
Under the terms of the Vanechanos Sr. Agreement, Mr. Vanechanos
serves as Vice President, Secretary and Treasurer of the
Corporation, and a member of the Board, and is entitled to an
annual salary of $66,000 through February 1999, $72,000 through
February 2000 or such larger sum as the Corporation may from time
to time determine in connection with annual performance reviews,
as well as annual bonus payments. Mr. Vanechanos also receives
certain employee benefits, including $50,000 of life insurance,
disability and health insurance, vacation days, and use of an
automobile. He is also eligible to participate in the
Corporation's 1997 Employee Stock Option Plan.
The Vanechanos Sr. Agreement provides that if
Mr. Vanechanos's employment is terminated by the Corporation
other than for "Cause," "Disability" or "Material Breach," each
as defined therein, or if he terminates his employment for "Good
Reason," as defined therein. Mr. Vanechanos is entitled to a
lump sum amount equal to the commuted value of this base salary
in effect or authorized at the time of termination for the
balance of his employment period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition of Software Associates and Megascore
On November 30, 1996, pursuant to the Stock Purchase
Agreement dated such date among the Corporation, Software
Associates and Kenneth R. Konikowski, the sole shareholder of
Software Associates (the "SA Agreement"), the Corporation
exchanged 224,330 shares of the Common Stock for all of the
issued and outstanding capital stock of Software Associates.
Software Associates is presently a wholly-owned subsidiary of the
Corporation.
Pursuant to the SA Agreement, Kenneth R. Konikowski was
named Executive Vice President and a director of the Corporation,
and the Employment Agreement was executed. The Corporation is
obligated to issue to Mr. Konikowski up to 178,420 additional
shares of its Common Stock in the event the average closing bid
price of the Common Stock does not equal $21.565 per share for
the five trading days immediately prior to January 30, 2000. If
any such additional shares are issued, the ownership interest of
the other holders of Common Stock will be diluted in favor of
Mr. Konikowski. On a pro forma basis assuming all of such shares
were issued to Mr. Konikowski on June 29, 1998, Mr. Konikowski
would own approximately 12.9% of the outstanding Common Stock,
and Steven L. Vanechanos, Jr. and Steve Vanechanos, Sr. would own
approximately 11.4% and 11.3% of the outstanding Common Stock,
respectively.
On September 30, 1996, pursuant to the Stock Purchase
Agreement dated such date among the Corporation, Megascore and
its shareholders, the Corporation acquired all of the issued and
outstanding capital stock of Megascore in exchange for 13,042
shares of Common Stock. Prior to such acquisition, Steve L.
Vanechanos, Jr. and Steve Vanechanos, Sr. were the President and
Vice President, Treasurer and Secretary, respectively, and
collectively owned of record approximately 86% of the outstanding
capital stock, of Megascore. Megascore is presently a
wholly-owned subsidiary of the Corporation.
Significant Shareholder
As of July 9, 1998, Michael Vanechanos is the beneficial
owner of approximately 102,133 shares of Common Stock
representing approximately 4.71% of the issued and outstanding
shares of Common Stock. He received 85,448 of those shares from
the Corporation in March, 1996 in exchange for shares he owned in
DWTS, as part of the Company's acquisition of DWTS, and received
71,734 of those shares as a finder's fee from Berkshire Financial
Corp. in connection with the Company's acquisition of DWTS. He
purchased 13,042 of those shares in an open market transaction on
April 30, 1997. Michael Vanechanos is the brother of Steven L.
Vanechanos, Jr., the Company's Chairman of the Board and Chief
Financial Officer, and is the son of Steve Vanechanos, Sr., the
Company's Vice President, Treasurer, Secretary and a director.
Each of the foregoing individuals disclaims beneficial ownership
of the shares of Common Stock owned by the others.
Office Lease
The Company leases a portion of its office facility from the
Mask Group, a partnership in which Kenneth R. Konikowski, the
Executive Vice President of the Company and a director, and his
wife are partners. The annual rent for the year ended
September 30, 1997 under such lease is approximately $42,000,
subject to fixed annual increases of 3%, plus the payment of
condominium maintenance fees. The lease expires on December 31,
2002. The Company believes that the rent charged by the Mask
Group approximates fair market rents in the area and is no less
favorable to the Company than would have been obtained from an
unaffiliated third party for similar office space. The Company
is jointly obligated with the Mask Group on approximately
$246,000 of indebtedness (as of September 1, 1997) to a third
party lender to the Mask Group relating to a mortgage loan on
those premises. The Mask Group is making the payments on that
loan, and has informed the Company that the loan is current.
Officer Loans
Steven L. Vanechanos, Jr. has loaned $102,675 to the
Corporation, $23,000 of which was advanced on July 11, 1997,
$35,000 of which was advanced on July 28, 1997, $875 of which was
advanced on August 1, 1997, $16,000 of which was advanced on
August 11, 1997, $2,800 of which was advanced on September 26,
1997, and $25,000 of which was advanced on December 9, 1997.
Steve Vanechanos, Sr. has loaned $40,000 to the Corporation,
$7,000 of which was advanced on July 23, 1997, $30,000 of which
was advanced on July 28, 1997, and $3,000 of which was advanced
on August 20, 1997. These loans bear interest at 8% per annum.
In March of 1998, all such loans were repaid in full.
AMENDMENT TO THE 1997 EMPLOYEE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER
General
The Corporation's 1997 Employee Stock Option Plan (the "1997
Employee Plan") was adopted by the Board of Directors and was
approved by the stockholders in June, 1997. At the time of
approval, a total of 234,764 shares of Common Stock were
initially reserved for issuance thereunder.
As of the Record Date, no shares have been issued pursuant
to the exercise of options granted under the 1997 Employee Plan,
but options to purchase 233,976 shares were outstanding, leaving
only 788 of the 234,764 shares available for future grants under
the 1997 Employee Plan (without giving effect to this proposed
amendment).
Proposed Amendment to Increase Shares Reserved
Stockholder approval is hereby being sought for an amendment
approved by the Board of Directors which increases the number of
shares of Common Stock reserved for issuance under the 1997
Employee Plan by 100,000 shares. The total number of shares of
Common Stock reserved for issuance under the 1997 Employee Plan
is 234,764. If the proposed amendment is approved, the total
number of shares of Common Stock reserved for issuance under the
1997 Employee Plan will be 334,764.
Required Vote
The affirmative vote of a majority of the votes cast will be
required to approve the proposed amendment to the 1997 Employee
Plan.
Summary of the 1997 Employee Plan
The essential features of the 1997 Employee Plan are
outlined below.
Purpose. The 1997 Employee Plan is designed to improve the
performance of the Corporation by encouraging ownership of the
Corporation by those who play significant roles in the
Corporation's success and by more closely aligning the interests
of the Corporation's employees with those of its shareholders by
relating capital accumulation to increases in shareholder value.
Moreover, the 1997 Employee Plan is designed to have a positive
effect on the Corporation's ability to attract, motivate and
retain employees having outstanding leadership and management
ability.
Description. The 1997 Employee Plan authorizes the
Compensation Committee (the "Committee") of the Board of
Directors to grant options for the purchase of up to
234,764 shares of the Common Stock. Any shares as to which an
option expires, lapses unexercised, or is terminated or canceled
may be subject to a new option.
Under the 1997 Employee Plan, both "Incentive Stock Options"
(as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")), which qualify for certain tax benefits,
and options which do not qualify for such tax benefits
("Nonqualified Stock Options") may be granted to eligible
employees of the Corporation and its subsidiaries. All current
employees of the Corporation are eligible to participate in the
1997 Employee Plan. As of the Record Date, there were
approximately 37 such employees.
The Committee has the authority to grant options to
employees under the 1997 Employee Plan, based upon the
recommendation of the Corporation's Chief Executive Officer and
subject to the approval of a majority of the disinterested
members of the Board. Option grants to employees are anticipated
to be made annually. Eligible employees generally include all
key employees of the Corporation and its subsidiaries. This
would include the executive officers listed in the Summary
Compensation Table in this Proxy Statement.
The 1997 Employee Plan authorizes the Committee to
administer and interpret the 1997 Employee Plan. The Committee
is composed of at least two members of the Board, who serve at
the discretion of the Board and are each required to be "outside
directors" within the meaning of Code Section 162(m).
The exercise price for Incentive Stock Options granted under
the 1997 Employee Plan will be equal to at least the fair market
value of the stock underlying the option on the date the option
is granted. However, the exercise price for Nonqualified Stock
Options granted under the 1997 Employee Plan will be such dollar
amount as may be specified by the Committee. Therefore, the
Corporation may issue Nonqualified Stock Options having an
exercise price which is less than the fair market value of the
stock underlying the option on the date of grant.
Incentive Stock Options granted under the 1997 Employee Plan
may be exercised for up to 10 years after the date of grant,
except in certain limited circumstances. Nonqualified Stock
Options granted under the 1997 Employee Plan may be exercised for
up to 10 years and 1 month after the date of grant. With the
approval of the Committee, an optionee may pay the required
exercise price for an option by surrendering shares of Common
Stock with a value equal to such exercise price, subject to
certain limitations with respect to payment with shares acquired
through the exercise of Incentive Stock Options. The aggregate
fair market value (determined at the time the option is granted)
of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an optionee
during any calendar year may not exceed $100,000. No employee
may receive option grants in excess of 250,000 shares under the
1997 Employee Plan during any twelve-month period. No option may
be transferred by the optionee other than by will or by the laws
of descent and distribution, and each option is exercisable
during the optionee's lifetime only by the optionee, or his
guardian or legal representative, unless otherwise approved by
the Committee.
Under the 1997 Employee Plan, options may not be exercised
during the 12-month period following the date of grant unless
(i) there occurs a "change in control" of the Corporation during
such period or (ii) the Committee waives the 12-month continuous
employment requirement for an employee whose employment has
terminated prior to the satisfaction of such requirement. In the
event of a "change in control," the options become immediately
exercisable. The term "change in control" is defined in the 1997
Employee Plan to mean, among other things, a merger,
consolidation or similar transaction in which (i) the
Corporation's shareholders do not own, after the transaction, at
least 66-2/3% of the voting securities of the surviving
institution, and (ii) persons who were members of the
Corporation's Board do not constitute at least 66-2/3% of the
members of the Board of the surviving institution.
Under the 1997 Employee Plan, in the event of an optionee's
retirement, Incentive Stock Options lapse at the earlier of three
months from the date of retirement or the expiration of the term
of the option, while Nonqualified Stock Options may continue to
be exercised during the term of the option for up to 24 months,
at the discretion of the Committee, from the date of retirement.
With respect to an optionee whose employment terminates due to
death or disability, the optionee or his or her legal
representative may exercise the option until the earlier of the
expiration of the term of the option or one year after such
termination of employment.
If an optionee's employment is terminated for any reason
except retirement, death or disability, all options granted to
such person under the 1997 Employee Plan terminate upon the date
employment is terminated, unless the Committee permits the
optionee to exercise such options until the earlier of (i) the
expiration of the term of the option or (ii) in the case of
Incentive Stock Options, three months after such termination of
employment, and in the case of Nonqualified Stock Options, up to
24 months from the date of termination.
The Board of Directors may amend, suspend or terminate the
1997 Employee Plan at any time without shareholder approval;
provided, however, that the Board may not, without shareholder
approval, amend the 1997 Employee Plan so as to (i) increase the
number of shares subject to the 1997 Employee Plan, (ii) change
the class of eligible employees, or (iii) make a change which
would otherwise require the approval of shareholders under
applicable tax, securities or other laws. In addition, the Board
may not modify or amend the 1997 Employee Plan with respect to
any outstanding options, or impair or cancel any outstanding
option, without the consent of the affected optionee.
Tax Consequences
General. The 1997 Employee Plan is not a qualified plan
under Code Section 401(a). The Corporation has been advised
that, under the Code, the following federal income tax
consequences will result when Incentive Stock Options or
Nonqualified Stock Options, or any combination thereof, are
granted or exercised, although the following is not intended to
be a complete statement of the applicable law.
Incentive Stock Options. An optionee generally will not be
deemed to receive any income for federal tax purposes at the time
an Incentive Stock Option is granted, nor will the Corporation be
entitled to a tax deduction at that time. No income is
recognized by an optionee upon the exercise of such an option.
Upon the sale or exchange of the shares at least two years after
the grant of the option and one year after receipt of the shares
by the optionee upon exercise, the optionee will recognize long-
term capital gain or loss upon the sale of such shares equal to
the difference between the amount realized on such sale and the
exercise price.
If the foregoing holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price
of the stock. If the sale price exceeds the fair market value on
the date of exercise, the gain in excess of the ordinary income
portion will be treated as either long-term or short-term capital
gain, depending on whether the stock has been held for more than
12 months on the date of sale. Any loss on disposition is a
long-term or short-term capital loss, depending upon whether the
optionee had held the stock for more than 12 months. A different
rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is a director or 10 percent
shareholder of the Corporation or an officer of the Corporation
subject to Section 16(b) of the Exchange Act. If the Corporation
cancels an option, the optionee recognizes income to the extent
of the amount paid to the optionee by the Corporation to cancel
the option over the optionee's basis in such option, if any.
No income tax deduction will be allowed to the Corporation
with respect to shares purchased by an optionee upon the exercise
of an Incentive Stock Option, provided that such shares are held
at least two years after the date of grant and at least one year
after the date of exercise. However, if those holding periods
are not satisfied, the Corporation may deduct an amount equal to
the ordinary income recognized by the optionee upon disposition
of the shares.
The exercise of an Incentive Stock Option could subject an
optionee to alternative minimum tax liability for federal income
tax purposes.
Nonqualified Stock Options. An optionee will not be deemed
to receive any income for federal tax purposes at the time a
nonqualified stock option is granted, nor will the Corporation be
entitled to a tax deduction at that time. At the time of
exercise, however, the optionee will realize ordinary income in
an amount equal to the excess of the market value of the shares
at such time over the option price of such shares. The
Corporation will generally be allowed a federal income tax
deduction, at the time of such recognition by the optionee, in an
amount equal to the ordinary income recognized by the optionee,
subject to certain possible limitations under the Code. Gain or
loss on the subsequent disposition of option stock by the
optionee will normally be capital gain or loss.
New Plan Benefits
The selection of participants who will receive awards under
the 1997 Employee Plan and the size and type of award are to be
determined by the Compensation Committee in its discretion. Such
future grants are not presently determinable and it is not
possible to predict the benefits or amounts that will be received
by or allocated to particular individuals or groups in the
future.
The following table sets forth the benefits that were
received by the following people pursuant to the 1997 Employee
Plan during the fiscal year ended September 30, 1997: (i) the
executive officers named in the Summary Compensation Table set
forth under "EXECUTIVE COMPENSATION AND RELATED MATTERS;"
(ii) all current executive officers as a group; (iii) all current
directors who are not executive officers as a group; and (iv) all
employees who are not executive officers, as a group:
Name and Position Dollar Value ($) Number of Units
Named Executive Officers -- 0
(3 persons)
All current executive officers (2) 104,338(1)
as a group (4 persons)
All directors who are not -- 0
executive officers, as a
group (4 persons)
All employees, excluding (3) 98,064
executive officers, as a
group
______________________
(1) The number of units shown corresponds to the number of the
Corporation's shares underlying options that were granted on
September 11, 1997 to James D. Conners, the President of the
Corporation.
(2) The exercise price for those options granted was $3.83 per
share. The last bid price for the Common Stock on the
National Association of Securities Dealers ("NASD") Over-
the-Counter ("OTC") Bulletin Board Service on the date of
grant was $6.71 per share (as adjusted to reflect the
Corporation's 0.2608491-for-one reverse stock split which
took place on January 9, 1998).
(3) The exercise prices for those options ranged from a low of
$1.56 per share to a high of $6.23 per share. The last bid
price for the Common Stock on the NASD OTC Bulletin Board
Service on the date of grant was $4.79 per share (as
adjusted to reflect the Corporation's 0.2608491-for-one
reverse stock split which took place on January 9, 1998).
Recommendation
The Board of Directors recommends a vote for the amendment
of the 1997 Employee Plan to increase the number of shares
reserved for issuance thereunder. The effect of an abstention is
the same as that of a vote against the amendment of the 1997
Employee Plan.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
General
The Board of Directors has appointed Richard A. Eisner &
Company, LLP, New York, New York, Certified Public Accountants,
as the Corporation's independent public accountants for the year
ending September 30, 1998, and has directed that the selection of
such auditors be submitted for ratification by the shareholders
at the Annual Meeting. The Corporation has been advised by
Richard A. Eisner & Company, LLP that none of its members has any
financial interest in the Corporation.
Annual Meeting
In the event that the shareholders do not ratify the
selection of Richard A. Eisner & Company, LLP as the
Corporation's independent public accountants to perform audit
services for the 1998 fiscal year, another accounting firm may be
chosen to provide audit services for the 1998 fiscal year.
Representatives of Richard A. Eisner & Company, LLP, are
expected to attend the Annual Meeting, will be afforded an
opportunity to make a statement if they desire to do so and will
be available to respond to questions from shareholders.
ANNUAL REPORT
The Corporation's Annual Report on Form 10-K for the year
ended September 30, 1997 immediately follows this Information
Statement. No part thereof is incorporated by reference in this
Information Statement. Upon the written request of any
shareholder and the payment of a fee of $0.25 per page covering
the Corporation's reasonable expenses in connection therewith,
the Corporation will furnish to such shareholder any exhibit to
the Form 10-K. Such request should be sent to Steve Vanechanos,
Sr., Secretary, DynamicWeb Enterprises, Inc., 271 Route 46 West,
Building F, Suite 209, Fairfield, New Jersey 07004, and shall set
forth a good faith representation that, as of June 29, 1998, the
person making the request was a beneficial owner of shares of the
Common Stock entitled to vote at the Annual Meeting.
By Order of the Board of Directors
Steve Vanechanos, Sr.
Secretary