SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)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 Section240.14a-11(c) or
Section240.14a-12Rule 14a-12
INET TECHNOLOGIES, 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:
----------------------------------------------------------
[LOGO]
INET TECHNOLOGIES, INC.
1255 WEST 15TH STREET, SUITE 600
PLANO,1500 NORTH GREENVILLE AVENUE
RICHARDSON, TEXAS 7507575081
April 17, 200016, 2001
Dear Stockholder:
You are cordially invited to attend the 2000 annual meeting of stockholders
of Inet Technologies, Inc., 2001 Annual
Meeting of Stockholders, which will be held at Plano Centre, 2000 East Spring
Creek Parkway, Plano, Texas on Tuesday,Wednesday, May 16, 20002001 at 9:10:00 a.m. (Central
Time).
Details of the business to be conducted at thisthe meeting, which includes the
election of two Class I members of our Board of Directors, are given in the
attached Notice of Annual Meeting of Stockholders and proxy statement.Proxy Statement.
After careful consideration, our Board of Directors has approved the
proposal set forth in the proxy statementProxy Statement and recommends that you vote for such
proposal.
In order for us to have an efficient meeting, please sign, date and return
the enclosed proxy promptly in the accompanying reply envelope. If you are able
to attend thisthe meeting and wish to change your proxy vote, you may do so simply
by revoking your proxy and voting in person at the annual meeting.Annual Meeting.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Elie S. Akilian
Elie S. Akilian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
- --------------------------------------------------------------------------------/s/ Samuel S. Simonian
Samuel S. Simonian
CHAIRMAN OF THE BOARD
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THISTHE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
- --------------------------------------------------------------------------------
[LOGO]
INET TECHNOLOGIES, INC.
1255 WEST 15TH STREET, SUITE 600
PLANO,1500 NORTH GREENVILLE AVENUE
RICHARDSON, TEXAS 7507575081
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 20002001
---------------------
To the Stockholders of Inet Technologies, Inc.:
The 2000 annual meeting2001 Annual Meeting of stockholdersStockholders of Inet Technologies, Inc. will be
held at Plano Centre, 2000 East Spring Creek Parkway, Plano, Texas on Tuesday,Wednesday,
May 16, 20002001 at 9:10:00 a.m. (Central Time) for the following purposes:
1. To elect two Class I directors to serve until the annual meeting2004 Annual Meeting of
stockholders
in 2001, two directors to serve until the annual meeting of stockholders
in 2002 and two directors to serve until the annual meeting of
stockholders in 2003,Stockholders, or in each case until their successors have been elected and qualified.
2. To act upon such other business as may properly come before thisthe meeting
or any adjournments thereof.
Only stockholders of record at the close of business on April 3, 20002, 2001 are
entitled to notice of and to vote at thisthe meeting. A list of stockholders
entitled to vote at thisthe meeting will be available for inspection at our offices.offices
for a period of at least ten days prior to the meeting. Whether or not you plan
to attend thisthe meeting in person, please sign, date and return the enclosed proxy
card in the reply envelope provided. If you
attend this meeting and revoke your proxy by written notice to the Secretary of
the meeting, you may vote by ballot and only your vote at this meeting will be
counted. The prompt return of your proxy card will
assist us in preparing for thisthe meeting. You may revoke your proxy in the manner
described in the accompanying Proxy Statement at any time before it has been
voted at the meeting. It may be possible for you to vote in person at the
meeting even if you have returned a proxy. Please review the Proxy Statement for
more information.
By Orderorder of theour Board of Directors,
/s/ Mark A. WeinzierlH. Kleinman
Mark A. WeinzierlH. Kleinman
SECRETARY
Richardson, Texas
April 17, 200016, 2001
INET TECHNOLOGIES, INC.
1255 WEST 15TH STREET, SUITE 600
PLANO,1500 NORTH GREENVILLE AVENUE
RICHARDSON, TEXAS 7507575081
------------------------
PROXY STATEMENT
---------------------
These proxy materials and the enclosed proxy card are being mailed in
connection with the solicitation of proxies by the Board of Directors of Inet
Technologies, Inc., a Delaware corporation, for the 20002001 Annual Meeting of
Stockholders to be held on Tuesday,Wednesday, May 16, 20002001 at 9:10:00 a.m. (Central Time)
and at any adjournment or postponement thereof. These proxy materials were first
mailed to stockholders of record beginning on or about April 17, 2000.16, 2001.
PURPOSE OF MEETING
The specific proposal to be considered and acted upon at thisthe meeting is
summarized in the accompanying Notice of Annual Meeting of Stockholders. The
proposal is described in more detail in this proxy statement.Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Any stockholder executing a proxy pursuant to this solicitation may revoke
it at any time prior to its exercise by delivering written notice of such
revocation to our Secretary before this meeting or by properly executing and
delivering a proxy bearing a later date. Proxies also may be revoked by any
stockholder present at this meeting who elects to vote his, her or its shares in
person. The cost of soliciting proxies will be paid by us and may include
reimbursement paid to brokerage firms and others for their expense in forwarding
solicitation materials as well as the expense of preparing, assembling,
photocopying and mailing this proxy statement. Solicitation will be made
primarily through the use of the mail; however, our regular employees may,
without additional remuneration, solicit proxies personally by telephone or
Internet e-mail.
Our annual report to stockholders for the year ended December 31, 19992000 Annual Report has been mailed concurrently with the mailing of the
Notice of Annual Meeting of Stockholders and this proxy statementProxy Statement to all
stockholders entitled to notice of, and to vote at, thisthe meeting. The annual report2000 Annual
Report is not incorporated into this proxy statementProxy Statement and is not considered proxy
solicitation material.
We have fixed April 3, 20002, 2001 as the record date for determining those
stockholders who are entitled to notice of, and to vote at, thisthe meeting. At the
close of business on the record date, we had 46,080,659approximately 46,578,505
outstanding shares of our common stock.
The accompanying proxy card is designed to permit each holder of common
stock as of the close of business on the record date to vote on the proposal to
be considered at the meeting. A stockholder is permitted to vote in favor of, or
to withhold authority to vote for, any or all nominees for election to the
Board. If a choice as to the matters coming before thisthe meeting has been
specified by a stockholder on the proxy, the shares will be voted accordingly.
If no choice is specified on the returned proxy, the shares will be voted in
favor of the approval of the proposal described in the Notice of Annual Meeting and in this
Proxy Statement.
Any stockholder executing a proxy statement.pursuant to this solicitation may revoke
it at any time prior to its exercise by delivering written notice of such
revocation to the Secretary of the meeting before the meeting or by properly
executing and delivering a proxy bearing a later date. Proxies also may be
revoked by any stockholder present at the meeting who elects to vote his, her or
its shares in person. Attendance at the meeting does not in itself constitute
the revocation of a proxy. In addition, if your shares are held in the name of
your broker, bank or other nominee, you must obtain a proxy, executed in your
favor, from the holder of record to be able to vote at the meeting.
The presence, in person or by proxy, of the holders of a majority of the
shares of our outstanding common stock entitled to vote is necessary to
constitute a quorum at thisthe meeting. Each of our stockholders is entitled to one
vote for each share of our common stock held by that stockholder as of the
record date. Cumulative voting is not permitted in the election of directors.
Abstentions and broker non-votes (I.E., the submission of a proxy by a broker or
nominee specifically indicating the lack of discretionary
1
authority to vote on the matter) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
The vote of a plurality of the shares of
our common stock present
1
in person or represented by proxy at this meeting and entitled to vote on the
election of directors is necessary for the election of a director. Abstentions
and broker non-votes have no effect on the determination of plurality, except to
the extent that they affect the total votes received by any particular
candidate.
As of February 29, 2000,28, 2001, our directors and executive officers beneficially
owned an aggregate of approximately 37.4 million36,479,364 shares of our common stock, not
including shares of common stock issuable upon exercise of outstanding stock
options, constituting approximately 81%78.5% of the shares of our common stock
outstanding. It is expected that such directors and executive officers will vote
or direct the vote of all shares of our common stock held or owned by such
persons, or over which such persons have voting control, in favor of the
proposal described in this proxy statement.Proxy Statement. Nonetheless, the approval of the
proposal is not assured. See "Principal Stockholders."
PROPOSAL 1
ELECTION OF DIRECTORS
We currently have the following six directors serving on our Board:
James R. Adams, Elie S. Akilian, Grant A. Dove, William H. Mina, Samuel S.
Simonian and Mark A. Weinzierl. At the Annual Meeting, the directors shall beOur Board of Directors is divided into three classes, which are as nearly
equal in size as is practicable, designated Class I, Class II and Class III.III,
with the term of office of one class expiring each year at our Annual Meeting of
Stockholders. The term of office of the initial Class I directors, shall expireJames R. Adams and
Grant A. Dove, expires at theour 2001 annual meetingAnnual Meeting of stockholders,Stockholders; the term of
office of the initial Class II directors, shall expireMark A. Weinzierl and William H. Mina, expires
at theour 2002 annual meetingAnnual Meeting of stockholders,Stockholders; and the term of office of the
initial Class III directors, shall
expireElie S. Akilian and Samuel S. Simonian, expires at theour 2003
annual meetingAnnual Meeting of stockholders,Stockholders, or in each case untilupon the election and
qualification of their successors have been elected and qualified. At each annual meeting of
stockholders held after this meeting, directorssuccessors. Directors to replace those of a class whose
terms expire at sucha given annual meeting shall be elected to hold office until the
third succeeding annual meeting or until their respective successors have been
elected and qualified.
VOTE REQUIRED
A boardNOMINEES FOR DIRECTOR
James R. Adams and Grant A. Dove, each of six directors is to be electedwhom presently serves as a
Class I director, have each been nominated for election at thisthe meeting to hold office
until their respectiveserve
as a Class I director for a term has expiredexpiring at our 2004 Annual Meeting of
Stockholders or until their successors arehis respective successor has been duly elected and
qualified. The two nominees within each Class receiving the greatest number
of votes of the shares present in person or represented by proxy at this meeting
and entitled to vote on the election of directors shall be elected to the Board
of Directors, even if any nominee receives the vote of less than a majority of
the shares. Unless otherwise instructed, the persons named in the accompanying
proxy card will vote the proxies received by them for each of thethese Board
nominees named
below, each of whom is presently a directornominees. Each of the Company. If any nominee of
the Board is unable or declinesnominees has indicated his willingness to serve as a
director at the timemember of the meeting,Board if elected; however, if any nominee should become
unavailable for election to the proxiesBoard for any reason not presently known or
contemplated, the proxy holders will be votedhave discretionary authority in that
instance to vote for anya substitute nominee who is designated by theour present Board
of Directors to fill the vacancy.Directors. It is not expected that any nominee will be unable or will decline
to serve as a director.
THE COMPANY'SVOTE REQUIRED
The vote of a plurality of the shares of our common stock present in person
or represented by proxy at the meeting and entitled to vote on the election of
directors is necessary for the election of a director. As a result, the two
nominees receiving the greatest number of votes of the shares present in person
or represented by proxy at the meeting and entitled to vote on the election of
directors shall be elected to our Board of Directors, even if any such nominee
receives the vote of less than a majority of the outstanding shares.
Abstentions, instructions withholding authority and broker non-votes have no
effect on the determination of plurality, except to the extent that they affect
the total votes received by any particular nominee.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED HEREIN,IN THIS PROXY STATEMENT, AND PROXIES EXECUTED AND RETURNED WILL BE SO
VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
CLASS2
The nominees for election at the meeting as Class I NOMINEESdirectors are:
NAME DIRECTOR SINCE AGE POSITION
- ------------------------------------------------- ----------------------------------------------------- -------- ---------------------------------------------
James R. Adams................................... 1999 60Adams......................... 61 Director
Grant A. Dove.................................... 1999 71Dove.......................... 72 Director
2
MR. ADAMS has served as a director of Inet since June 1999. Mr. Adams has
served as a director of Texas Instruments Incorporated since 1989 and served as
its Chairman of the Board from 1996 to 1998. He previously served as President
of SBC Communications, Inc. from 1992 to 1995 and as President of Southwestern
Bell Telephone Company from 1988 to 1992. He serves as a director of Storage
Technology Corp. and Prodigy Communications Corporation. Mr. Adams holds an
M.B.A. from the University of Texas at Austin and a B.S. in Math and Physics
from Texas A&M University.
MR. DOVE has served as a director of Inet since June 1999. Mr. Dove has
served as Managing Partner of Technology Strategies & Alliances or TS&A, since 1991 and currently serves as a director of the following publicly held
companies: MediaOne Group, Inc., a provider of telecommunications and cable
television, Cooper Cameron Corporation, an oilfield services company, and
InterVoice Brite, Inc., a telecommunications equipment and software sales
company.1991.
Prior to joining TS&A,Technology Strategies & Alliances, Mr. Dove served as Chairman
and Chief Executive Officer of the Microelectronics and Computer Technology
Corporation. He currently serves as a director of Cooper Cameron Corporation,
InterVoice-Brite, Inc., Netpliance, Inc. and Intrusion.com, Inc. Mr. Dove holds
a B.S. in Electrical Engineering from Virginia Polytechnic Institute and State
University.
CLASSOTHER DIRECTORS
Our current Class II NOMINEESdirectors, who are not standing for reelection at the
meeting and whose terms will expire at our 2002 Annual Meeting of Stockholders,
are as follows:
NAME DIRECTOR SINCE AGE POSITION
- --------------------------- ----------------------------------------------------- -------- ----------------------------------------------------------------------------
Mark A. Weinzierl.......... 1989 36Weinzierl...................... 37 Director and Secretary
William H. Mina............ 1996 54Mina........................ 56 Senior Vice President of
Administration and Legal Affairs, and
Director
MR. WEINZIERL co-founded Inet in 1989 and has served as a director and as
Secretary since
suchthat time. Since February 2000, he has served as President and Chief Executive
Officer of Nextcell,Enfora, Inc., a provider of wireless data modems. He served as
Executive Vice President of Inet from March 1990 to February 2000.
Mr. Weinzierl received his B.S. in Electrical Engineering from Iowa State
University and attended the University of Texas at Dallas M.B.A. program.
Prior
to co-founding Inet, Mr. Weinzierl worked from 1986 to 1989 at Electrospace
Systems, Inc. in its switching department.
MR. MINA has served as a director since 1996 and as Senior Vice President of
Administration and Legal Affairs since February 2000. He served as Senior Vice
President of Finance &and Administration from April 1999 to February 2000. He
previously served as our Senior Vice President and Chief Financial Officer from
February 1997 to April 1999. He has been a director of Inet since June 1996. From 1985 to February 1997, Mr. Mina was employed
by Wafra Investment Advisory Group Inc., or Wafra, a New York-based investment banking
firm. While at Wafra, he served in various positions, including Senior Vice
President and Chief Financial Officer. Mr. Mina holds an M.B.A. from Southern
Methodist University and a B.A. in Business Administration from Dallas Baptist
University. Mr. Mina is married to Mr. Simonian's aunt.
CLASSOur current Class III NOMINEESdirectors, who are not standing for reelection at the
meeting and whose terms will expire at our 2003 Annual Meeting of Stockholders,
are as follows:
NAME DIRECTOR SINCE AGE POSITION
- ---------------------------- ----------------------------------------------------- -------- -----------------------------------------------------------------------
Elie S. Akilian............. 1989 43Akilian........................ 44 President, Chief Executive Officer
and Director
Samuel S. Simonian.......... 1989 44Simonian..................... 45 Chairman of the Board
3
MR. AKILIAN co-founded Inet in 1989, has served as a director since suchthat
time and has served as President and Chief Executive Officer since April 1999.
He previously served as Executive Vice President responsible for sales and
marketing from March 1989 to April 1999. Prior to co-founding Inet, Mr. Akilian
worked from 1980 to 1989 at Electrospace Systems, Inc. in its switching
department. Mr. Akilian received his B.S. in
Electrical Engineering from the University of Texas at Arlington.
3
MR. SIMONIAN co-founded Inet in 1989 has served as a director since such
time and has served as Chairman of the Board
since April 1999.that time. He previously served as President from 1989 to April 1999 and
as Chief Executive Officer from March 1994 to April 1999. Prior to co-founding Inet, Mr. Simonian worked from
1979 to 1989 at Electrospace Systems, Inc. in its antenna control systems
division and its switching department.currently
serves as President of Epygi Technologies, Ltd., a broadband networking company.
Mr. Simonian holds a B.S. in Electrical Engineering from the University of Texas
at Arlington. Mr. Simonian is the nephew of Mr. Mina's spouse.
DIRECTOR COMPENSATION AND INDEMNIFICATION ARRANGEMENTS
Directors who are not our employees or employees of any of our subsidiaries,
other than Mr.Messrs. Simonian and Weinzierl, receive $5,000 per quarter for
services as members of our Board of Directors and committees thereof. In
addition, all directors are reimbursed for out-of-pocket expenses incurred in
attending meetings of our Board and committees on which they serve. Each
individual who first joins the Board will receive ana non-qualified option grant forto purchase
20,000 shares of common stock under our 1998 Stock Option/Stock Issuance Plan at
the time of his or her commencement of Board service, provided such individual
has not otherwise previously been employed by us. As a result of their appointment to
the Board, on June 15, 1999, Messrs. Adams and Dove received a grant of 20,000
non-qualified stock options at an exercise price of $18.06. In addition, at each Annual
Stockholders Meeting beginning with the 2000 Annual Meeting,of Stockholders, each individual who is to continue to serve as a
non-employee Board member, other than Mr.Messrs. Simonian and Weinzierl, will
receive an automatic grant of 10,000 non-qualified stock options under theour 1998
Stock Option/Stock Issuance Plan, or the 1998 Plan. Each option will have an exercise price per
share equal to 100% of the fair market value per share of our common stock on
the option grant date and a maximum term of ten years measured from the option
grant date. Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase by us, at the
exercise price paid per share, should the optionee's service as a non-employee
Board member cease prior to vesting in the shares. The 20,000 shareEach 20,000-share grant will
vest, and our repurchase rights will lapse, in three equal annual installments
over the director's period of Board service, with the first installment to vest
one year from the option grant date. Each additional 10,000-share grant will
vest upon the director's completion of one year of Board service measured from
the grant date. Messrs. Adams and Dove each received options to purchase 10,000
shares in 2000.
We maintain directors' and officers' liability insurance and our Bylaws
provide for mandatory indemnification of directors and officers to the fullest
extent permitted by Delaware law. We have entered into indemnification
agreements with all of our directors and executive officers. In addition, our
Certificate of Incorporation limits the liability of our directors to us and our
stockholders for breaches of the directors' fiduciary duties to the fullest
extent permitted by Delaware law.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors met threesix times during 1999,2000 and acted afour times by
unanimous written consent. During 2000, each member of the Board participated in
at least 75% of all Board and applicable committee meetings held during the
period.
We have standing Compensation, Audit and Secondary Stock Option Committees
to devote attention to specific subjects and to assist the Board in the
discharge of its responsibilities. The functions of those committees, their
current members and the number of times by written consent. Overall attendance at board and committee meetings was
100%.
We have a standing Compensation Committee currently composed of
Messrs. Adams and Dove. The Compensation Committee met one time in 1999.held during 2000 are set forth below.
The Compensation Committee has the responsibility for establishing the
compensation payable to our Chief Executive Officer and is responsible for
establishing compensationscompensation payable to our other executive officers based on
recommendations made by the Chief Executive Officer. The Compensation Committee
also is responsible for the overall administration of our employee benefit
plans, including our employee stock plans. We also have a standing AuditThe current members of the
Compensation Committee composed of Messrs.are James R. Adams (Chairman) and
4
Grant A. Dove. The AuditIn 2000, the Compensation Committee met one time in 1999.two times and acted by
written consent seven times.
The Audit Committee assists in the selection of our independent auditors and
is responsible for designating those services to be performed by, and
maintaining effective communication with the auditors. The current members of
the Audit Committee are Grant A. Dove (Chairman) and James R. Adams. In 2000,
the Audit Committee met seven times and acted by written consent one time.
The Secondary Stock Option Committee has the authority, as delegated by our
Compensation Committee, to approve limited grants of options from our 1998 Stock
Option/Stock Issuance Plan to employees who are not Section 16 officers. Our
Chief Executive Officer is the sole member of the Secondary Stock Option
Committee. In 2000, the Secondary Stock Option Committee acted 18 times by
written consent.
We do not have a standing Nominating Committee or any other committee
performing similar functions, and these matters are considered at meetings of
the full Board of Directors.
4
PRINCIPAL STOCKHOLDERS
The following table sets forth certainspecified information regarding the
beneficial ownership of our common stock as of February 29, 200028, 2001 by (1) each
person who is known by us to own beneficially more than five percent of our
common stock, (2) each of our directors, (3) each of our executive officers
named in the Summary Compensation Table below and (4) all executive officers and
directors as a group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)OWNERSHIP (1) CLASS
- ---------------------------------------------------------- ----------------- ----------
Elie S. Akilian (2)....................................... 12,634,000 (4) 27.4%12,599,083(3) 27.1%
Samuel S. Simonian (2)(4).................................... 12,498,000 (5) 27.1%12,243,983(5) 26.3
Mark A. Weinzierl (3)(6)..................................... 12,132,300 26.3%11,470,784 24.7
William H. Mina........................................... 116,200 (6)101,200(7) *
James R. Adams............................................ 24,500 (7)35,480(8) *
Grant A. Dove............................................. 22,400 (8)32,400(9) *
Pierce E. Brockman........................................ 144,885(10) *
Luis J. Pajares........................................... 75,716(11) *
Jeffrey A. Kupp........................................... 22,006(12) *
All executive officers and directors as a group (ten(eleven
persons)........................................... 37,558,578 (9) 81.3%................................................ 36,730,614(13) 79.0
- ------------------------
* Indicates less than 1%.
(1) Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission, under Rule 13d-3(d)(i).or SEC. Percentage of beneficial
ownership is based on 46,048,91046,491,955 shares of our common stock outstanding as
of February 29, 2000.28, 2001. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares of our
common stock subject to options held by that person that are currently
exercisable or will become exercisable within 60 days following
February 29, 200028, 2001 are deemed outstanding. However, these shares are not
deemed outstanding for the purpose of computing the percentage ownership of
any other person. Unless otherwise indicated in the footnotes to this table,
the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) The address for suchthe stockholder is 1255 West 15th Street, Suite 600, Plano,1500 North Greenville Avenue, Richardson,
Texas 75075.75081.
(3) Includes 178,600 shares held by the stockholder's minor children.
5
(4) The address for suchthe stockholder is 5040 Addison Circle, #225, Addison, Texas
75001.
(5) Includes 267,900 shares held by the stockholder's minor children.
(6) The address for the stockholder is 661 East 18th Street, Plano, Texas 75074.
(4)(7) Includes 178,600 shares held by such stockholder's minor children.
(5) Includes 267,900 shares held by such stockholder's minor children.
(6) Represents 50,00065,000 shares subject to exercisable options and 66,200200 shares held jointly by suchthe
stockholder and his spouse.
(7) Includes 20,000(8) Consists of 4,180 shares held directly, 10,000 shares subject to exercisable options,
40021,200 shares held by limited partnerships controlled by the James R. Adams Family Limited Partnership (of which Mr. Adams is a
general partner)stockholder and
100 shares held by Mr. Adam'sthe stockholder's son.
(8)(9) Includes 20,00030,000 shares subject to exercisable options.
(9)(10) Includes 132,50050,000 shares subject to exercisable options.
5
(11) Includes 75,000 shares subject to options.
(12) Includes 18,750 shares subject to options.
(13) Includes 251,250 shares subject to options.
EXECUTIVE COMPENSATION
DIRECTORS AND
EXECUTIVE OFFICERS
Our executive officers and directors are as follows:
NAME AGE POSITION
- --------------------------------------------------------------- -------- ---------------------------------------------------------------------------------------
Samuel S. Simonian..................... 45 Chairman of the Board
Elie S. Akilian......... 43Akilian........................ 44 President, Chief Executive Officer
and Director
Samuel S. Simonian...... 44 Chairman of the Board
William H. Mina......... 54Mina........................ 56 Senior Vice President of
Administration and Legal Affairs, and
Director
Pierce E. Brockman...... 36Brockman..................... 37 Senior Vice President and Chief
Technology Officer
Jim W. Oliphant......... 57 Senior Vice President of Operations
Luis J. Pajares......... 39Pajares........................ 40 Senior Vice President of Sales,
Marketing and MarketingCustomer Operations
Jeffrey A. Kupp......... 37Kupp........................ 38 Vice President and Chief Financial
Officer
Mark A. Weinzierl....... 36 Director
James R. Adams.......... 60 Director
Grant A. Dove........... 71 DirectorH. Kleinman....................... 39 Vice President, General Counsel and
Secretary
Biographical information for Messrs. Simonian, Akilian Simonian,and Mina Weinzierl,
Adams and Dove is set forth
under Proposal 1--"Election1--Election of Directors".Directors.
MR. BROCKMAN has served as Senior Vice President and Chief Technology
Officer since April 1999. He served as Vice President of Software Development
from January 1998 to April 1999. He previously served as Director of Software
Development from March 1995 to January 1998, and has held various other various
positions since joining Inet in September 1990. Mr. Brockman holds a B.S. in
Computer Science from Texas Tech University and a M.S. in Computer Science from
The University of Texas at Dallas.
MR. OLIPHANT has served as Senior Vice President of Operations since
May 1999. Prior to joining Inet, Mr. Oliphant was employed by Texas Instruments,
or TI, for more than 30 years. While at TI, he served in various positions,
including Manager of the Microelectronics Technology Center from 1993 through
July 1997, at which time the Microelectronics Technology Center was sold to
Raytheon. After the sale, Mr. Oliphant continued employment in this capacity
until he joined Inet in 1999. Mr. Oliphant holds a B.S. in Electrical
Engineering from the University of Texas at Arlington and a M.S. in Electrical
Engineering from Southern Methodist University.
MR. PAJARES has served as Senior Vice President of Sales, Marketing and
MarketingCustomer Operations since September 1999. From 1994 to September 1999,
Mr. Pajares was employed by DSC/Alcatel, a manufacturer of telecommunications
equipment. While at
DSC/Alcatel,equipment, where he served in various positions, including Vice President--
International Business and Vice President--Wireless Networks. Mr. Pajares holds
a B.A. from the University of Florida and an M.B.A. from The University of
Dallas.
6
MR. KUPP has served as Vice President and Chief Financial Officer since
February 2000. From November 1997 to February 2000, Mr. Kupp was employed by IEX
Corporation (a Tekelec Company), a provider of telecommunications software
products, as Vice President of Finance and Chief Financial Officer. From
January 1997 to November 1997, Mr. Kupp was employed by CS Wireless
Systems, Inc., a wireless video and internet access provider, as Senior Vice
President and Chief Financial Officer. From 1995 to 1997, Mr. Kupp worked as
Director in the Corporate Finance department of DSC Communications Corporation,
which is now named Alcatel. Mr. Kupp holds a B.A. in Accounting and Computer
Science from Asbury College and an M.B.A. from The Johnson Graduate School of
Management at Cornell University. Mr. Kupp is a Certified Public Accountant.
6
MR. KLEINMAN has served as Vice President, General Counsel and Secretary
since January 2001. He served as Vice President, Legal from June 2000 to
January 2001. From May 1996 to April 2000, he served as Assistant General
Counsel of Sterling Software, Inc., a worldwide supplier of computer software
and services. Prior to that time, Mr. Kleinman was a shareholder in Stanley,
Mandel & Kleinman, P.C., a Dallas-based law firm. Mr. Kleinman holds a B.A. in
Government from The University of Texas at Austin and a J.D. from The University
of Texas School of Law.
EMPLOYMENT CONTRACTS; CHANGE-IN-CONTROL AND INDEMNIFICATION ARRANGEMENTS
The executive officers serve at the discretion of our Board of Directors. We
presently do not have an employment contractagreement in effect with any of our officers
named in the executive
officersSummary Compensation Table below, other than Messrs. KuppMr. Pajares. Our
employment agreement with Mr. Pajares provides for an annual base salary set by
our Board with an annual variable bonus, which is based primarily on our sales
order activity. The initial term of the agreement ends in August 2001 and Pajares.is
subject to automatic renewal on a year-to-year basis, unless either party
provides advance notice of termination as provided in the agreement. In the
event Mr. Pajares' employment is terminated in connection with a change in
control of Inet, all of the 200,000 incentive stock options granted under the
agreement and not otherwise vested will become fully vested. In the event
Mr. Pajares' employment is terminated by Mr. Pajares for good reason (as
defined) or by Inet for any reason other than for cause (as defined), then
Mr. Pajares will be entitled to receive an amount equal to his then-current base
salary for six months and a variable bonus equal to $150,000 less any variable
bonus previously paid during that calendar year. Mr. Pajares also is eligible
for continued medical benefits for 12 months following the termination of his
employment.
We have entered into indemnification agreements with all of our executive
officers. We maintain directors' and officers' liability insurance and our
Bylaws provide for mandatory indemnification of officers to the fullest extent
permitted by Delaware law.
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the compensation
earned during each of our last three fiscal years by our current Chief Executive
Officer our former Chief
Executive Officer and each of the other five most highly
7
compensated executive officers whose salary and bonus exceeded
$100,000 for services rendered during 2000 in all
capacities to us and our subsidiaries
during 1998 and 1999.subsidiaries. These individuals are referred to as the
Named Officers. No individual resigned during the last fiscal year who would
otherwise have been required to have been included in the table.
LONG-TERM
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION ------------------- ------------(1) COMPENSATION
----------------------- -------------
OPTIONS ALL OTHER
NAME AND POSITION(S) YEAR SALARY BONUS (#OF(# OF SHARES) COMPENSATION
- -------------------------------------------------------------------------------------- -------- -------- -------- ---------------------- ---------- ------------- ------------
Elie S. Akilian (2) ..................... 1999............................. 2000 $204,000 $460,250$375,000 -- $ 674 (3)192(3)
President, Chief Executive Officer and 1999 204,000 460,250 -- 192(3)
Director 1998 204,000 425,250 -- 204 (3)
Officer and Director204(3)
Samuel S. Simonian (2) .................. 1999 $204,000 $335,250.......................... 2000 204,000 100,000 -- $ 674 (3)192(3)
Chairman of the Board 1999 204,000 335,250 -- 192(3)
1998 204,000 455,250 -- 204 (3)
Mark A. Weinzierl (6) ................... 1999 $204,000 $185,250 -- $ 674 (3)
Executive Vice President, Secretary and 1998 204,000 420,250 -- 204 (3)
Director204(3)
William H. Mina ......................... 1999 $192,075 $100,250............................. 2000 200,000 100,000 -- $17,532 (4)13,423(4)
Senior Vice President of Administration &and 1999 192,075 100,250 -- 17,050(4)
Legal Affairs, and Director 1998 180,000 160,250 65,000 29,828 (5)
Legal Affairs,29,828(4)
Pierce E. Brockman (2) ...................... 2000 150,000 150,000 75,000 11,866(5)
Senior Vice President and DirectorChief Technology 1999 123,250 250 -- 10,966(5)
Officer
Luis J. Pajares (2) ......................... 2000 171,231 178,207 -- 13,267(6)
Senior Vice President of Sales, Marketing and 1999 53,455 194,000 200,000 192(6)
Customer Operations
Jeffrey A. Kupp (2) ......................... 2000 154,450 150,000 75,000 12,078(7)
Vice President and Chief Financial Officer
- ------------------------
(1) Excludes certain perquisites and other benefits, the aggregate of which did not
exceed 10% of any officers'the Named Officer's total salary and bonus.
(2) Although Mr. Simonian served as Chief Executive Officer untilBrockman was elected an executive officer in April 1999,
compensation is reported for the full year. Mr. Pajares joined Inet in
September 1999. Mr. Kupp joined Inet in February 2000.
(3) Represents life and disability insurance premiums paid on behalf of suchthe officer.
(4) Consists of life and disability insurance premiums paid on behalf of suchthe officer as well as
contributions by us to the officer's participation in our 401(k) plan of
$13,231 for 2000, $16,858 for 1999 and $29,624 for 1998.
(5) Consists of life insurance premiums paid on behalf of the officer as well as
contributions by us to the officer's participation in our 401(k) plan of
$11,674 for 2000 and $10,774 for 1999.
(6) Consists of life insurance premiums paid on behalf of the officer as well as
contributions by us to the officer's participation in our 401(k) plan of
$13,076 for 2000.
(7) Consists of life insurance premiums paid on behalf of the officer as well as
$11,918 of contributions by us to suchthe officer's participation in our 401(k)
plan.
(5) Consists8
OPTION GRANTS IN 2000
The following table provides information related to options to purchase our
common stock granted to the Named Officers during 2000. The Company did not
grant stock appreciation rights during 2000.
INDIVIDUAL GRANTS (1)
------------------------------ POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES
TOTAL OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR OPTION
SECURITIES GRANTED TO TERM (3)
UNDERLYING EMPLOYEES IN EXERCISE PRICE ---------------------------
NAME OPTIONS GRANTED 2000 PER SHARE (2) EXPIRATION DATE 5% 10%
- --------------------- --------------- ------------- -------------- ----------------- ------------ ------------
Pierce E. Brockman... 75,000 4.19% $40.63 August 11, 2010 $1,916,163 $4,855,934
Jeffrey A. Kupp...... 75,000 4.19 49.00 February 14, 2010 2,311,188 5,857,004
- --------------------------
(1) Each option has a ten-year term and becomes exercisable in four equal annual
installments upon the optionee's completion of life and disability insurance premiums paideach year of service measured
from the grant date. In addition, each option becomes exercisable on behalfan
accelerated basis upon a liquidation or dissolution of such
officer as well as $29,624Inet or a merger or
consolidation in which there is a change in ownership of contributionssecurities
possessing more than 50% of the total combined voting power of our
outstanding securities, unless the option is assumed by us to such officer's
participationthe acquiring,
surviving or resulting entity. In addition, the Compensation Committee may
accelerate the vesting of each option in our 401(k) plan.
(6) Effective February 2000, Mr. Weinzierl resigned as Executive Vice President
but continues to serve as Secretary andthe event of (a) a memberchange in the
composition of our Board of Directors.
OPTION GRANTS IN 1999
No stock optionsDirectors over a period of two years or stock appreciation rights were granted to anyless
such that those individuals serving as directors at the beginning of the
Named Officers during 1999.
7period cease to represent a majority of the Board or (b) a change of
ownership of securities possessing more than 50% of the total combined
voting power of our outstanding securities pursuant to a hostile tender
offer.
(2) The exercise price may be paid in cash or in shares of our common stock
valued at fair market value on the exercise date. Alternatively, the option
may be exercised through a cashless exercise procedure pursuant to which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to us, out of the sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes. The
Compensation Committee also may assist an optionee in the exercise of an
option by authorizing a loan from Inet in a principal amount not to exceed
the aggregate exercise price plus any tax liability incurred in connection
with the exercise.
(3) The potential realizable value columns of the table above illustrate the
value that might be realized upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates of
appreciation of the price of our common stock over the terms of the options.
These amounts do not take into account provisions providing for termination
of the options following termination of employment or vesting over a four
year period. The use of the assumed 5% and 10% returns is established by the
SEC and is not intended by the Company to forecast possible future
appreciation of the price of the Common Stock.
9
AGGREGATE OPTION EXERCISES IN 19992000 AND DECEMBER 31, 19992000 OPTION VALUES
NoThe following table provides information concerning options were exercised by the
Named Officers during 1999. The following
table sets forth certain information concerning2000 and option holdings at December 31, 19992000 by each of
the Named Officers. No SARsstock appreciation rights were exercised during 19992000 and
none were outstanding at December 31, 1999.2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1999(1)SHARES 2001 (1) DECEMBER 31, 1999(1)2000 (1)(2)
ACQUIRED ON --------------------------- ---------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------- ----------- -------------- ----------- ------------- ----------- -------------
Elie S. Akilian...............Akilian................... -- -- -- -- -- --
Samuel S. Simonian............Simonian................ -- -- -- --
Mark A. Weinzierl............. -- -- -- --
William H. Mina...............Mina................... 110,000 $4,685,060 -- 65,000 $7,559,750 $4,268,875-- $2,359,500
Pierce E. Brockman................ 17,500 513,625 -- 125,000 -- 1,815,000
Luis J. Pajares................... -- -- 75,000 125,000 $651,563 1,085,937
Jeffrey A. Kupp................... -- -- -- 75,000 -- --
- ------------------------
(1) "Exercisable" refers to those options whichthat were both exercisable and vested,
while "Unexercisable" refers to those options whichthat were unvested.
(2) Value is determined by subtracting the exercise price from the fair market
value of our common stock at December 31, 19992000 ($69.8840.50 per share based upon
the closing sale price of our common stock on the Nasdaq NationalStock Market on such
date) and multiplying by the number of shares underlying the options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee was formed in July 1999. Messrs. Adams and Dove
have served onas the sole members of the Compensation Committee since that time.
Neither of these persons is an officer or employee, or former officer or
employee, of us or any of our subsidiaries. No interlocking relationship exists between the memberscurrent executive officer has
ever served as a member of
our Board of Directors or Compensation Committee and the board of directors or compensation committee of
any other company, norentity that has any such interlocking
relationship existed in the past.or has had one or more of its executive officers
serving as a member of our Board of Directors or Compensation Committee.
REPORT ON EXECUTIVE COMPENSATION
During 1999,2000, compensation decisions concerning our executive officers were
made by the Compensation Committee of the Board of Directors, which is composed
of the non-employee directors listed below. The following report describes the
procedures employed by the Compensation Committee in formulating the
compensation policy for our executive officers during 1999.2000.
It is the duty of theour Compensation Committee to reviewrecommend to our Board of
Directors the compensation payable to our Chief Executive Officer and determine the
salaries and bonusescompensation payable to our other executive officers (taking into account the
recommendation of our executive officers, including the Chief Executive Officer,Officer), and to establish the general
compensation policies for such individuals. The Compensation Committee believes
that the compensation policies for our executive officers should reflect our performance
and the value created for our stockholders. In addition, the compensation
policies should support our short-term and long-term strategic goals and values
and should reward individual contribution to our success. We are engaged in a
very competitive industry, and our success depends upon our ability to attract
and retain qualified executives through the competitive compensation packages we
offer to such individuals.
The following objectives are evaluated and considered when making
compensation decisions: (i)(1) provide competitive annual cash compensation to
attract, retain and motivate high-caliber executives; (ii)(2) in at-risk
compensation, align the interests of executives with those of our stockholders
through equity-based compensation and/or equity ownership; (iii)(3) communicate
overall corporate objectives to executives so that
10
all parties are working towards a similar goalgoals; and (iv)(4) deliver compensation
through cost- and tax-
effectivetax-effective programs.
8
GENERAL
Our overall philosophy is to reward executives for building long-term value
for our stockholders. We compensate our executive officers with a combination of
salary and incentives designed to focus their efforts on maximizing both our
near-term and long-term financial performance. In addition, our compensation
structure also rewards individual performance that furthers our goals. Elements
of our compensation structure include the following:
- Base Salarysalary
- Annual Incentivesincentives
- Equity Incentives/Equity Ownershipincentives/equity ownership
Each executive officer's compensation package is designed to provide an
appropriately weighted mix of these elements which cumulatively provide a level
of compensation roughly equivalent to that paid by peer companies.companies, as further
discussed below. The actual value of total compensation is ultimately based on
performance, and will be strongly linked to stockholder value.
BASE SALARY
Base salary and increases in base salary are primarily determined by
individual performance. Each executive officer's base salary is adjusted each
year on the basis of (i)(1) the Compensation Committee's evaluation of the
officer's personal performance for the year taking into account the
recommendation of the Chief Executive Officer and (ii)(2) the competitive
marketplace for persons in comparable positions.positions, with the goal to provide base
compensation roughly in the median range of the levels paid by peer companies.
Our performance and profitability also may also be a factor in determining the base
salaries of executive officers. In many instances, the qualitative factors
involve a subjective assessment by the Compensation Committee.
ANNUAL INCENTIVES
We maintain annual cash incentive bonus programs to reward executive
officers and other key employees for attaining pre-established corporate
performance goals. The annual incentives vary significantly and in general are
based on our profitability, revenue growth and total shareholderstockholder return; the
achievement of our strategic objectives; and each individual's contribution
towards that performance. As discussed under "Management
Compensation--Employment Contracts; Change-in-Control and Indemnification
Arrangements," cash incentive compensation paid to our Senior Vice President of
Sales, Marketing and Customer Operations is based primarily on our sales order
activity. In setting corporate performance goals, we consider our historical
performance and underlying business model, as well as external and internal
expectations related to overall financial and operating performance.performance, with the
goal to provide cash incentive compensation in the upper range of the levels
paid by peer companies.
EQUITY INCENTIVES/EQUITY OWNERSHIP
As mentioned, we believe it is important to align the interests of the
executive officers with those of our stockholders. In our opinion, equity
incentives and ownership are a way of achieving this objective. The twoOur Chief
Executive Officer, one of our founders, who continue as our executive officers maintainmaintains a substantial ownership of our
common stock, with each owning approximately 28%27% of total shares outstanding. For the
executive officers who do not have substantial outright ownership, we believe
equity-based incentives are an effective means of aligning the interests of
executives with those of stockholders. We utilize our 1998 Planstock incentive plans to
grantimplement the equity-based incentives. Options granted under the 1998 Planour plans have an
exercise price equal to the market price
11
of our stock on the date of grant, generally vest on a pro rata basis over four
years and carry a ten-year term. In general, the greater responsibility an
executive officer has, the greater the equity portion of his or her total
compensation package.package, with the goal to provide equity-based incentives in the
upper range of the levels implemented by peer companies. To encourage employee
ownership and to incent employees to grow the value of the business through
performance, we have
established an all-employee grant stock options to nearly all of stock options.our employees.
Additionally, employees have the ability to participate in our Employee Stock
Purchase Plan.
COMPLIANCE WITH THE INTERNAL REVENUE CODE
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 most highly compensated executive officers of a corporation. We have
not 9
and do not currently anticipate paying cash compensation in excess of
$1,000,000 per annum to any employee. None of the compensation paid by us in
19992000 was subject to the limitation on deductibility. TheOur Board of Directors and
Compensation Committee will continue to assess the impact of Section 162(m) of the Code on
itsour compensation practices and determine what further action, if any, is
appropriate.
CEO COMPENSATION
In setting compensation payable to our Chief Executive Officer,
Mr. Akilian, the Compensation Committee has taken into consideration his
significant ownership interest in Inet and has sought to be competitive with
companies of similar size within the industry. Given that consideration,
Mr. Akilian's compensation is tied to our performance and to his personal
performance. In 1999,2000, Mr. Akilian earned a based salary of $204,000 and cash
bonus of $460,250.$375,000. The bonus for 19992000 was based on our revenue and profitability
performance and Mr. Akilian's significant contribution to that performance in
terms of both leadership and strategic vision. Our 2000 results reflected record
revenues and profitability. Revenues increased 44.6% in 2000 over 1999, and
earnings per diluted share increased 47.4% in 2000 over 1999, excluding the
one-time gain from the sale of our wireless data assets in 1999.
SUMMARY
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align our performance and the interests of our stockholders through
the use of competitive and equitable executive compensation in a balanced and
reasonable manner, in both the short and long-term.long term.
Submitted by the Compensation Committee of the Board of Directors:
James R. Adams (Chairman)
Grant A. Dove
12
STOCK PERFORMANCE GRAPH
The graph below depicts our stock price as an index assuming $100 invested
on May 27, 1999, the date of our initial public offering, along with the
composite prices of companies listed in the Nasdaq Stock Market (U.S. Companies)) Index and
the S&P 500Nasdaq Telecommunications Index. This information has been provided to us by the
Nasdaq Stock Market. The comparisons in the graph are required
by regulations of the Securities and Exchange CommissionSEC and are not intended to forecast or to be indicative
of the possible future performance of our common stock.
COMPARISON OF THE CUMULATIVE TOTAL RETURN* AMONG INET TECHNOLOGIES, INC.,
THE NASDAQ STOCK MARKET--U.S.MARKET (U.S.) INDEX AND THE S&P 500 INDEXNASDAQ TELECOMMUNICATIONS INDEX**
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INET NASDAQ STOCK NASDAQ
TECHNOLOGIES, INC. NASDAQ STOCK MARKET (US)(U.S.) S & P 500 TELECOMMUNICATIONS
5/27/99 100 100 100$100.00 $100.00 $100.00 $100.00
12/31/99 388 164 116$388.19 $160.53 $111.00 $132.57
12/31/00 $225.00 $96.51 $100.89 $57.01
* $100 invested 5/27/99 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31.
10
** To comply with SEC disclosure requirements, the Nasdaq Telecommunications
Index, which was not included in the Stock Performance Graph contained in
our Proxy Statement relating to our 2000 Annual Meeting of Stockholders, is
included in this Stock Performance Graph. The S&P 500 Index, which was
included in the Stock Performance Graph in our Proxy Statement relating to
our 2000 Annual Meeting of Stockholders, but which we do not intend to
include in the Stock Performance Graph contained in our Proxy Statements
relating to future Annual Meetings of Stockholders, is included in this
Stock Performance Graph for comparative purposes in accordance with SEC
disclosure requirements.
NASDAQ NASDAQ
MEASUREMENT PERIOD INET NASDAQSTOCK MARKET (U.S.) TELECOMMUNICATIONS
(FISCAL YEAR COVERED) TECHNOLOGIES, INC. STOCK MARKET (US)INDEX INDEX S&P 500
- --------------------- ------------------ ------------------- ----------------------------------- --------
5/27/99 100 100 100 100
12/31/99 388 164 116161 133 111
12/31/00 225 97 57 101
THE PRECEDING REPORT ON EXECUTIVE COMPENSATION, AND THE STOCK PERFORMANCE GRAPH,
THE REPORT OF THE AUDIT COMMITTEE THAT FOLLOWS OR REFERENCES IN THIS PROXY
STATEMENT TO THE INDEPENDENCE OF THE AUDIT COMMITTEE MEMBERS SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE INTO ANY OF OUR PREVIOUS FILINGS UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 WHICH MIGHT INCORPORATE
FILINGS MADE BY US UNDER THOSE ACTS,
13
NOR WILL SUCH REPORTREPORTS, GRAPH OR GRAPHOTHER INFORMATION BE INCORPORATED BY REFERENCE
INTO ANY FUTURE FILINGS MADE BY US UNDER THOSE ACTS, EXCEPT TO THE EXTENT THAT
WE SPECIFICALLY INCORPORATE THIS INFORMATION BY REFERENCE.
CERTAIN TRANSACTIONS WITH MANAGEMENT
In September 1999, we sold our wireless data product line and related assets
to Nextcell, Inc., an entity controlled by Mr. Weinzierl, for a cash purchase
price of $7.0 million. The transaction was approved by a special committee of
disinterested members of the Board of Directors.
Effective January 1, 2000, we sold our membership interest in Inet Global
Research, L.L.C. to Epygi Technologies, Ltd., to an entity controlled by
Mr. Simonian, our Chairman of the Board, for a cash purchase price of $82,000.
This entityEpygi is currently performing programming services for us andfor which it is paid a
monthly fee per dedicated full time programmer plus reimbursement of reasonable
business expenses. Since the beginning of 2000 through March 31, 2001, we intendhave
made payments totaling approximately $1.8 million to enter into a formal agreement with this entityEpygi for certain contract
services.providing these
services to us.
14
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who beneficially own more than 10% of our
common stock, to file reports of ownership and changes in ownership with the Securities and Exchange CommissionSEC
and the Nasdaq Stock Market. Executive officers, directors and greater than 10%
beneficial owners are required by Securities and Exchange CommissionSEC regulations to furnish us with copies of
all Section 16(a) forms they file.
Based solely on our review of the copies of the forms furnished to us or
written representations from certainthe reporting persons that no Forms 5 were
required, we believe that, during 1999,2000, all of our executive officers, directors
and greater than 10% beneficial owners complied with all applicable
Section 16(a) filing requirements.
REPORT OF THE AUDIT COMMITTEE
Our Board of Directors has established an Audit Committee of independent
directors, which operates under a written charter adopted by the Board. A copy
of the charter is attached to this Proxy Statement as Appendix A. The members of
the Audit Committee have been determined to be independent pursuant to Nasdaq's
listing standards.
Management has the primary responsibility for the financial statements and
the related financial reporting process, which includes our systems of internal
controls. The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing and
discussing the financial information that will be provided to our stockholders
and others, the systems of internal controls that management and our Board of
Directors have established and our audit and financial reporting processes. In
fulfilling its oversight responsibilities, the Audit Committee reviewed and
discussed with management our audited financial statements for the year ended
December 31, 2000; discussed with our independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61; and received from the
independent auditors the written disclosures and the letter regarding their
independence, as required by Independence Standards Board Standard No. 1, and
discussed with the auditors their independence (including whether the provision
of services not involving the annual audit or quarterly reviews of the financial
statements is compatible with maintaining auditor independence) in light of
these disclosures.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to our Board of Directors that the audited consolidated financial
statements for the year ended December 31, 2000 be included in our Annual Report
on Form 10-K filed with the SEC.
Submitted by the Audit Committee of the Board of Directors:
Grant A. Dove (Chairman)
James R. Adams
INDEPENDENT AUDITORS
Ernst & Young LLP served as our independent public auditors for fiscal year 1999,2000,
and was selected by our Board of Directors to serve in this capacity for the
20002001 fiscal year. Notwithstanding this selection, our Board of Directors, in its
discretion, may direct the appointment of a different independent accounting
firm at any time during the year if our Board of Directors believes that this
change would be in our stockholders' best interests. Representatives of Ernst &
Young LLP are expected to be present at thisthe meeting to respond to appropriate
questions and will have the opportunity to make a statement if they desire to do
so.
Set forth below is a summary of certain fees that we paid to Ernst & Young
for services in 2000 and for the 2000 audit. The engagement of Ernst & Young LLP as
our auditors has been approvedwas recommended to the Board by our Audit Committee.Committee, which
considered, among other things, whether the provision of non-audit services is
compatible with maintaining the auditors' independence.
15
AUDIT FEES
We paid Ernst & Young an aggregate of $202,600 for professional services
rendered for the audit of our annual financial statements for the year ended
December 31, 2000, and the reviews of our financial statements included in our
Forms 10-Q for the first three quarters in 2000.
ALL OTHER FEES
We paid Ernst & Young an aggregate of $179,253 for professional services
rendered in 2000 other than for services described in the preceding paragraph.
These professional services related primarily to accounting consulting, the
audit of our 401(k) plan, tax consulting and compliance and employment and
benefits consultation. During 2000, Ernst & Young did not provide us financial
information systems design and implementation services.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 and our
Bylaws, stockholder proposals to be presented at our 2001 annual meeting2002 Annual Meeting of
stockholdersStockholders and included in our proxy statementProxy Statement and form of proxy relating to
that meeting, must be received by us at our offices in Plano,Richardson, Texas,
addressed to our Secretary, not later than 120 days prior to April 17, 2001. With respect to any stockholder
proposal submitted outside of Rule 14a-8, persons16, 2002.
Persons acting as proxies shall have discretionary authority to vote against any
proposal presented at our 2001
annual meeting2002 Annual Meeting of stockholdersStockholders unless notice is
received by us in the manner specified in the previous sentence. These proposals
must comply with applicable Delaware law, certain rules and regulations
promulgated by the Securities and
Exchange CommissionSEC and the procedures set forth in our Bylaws.
11
ANNUAL REPORT ON FORM 10-K
WE WILL MAIL TO ANY STOCKHOLDER WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY
OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999,2000,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS. REQUESTS
SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS, AT OUR EXECUTIVE OFFICES
LOCATED AT 1255 WEST 15TH STREET, SUITE 600, PLANO,1500 NORTH GREENVILLE AVENUE, RICHARDSON, TEXAS 75075.75081.
OTHER MATTERS
Our Board of Directors is not aware of any matter to be presented for action
at thisthe meeting other than the matters set forth in this proxy statement.Proxy Statement. Should
any other matter requiring a vote of the stockholders arise, the persons named
as proxies on the enclosed proxy card will vote the shares represented thereby
in accordance with their best judgment of our interest.interests. Discretionary authority
with respect to such other matters is granted by the execution of the enclosed
proxy card.
By OrderMISCELLANEOUS
The cost of soliciting proxies will be paid by us and may include
reimbursement paid to brokerage firms and others for their expense in forwarding
solicitation materials as well as the expense of preparing, assembling,
photocopying and mailing this Proxy Statement. Solicitation will be made
primarily through the use of the mail; however, our regular employees may,
without additional remuneration, solicit proxies personally by telephone or
Internet e-mail.
By order of our Board of Directors,
/s/ Mark A. WeinzierlH. Kleinman
Mark A. WeinzierlH. Kleinman
SECRETARY
April 17, 2000
1216, 2001
16
PROXYAPPENDIX A
INET TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORSAUDIT COMMITTEE CHARTER
I. PURPOSE
The undersigned hereby appoints Elie S. Akilian and Mark A. Weinzierl,
and each of them, with full power of substitution, attorneys and proxiesprimary function of the undersignedAudit Committee is to voteassist the sharesBoard of
our common stock, par value $0.001 per
share,Directors in fulfilling its oversight responsibilities. The Audit Committee will
primarily fulfill these responsibilities by carrying out the activities
enumerated in Section IV of Inet Technologies,this Charter.
The independent accountants' ultimate accountability is to the Board of
Directors and the Audit Committee, as representatives of the stockholders. The
Board of Directors and the Audit Committee have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent accountants (or to nominate the independent accountants to be
proposed for stockholder ratification in any proxy statement).
II. MEMBERSHIP
The Audit Committee shall be comprised of two or more "independent
directors" (within the meaning of applicable requirements promulgated from time
to time by The Nasdaq Stock Market, Inc., or any exchange on which the
undersigned could vote,Corporation's securities are listed), increasing to three or more independent
directors not later than June 14, 2001, except as otherwise permitted or
required by such applicable requirements. The Audit Committee will comply with
the applicable composition and with
all powerother audit committee requirements promulgated
from time to time by The Nasdaq Stock Market, Inc. or any exchange on which the
undersigned would possess, if personally presentCorporation's securities are listed.
III. MEETINGS
The Audit Committee shall meet on a regular basis and shall hold special
meetings as circumstances require.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review this Charter at least annually and recommend any changes to the
Board of Directors, and publish the Charter every three years in the
annual meeting of stockholders of Inet Technologies, Inc.proxy statement.
2. Report in the proxy statement on the matters required to be held at Plano
Centre, 2000 East Spring Creek Parkway, Plano, Texasdisclosed in
the annual meeting proxy statement with respect to the Audit Committee.
3. Prior to the release of the Corporation's annual and quarterly financial
statements, review and discuss the financial statements with management
and discuss with the independent accountants matters required by
applicable auditing standards, including Statement on Tuesday, May 16, 2000
at 9:00 a.m. (Central Time),Auditing Standards
No. 61. Recommend action to the Board of Directors regarding the
inclusion of the audited financial statements in the stockholder and SEC
annual reports.
4. Review and discuss the systems of internal controls that management and
the Board of Directors have established; the Corporation's audit and
financial reporting processes; and any adjournment thereof.
- -------------------------------------------------------------------------------relevant internal financial
reports prepared by management or any internal auditing department, or
request a study of any particular area of interest or concern that the
Audit Committee deems appropriate.
5. On an annual basis, review and discuss the performance of the
independent accountants. Obtain a formal written statement from the
independent accountants consistent with Independence
A-1
Standards Board Standard 1, delineating all relationships between the
independent accountants and the Corporation and review and discuss with
the accountants all such relationships that may impact the objectivity
and independence of the accountants.
6. Recommend to the Board of Directors the selection of or replacement of
the independent accountants, and approve the annual audit fees and any
significant non-audit fees to be paid to the independent accountants.
7. Following completion of the annual audit, review and discuss with the
independent accountants, the internal auditing department, if any, and
management (a) the adequacy and effectiveness of the Corporation's
systems of internal controls regarding finance and accounting, (b) any
significant difficulties encountered during the course of the audit and
(c) the independent accountant's judgments about the quality of the
Corporation's accounting principles as applied in its financial
reporting.
8. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
A-2
PROXY
INET TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2001
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elie S. Akilian and William H. Mina, and each of them, with full power of substitution,
attorneys and proxies of the undersigned to vote the shares of the common stock, par value $0.001 per share, of Inet
Technologies, Inc., which the undersigned could vote, and with all power the undersigned would possess, if personally present at
the 2001 Annual Meeting of Stockholders of Inet Technologies, Inc. to be held at Plano Centre, 2000 East Spring Creek Parkway,
Plano, Texas on Wednesday, May 16, 2001 at 10:00 a.m. (Central Time), and any adjournment thereof.
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark
your votevotes as /X/
indicated in this[x]
the example
1. The election of Class I directors: FOR all WITHHOLD By checking the box to the right, I consent
Nominees: James R. Adams and nominees WITHHOLDAUTHORITY to future access to the Annual Reports, proxy
Grant A. Dove (except as to vote for all statements, prospectuses and other
marked left) nominees communications from the Company
For, except vote withheld from the electronically via the Internet. I
following nominee(s): understand that the Company may no longer [ ]
[ ] [ ] distribute printed materials to me for any
_______________________________ future stockholder meeting until such consent
is revoked. I understand that I may revoke
my consent at any time by contacting the
2. In their discretion, to act (except as marked AUTHORITY upon any matters incidental to Class I nominees: James R. Adams and Grant A. Dove left). to vote for the foregoing Company's transfer agent, Mellon Investor
and such other
all nominees. business as may properly come before the annual meetingAnnual Meeting Services, Ridgefield Park, NJ and that costs
or
Class II nominees: Mark A. Weinzierl and William H. Mina / / / / any adjournment thereof. Class III nominees: Elie S. Akiliannormally associated with electronic access,
such as usage and Samuel S. Simonian
For, except vote withheld from the following nominee(s):telephone charges, will be
my responsibility. Please disregard if you
have previously provided your consent
decision.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ITEM 1. ANY HOLDERSTOCKHOLDER WHO WISHES TO WITHHOLD THE DISCRETIONARY AUTHORITY REFERRED TO IN
- ----------------------------------------------------------
ITEM 2 ABOVE SHOULD MARK A LINE THROUGH THE ENTIRE ITEM.
Receipt of the proxy statement dated April 17, 2000,16, 2001, is
hereby acknowledged.
Dated ,2000
-----------------------------------------
----------------------------------------------------_________________________________, 2001
_____________________________________________
Signature
----------------------------------------------------_____________________________________________
Signature
(Please sign exactly and as fully as your name appears on
your stock certificate. If shares are held jointly, each
stockholder should sign).sign.)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE