<PAGE> 1
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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POET HOLDINGS, INC.
(Name of Registrant as Specified in its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
POET HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 16, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of POET
HOLDINGS, INC. (the Company), a Delaware corporation, will be held on June 16,
2000 at 9:00 a.m., local time, at [the Company's principal offices located at
999 Baker Way, Suite 200, San Mateo, California 94404], for the following
purposes:
1. To elect five (5) directors to serve for the ensuing year and until
their successors are duly elected (Proposal One);
2. To approve the amendment of the Company's 1995 Stock Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 300,000 shares from 1,410,942 shares to 1,710,942 shares
(Proposal 2);
3. To amend the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 30,000,000 shares to
100,000,000 shares (Proposal Three);
4. To ratify the appointment of Deloitte & Touche LLP as independent
public auditors to the Company for the fiscal year ending December 31, 2000
(Proposal Four); and
5. To transact such other business as may properly be brought before
the meeting and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on May , 2000, are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she has returned a proxy.
Sincerely,
JUDITH M. O'BRIEN
Secretary
San Mateo, California
May , 2000
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
POET HOLDINGS, INC.
999 BAKER WAY,
SUITE 200
SAN MATEO, CALIFORNIA 94404
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of POET
HOLDINGS, INC. (the Company) for use at the Annual Meeting of Stockholders to be
held at the Company's principal offices located at 999 Baker Way, Suite 200, San
Mateo, California 94404, on June 16, 2000, at 9:00 a.m., local time, and at any
adjournment(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Company's telephone
number at the address above is (650) 286-4640.
These proxy solicitation materials and the Annual Report on Form 10-K for
the year ended December 31, 1999, including financial statements, will first be
mailed on or about May , 2000, to all stockholders entitled to vote at the
meeting.
THE COMPANY SHALL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER SOLICITED BY
THESE PROXY SOLICITATION MATERIALS A COPY OF THE ANNUAL REPORT ON FORM 10-K,
TOGETHER WITH THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
REQUIRED TO BE FILED WITH THE ANNUAL REPORT, UPON REQUEST OF THE STOCKHOLDER
MADE IN WRITING TO POET HOLDINGS, INC., 999 BAKER WAY, SUITE 200, SAN MATEO,
CALIFORNIA 94404, ATTN: JERRY WONG, VICE PRESIDENT OF FINANCE.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on May , 2000 (the Record
Date) are entitled to notice of, and to vote at, the meeting and at any
adjournment(s) thereof. The Company has one series of Common Shares outstanding,
designated Common Stock, $0.001 par value per share. As of the Record Date,
shares of the Company's Common Stock were issued and outstanding and
held of record by approximately stockholders. As of the Record Date, no
shares of the Company's Preferred Stock were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by (A) delivering to the Company at its
principal offices (Attention: Jerry Wong, Vice President of Finance) (i) a
written notice of revocation or (ii) a duly executed proxy bearing a later date
or (B) attending the meeting and voting in person.
VOTING
On all matters each share has one vote. See Proposal One -- Election of
Directors -- Vote Required.
SOLICITATION OF PROXIES
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. The Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and employees, without
additional compensation, personally or by telephone or facsimile.
<PAGE> 4
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the Inspector) who will be an employee of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares entitled to vote and
present or represented by proxy at the meeting.
The Inspector will treat shares that are voted WITHHELD or ABSTAIN as being
present and entitled to vote for purposes of determining the presence of a
quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. When proxies are properly dated,
executed and returned, the shares represented by such proxies will be voted at
the Annual Meeting in accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted for (i) the election
of the nominees for directors set forth herein; (ii) the amendment to the
Company's 1995 Stock Plan to increase the size of the option pool by 300,000 set
forth herein ; (iii) the approval of an amendment to the Company's Certificate
of Incorporation to increase the authorized number of shares of Common Stock
from 30,000,000 to 100,000,000; (iv) the ratification of Deloitte & Touche LLP,
as independent auditors of the Company for the fiscal year ending December 31,
1999; and (v) upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
If a broker indicates on the enclosed proxy or its substitute that such
broker does not have discretionary authority as to certain shares to vote on a
particular matter (broker non-votes), those shares will not be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and determination
of a quorum.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that while broker non-votes may be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore not be considered "Votes Cast" and,
accordingly, will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules established by
the Securities and Exchange Commission. Proposals of stockholders of the Company
that are intended to be presented by such stockholders at the Company's 2001
Annual Meeting of Stockholders must be received by the Company no later than May
12, 2001, in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2001 Annual Meeting of Stockholders which is
not eligible for inclusion in the proxy statement relating to the meeting, and
the stockholder fails to give the Company notice in accordance with the
requirements set forth in the Securities Exchange Act of 1934, as amended, no
later than May , 2001, then the proxy holders will be allowed to use their
discretionary authority when and if the proposal is raised at the Company's
Annual Meeting in 2001.
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<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000, certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
any person (including any group as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the Exchange Act)), known by the
Company to be the beneficial owner of more than 5% of the Company's voting
securities, (ii) each director and each nominee for director to the Company,
(iii) each of the executive officers named in the Summary Compensation Table
appearing herein, and (iv) all current executive officers and directors of the
Company as a group. The number and percentage of shares beneficially owned are
based on the aggregate of 10,644,305 shares of Common Stock outstanding as of
March 31, 2000. The Company does not know of any arrangements, including any
pledge by any person of securities of the Company, the operation of which may at
a subsequent date result in a change of control of the Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAMES AND ADDRESSES OF BENEFICIAL OWNERS(1) SHARES OF TOTAL
------------------------------------------- --------- --------
<S> <C> <C>
OFFICERS AND DIRECTORS:
Dirk Bartels................................................ 799,836 7.51%
Carol Curry(2).............................................. 33,229 *
David Guinther(3)........................................... 16,030 *
Robert Helgerth............................................. -- --
Michael Hogan(4)............................................ 64,200 *
Volker Smid................................................. -- --
Jorg Tewes(5)............................................... 60,000 *
Jochen Witte(6)............................................. 448,019 4.21%
Jerry Wong(7)............................................... 50,416 *
Gert Kohler(8).............................................. 1,162,935 10.93%
c/o European Technologies Holding N.V.
De Biender 5
NL-1852 ED Heiloo, The Netherlands
Jerome Lecoeur(9)........................................... 563,298 5.29%
c/o INNOVACOM 1
23 Rue Royale
75008 Paris, France
All directors and executive officers as a group (11
persons).................................................. 3,197,963 30.04%
5% STOCKHOLDERS:
European Technologies Holding N.V.(10)...................... 1,102,444 10.36%
De Biender 5
NL-1852 ED Heiloo, The Netherlands
INNOVACOM 1(11)............................................. 552,589 5.19%
23 Rue Royale
75008 Paris, France
El Dorado Ventures(12)...................................... 552,672 5.19%
2400 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Sigma Partners(13).......................................... 552,670 5.19%
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
</TABLE>
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* Represents less than 1%.
(1) Unless otherwise indicated, the address of each officer, director or 5%
stockholder is c/o POET Holdings, Inc., 999 Baker Way, Suite 200, San
Mateo, California 94404.
(2) Ms. Curry resigned as our Vice President of Marketing effective December
31, 1999.
(3) Includes 16,030 shares issuable upon exercise of options held by Mr.
Guinther exercisable within 60 days of March 31, 2000.
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(4) Includes 15,243 shares subject to right of repurchase by us, which lapses
over time.
(5) Includes 13,542 shares subject to right of repurchase by us, which lapses
over time.
(6) Includes 150,000 shares held by Mrs. Witte and 302 shares issuable upon
exercise of an option held by Mrs. Witte exercisable within 60 days of
March 31, 2000.
(7) Includes 20,416 shares issuable upon exercise of options held by Mr. Wong
exercisable within 60 days of March 31, 2000.
(8) Comprised of 1,084,877 shares and a warrant to purchase 17,567 shares held
by European Technologies Holding N.V., 48,393 shares held by
Innovationsfonds Schleswig-Holstein & Hamburg GmbH and 12,098 shares held
by TH Fonds VC GbmH. Dr. Kohler is a principal of each of European
Technologies Holding N.V., Innovationsfonds Schleswig-Holstein & Hamburg
GmbH and TH Fonds VC GbmH, and is a director of POET Holdings. Dr. Kohler
disclaims beneficial ownership of shares held by European Technologies
Holding N.V., Innovationsfonds Schleswig-Holstein & Hamburg GmbH and TH
Fonds VC GmbH, except to the extent of his proportional interest in those
entities.
(9) Includes 543,682 shares held by INNOVACOM 1 and a warrant to purchase 8,907
shares held by INNOVACOM 1. Mr. Lecoeur is an investment manager with
INNOVACOM 1 and is a director of POET Holdings. Mr. Lecoeur disclaims
beneficial ownership of shares held by INNOVACOM 1, except to the extent of
his proportional interest in INNOVACOM 1.
(10) Comprised of 1,084,877 shares and a warrant to purchase 17,567 shares held
by European Technologies Holding N.V. Mr. Albertus G.J. Lucassen is the
sole managing director of European Technologies Holding N.V. and thus may
be deemed to have an indirect pecuniary interest in an indeterminate
portion of the shares beneficially owned by European Technologies Holding
N.V. Mr. Lucassen disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(11) Includes 543,682 shares and a warrant to purchase 8,907 shares held by
INNOVACOM 1. Mr. Denis Champenois is the sole general partner of INNOVACOM
1 and thus may be deemed to have an indirect pecuniary interest in an
indeterminate portion of the shares beneficially owned by INNOVACOM 1. Mr.
Champenois disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein.
(12) Includes (i) 516,736 shares and a warrant to purchase 8,833 shares held by
El Dorado Ventures III, L.P., (ii) 17,178 shares and a warrant to purchase
193 shares held by El Dorado Technology IV, L.P., and (iii) 9,569 shares
and a warrant to purchase 163 shares held by El Dorado C&L Fund, L.P. El
Dorado Ventures III, L.P., El Dorado Technology IV, L.P. and El Dorado C&L
Fund are affiliated with El Dorado Ventures. Ms. Bahles was a director of
POET Holdings from April 7, 1995, to March 7, 2000, and is a general
partner of El Dorado Ventures and may be deemed to control El Dorado
Ventures III, L.P., El Dorado Technology IV, L.P. and El Dorado C&L Fund.
Accordingly, Ms. Bahles may be deemed to have an indirect pecuniary
interest in an indeterminate portion of the shares beneficially owned by El
Dorado Ventures III, L.P., El Dorado Technology IV, L.P. and El Dorado C&L
Fund. Ms. Bahles disclaims beneficial ownership of such shares except to
the extent of her pecuniary interest therein.
(13) Includes (i) 475,965 shares and a warrant to purchase 7,207 shares held by
Sigma Partners III, (ii) 59,333 shares and a warrant to purchase 1,783
shares held by Sigma Associates III, and (iii) 8,184 shares and a warrant
to purchase 198 shares held by Sigma Investors III. Sigma Partners III,
Sigma Associates III and Sigma Investors III are affiliated with Sigma
Partners. Mr. Jamieson was a director of POET Holdings from April 7, 1995,
to December 1, 1999, and is a general partner of Sigma Partners and may be
deemed to control Sigma Partners III, Sigma Associates III and Sigma
Investors III. Accordingly, Mr. Jamieson may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the shares beneficially
owned by Sigma Partners III, Sigma Associates III and Sigma Investors III.
Mr. Jamieson disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein.
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<PAGE> 7
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
In February 2000, the Board of Directors changed the fixed number of
directors from seven (7) to five (5) members, and three (3) directors are to be
elected at the Annual Meeting of Stockholders, with two vacancies remaining.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the Company's five nominees named below, each of whom is currently a
director of the Company. Each nominee has consented to be named a nominee in the
proxy statement and to continue to serve as a director if elected. If any
nominee becomes unable or declines to serve as a director, if additional persons
are nominated at the meeting, or if stockholders are entitled to cumulate votes,
the proxy holders intend to vote all proxies received by them in such a manner
(in accordance with cumulative voting) as will assure the election of as many of
the nominees listed below as possible (or, if new nominees have been designated
by the Board of Directors, in such a manner as to elect such nominees), and the
specific nominees to be voted for will be determined by the proxy holders.
The Company is not aware of any reason that any nominee will be unable or
will decline to serve as a director. The term of office of each person elected
as a director will continue until the next Annual Meeting of Stockholders or
until a successor has been elected and qualified. There are no arrangements or
understandings between any director or executive officer and any other person
pursuant to which he is or was to be selected as a director or officer of the
Company.
The names of the nominees, all of whom are currently directors of the
Company, and certain information about them as of the Record Date, are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE POSITION WITH THE COMPANY
---------------- --- -------- -------------------------
<S> <C> <C> <C>
Dirk Bartels..................... 40 1995 President, Chief Executive
Officer and Director of the
Company
Gert Kohler(1)(2)................ 49 1995 Director
Jerome Lecoeur(1)(2)............. 42 1995 Director
</TABLE>
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Two of the five seats for directors will remain open until such time as the
Board of Directors and the Company select two nominees. There is no family
relationship between any director or executive officer of the Company.
Mr. Bartels is a co-founder of POET Holdings and has served as President
and Chief Executive Officer since we commenced our operations in March 1995.
Prior to that time, Mr. Bartels served as a General Manager of our subsidiary
POET Software GmbH. Mr. Bartels has served as a director of our company since
March 1995 and has acted as our Chairman of the Board since December 1996. Mr.
Bartels received a Master of Science in Computer Science from the Technical
University in Berlin, Germany.
Dr. Kohler has served as a director of POET Holdings since March 1995 and
has served as a member of the compensation committee since January 1999 and as a
member of the audit committee since September 1999. Dr. Kohler has been a
Managing Director with Technologieholding, a venture capital company, since
October 1987. Dr. Kohler also serves on the boards of Intershop Communications
AG, European Technologies Holding N.V., Advanced European Technologies N.V.,
Strategic European Technologies N.V., Innovationsfonds Schleswig-Holstein &
Hamburg GmbH and Technologieholding Fund GmbH. Dr. Kohler holds Masters degrees
in Solid State Physics and in Mathematics from the University of Tubingen, a
Masters degree in Operational Research from the University of Grenoble, and a
Ph.D. in Mathematics from Institute de Recherche Mathematique Applique in France
and a Master of Science in Business Administration from Institute
d'Adminstration Enterprise in France.
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<PAGE> 8
Mr. Lecoeur has served as a director of POET Holdings since April 1995. Mr.
Lecoeur has been an Investment Manager with INNOVACOM, a venture capital
company, since February 1991. Mr. Lecoeur holds a Masters in Economics and a
graduate degree in Marketing from the University of Paris.
DIRECTOR COMPENSATION
In fiscal year 1999, members of the Board of Directors were not compensated
in cash for their services as members of the Board of Directors, although they
were reimbursed for some of their expenses incurred in connection with
attendance at Board and Committee meetings.
Under the Company's 1995 Stock Plan, nonemployee directors are eligible to
receive stock option grants at the discretion of the Board of Directors. In
addition, the Company's 1999 Director Stock Option Plan (the Director Option
Plan) was adopted by the Board of Directors on September 15, 1999, and was
approved by the stockholders on November 4, 1999. The Director Option Plan
provides for the automatic and non-discretionary grant of a non-statutory stock
option to purchase 20,000 shares of the Company's Common Stock to each
non-employee director on the later of the effective date of the Director Option
Plan or the date on which such person becomes a director. Thereafter, each
non-employee director will be automatically granted a non-statutory stock option
to purchase 5,000 shares of Common Stock on the date of each Annual Meeting of
Stockholders at which such non-employee director is reelected to serve on the
Board of Directors, if, on such date, he or she remains an outside director and
has served on the Board for at least the six months preceding the Annual
Meeting. The initial option grant vests 25% one year after the date of grant and
an additional 25% each anniversary of the date of grant thereafter, provided
that the optionee continues to serve as an outside director. Each subsequent
option grant shall vest 100% four years after the date of grant. Such plan
provides that the exercise price shall be equal to the fair market value of the
Common Stock on the date of grant of the options.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 11 meetings during
the fiscal year ended December 31, 1999. With the exception of one director, no
director serving during such fiscal year attended fewer than 73% of the
aggregate of all meetings of the Board of Directors and the committees of the
Board upon which such director served. Mr. Lecoeur attended at least 55% of the
aggregate of all meetings of the Board of Directors and the committees of the
Board upon which Mr. Lecoeur served. The Board of Directors has two committees:
the Audit Committee and the Compensation Committee.
The Audit Committee of the Board of Directors was established on September
15, 1999, and consists of directors Dr. Kohler and Mr. Lecoeur. The Audit
Committee recommends engagement of the Company's independent public accountants.
In addition, the Audit Committee is primarily responsible for approving the
services performed by the Company's independent public accountants and for
reviewing and evaluating the Company's accounting procedures and its system of
internal accounting controls. During 1999, these functions were performed by the
Board of Directors. Accordingly, the Audit Committee had no separate meetings in
1999.
The Compensation Committee of the Board of Directors consists of Dr. Kohler
and Mr. Lecoeur. The Compensation Committee reviews and recommends to the Board
of Directors the compensation of all of our officers and directors, including
stock compensation and loans, and establishes and reviews general policies
relating to the compensation of the Company's employees. During 1999, these
functions were performed by the Board of Directors. Accordingly, the
Compensation Committee had no separate meetings in 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, none of the members of the compensation committee was
an officer or employee of the Company. No member of the compensation committee
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors.
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<PAGE> 9
VOTE REQUIRED
Directors will be elected by a plurality vote of the shares of the
Company's Common Stock present or represented and entitled to vote on this
matter at the meeting. Accordingly, the three candidates receiving the highest
number of affirmative votes of shares represented and voting on this proposal at
the meeting will be elected directors of the Company. Votes withheld from a
nominee and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but, because directors are elected by a
plurality vote, will have no impact once a quorum is present. See
"Voting -- Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES LISTED ABOVE
PROPOSAL TWO
AMENDMENT TO STOCK OPTION PLAN
At the Annual Meeting, Stockholders are being asked to approve an amendment
and restatement of the Company's 1995 Stock Plan (the "Plan"). The Plan provides
a means to attract and retain officers and key employees and promote the success
of the Company.
PROPOSED AMENDMENT TO THE PLAN
Subject to approval by a majority of the Stockholders, the Board of
Directors has approved an amendment to the Plan to increase the number of shares
of Class A Common Stock of the Company ("Common Stock") authorized to be issued
under the Plan by 300,000 shares, from 1,410,942 shares to 1,710,942 shares. At
the Annual Meeting, Stockholders will be requested to approve this increase.
Currently, the Company has a limited shares number of available for grant
under the Plan, which is the Company's primary mechanism for providing equity
incentives to the Company's employees; thus, the Company cannot fulfill its
compensation objectives. Equity incentives have continually been a significant
component of compensation for the Company's employees. By linking key employees'
compensation to corporate performance, the employees' reward is directly related
to the Company's success. The Company believes the use of equity incentives
increases employee motivation to improve Stockholder value. In addition, the
market for employees in technology companies, such as the Company, is extremely
competitive. Consequently, the Board of Directors believes additional shares
must be reserved under the Plan to enable the Company to attract and retain key
employees through the granting of options under the Plan.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required to approve the amendment to increase the number of
shares available for issuance under the Plan by 300,000 shares (the
"Amendment").
SUMMARY DESCRIPTION OF THE PLAN
The following description of the Plan is qualified in its entirety by
reference to the full text of the Plan, a copy of which may be obtained by
Stockholders of the Company upon written request directed to the Company's
Secretary at the address listed on the first page of this Proxy Statement.
Purpose of the Plan.
The Plan was adopted to promote the growth and profitability of the Company
by providing, through the granting of options, incentives to attract highly
talented persons to positions with the Company, to retain such persons and to
motivate them to use their best efforts on behalf of the Company. The Plan is
composed of two parts: the Incentive Stock Option Plan (the "Incentive Plan")
and the Nonstatutory Stock Option Plan (the "Nonstatutory Plan"). Options
granted under the Incentive Plan ("Incentive Options") are intended to
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<PAGE> 10
qualify as "incentive stock options" under the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended ("Code"). Options granted under
the Nonstatutory Plan ("Nonstatutory Options") are not intended to qualify as
Incentive Options. Incentive Options and Nonstatutory Options granted or to be
granted under the Plans are collectively referred to herein as "Stock Options."
Administration of the Plan.
The Plan is administered by the Board of Directors of the Company or a
committee of the Board (collectively the "Board"). Subject to the provisions of
the Plan, the Board has sole discretion to determine from among eligible persons
to whom, and the time or times at which, options may be granted, the number of
shares of Common Stock to be subject to each option, and the period for the
exercise of each Stock Option. Under the Plan, the Board has discretion, within
the limits set by the Plan, to interpret the Plan, to prescribe, amend or
rescind rules and regulations relating to the Plan, to determine the details and
provisions of each stock option agreement between the Company and each person to
whom options are granted, to delegate some or all of its powers under the Plan
to a committee of the Board and to make all other determinations necessary or
appropriate in the administration of the Plan.
Securities Subject to the Plan.
The maximum aggregate number of shares of Common Stock of the Company
reserved for issuance under the Plan is 1,410,942 shares. Shares of Common Stock
that are subject to Stock Options which for any reason terminate or expire
without being exercised shall again be available for granting under the Plan.
The proposed amendment to the Plan would increase the number of shares available
for issuance under the Plan to 1,710,942 shares. This increase, if approved by
the stockholders, will be in addition to the Plan's automatic increase on the
first day of the fiscal year of the lesser of (i) 230,889 shares, (ii) 2% of the
outstanding shares on that date, or (iii) a lesser amount determined by the
Board of Directors. As of the date of this Proxy Statement, a limited number of
shares remain available for grant under the Plan.
Employees, Directors and Consultants Who May Participate in the Plan.
Employees of the Company are eligible to receive incentive stock options,
and employees and consultants of the Company are eligible to receive
nonstatutory stock options. The Board, in its sole discretion, has the power to
determine which persons meet the eligibility requirements of the Plan and which
persons shall be granted Stock Options.
Limitations.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the Plan provides that
no employee may be granted, in any fiscal year of the Company, options to
purchase more than 200,000 shares of Common Stock. Notwithstanding this limit,
however, in connection with such individual's initial employment with the
Company, he or she may be granted options to purchase up to an additional
300,000 shares of Common Stock.
Terms and Conditions of Options.
Option Agreement. Options granted under the Plan will be evidenced by a
stock option agreement in such form as the Board of Directors may from time to
time approve. Other than the stock option agreement, optionees are not provided
with any periodic or other report concerning the status of their individual
options. The Company will distribute to each optionee copies of all reports,
proxy statements and other communications which are distributed to its
stockholders generally. The Company will also supply information in response to
written inquiries.
Option Exercise Price. The Board determines the exercise price of options
at the time the options are granted. The exercise price of an incentive stock
option may not be less than 100% of the fair market value of
8
<PAGE> 11
the Common Stock on the date of grant; provided, however, the exercise price of
an incentive stock option granted to a 10% employee/shareholder may not be less
than 110% of the fair market value of the Common Stock on the date of grant. The
exercise price of a nonstatutory stock option may not be less than 85% of the
fair market value of the Common Stock on the date of grant; provided, however,
the exercise price of an incentive stock option granted to a 10% shareholder may
not be less than 110% of the fair market value of the Common Stock on the date
such option is granted.
Term and Exercisability of Options. The term of Stock Options granted under
the Plan shall be for such periods as the Board determines and shall vest and
become exercisable in such installments and at such times as the Board may
provide in each individual Stock Option grant, and the Board may thereafter in
its sole discretion accelerate the time at which an option or installment may be
exercised. The period for the exercise of each Stock Option cannot exceed ten
(10) years from the date of grant, except in the case of a Stockholder holding
more than ten percent (10%) of the outstanding shares of the Company's Common
Stock, in which case the term for the exercise of an Incentive Option cannot
exceed five (5) years from the date of grant.
Termination of Employment or Directorship. In the event that an optionee's
employment or directorship with the Company or a Participating Company is
terminated for any reason other than death or disability, any unexercised vested
installments of options granted under the Plan to such an optionee shall expire
and become unexercisable as of the earlier of (i) the original termination date
of the option or (ii) three (3) months following the termination of employment
or of directorship. In the event of termination of employment or a directorship
by reason of an optionee's disability or death, any unexercised vested
installments of Stock Options granted under the Plan of such optionee will
expire and become unexercisable as of the earlier of (a) the original
termination date of the option, or (b) the date twelve (12) months following the
date of such termination of employment or directorship. Regardless of the reason
for the termination of the optionee's employment or directorship, the Board in
its discretion, with the consent of the optionee or the optionee's estate (in
the case of the death of the optionee), may extend the period of time in which
unexercised installments of Stock Options remain exercisable after termination
of the optionee's employment or directorship, but not later than the original
termination date of the option. In the case of Incentive Options, such an
extension may result in loss of the tax treatment accorded Incentive Options.
Any installments of a Stock Option that have not vested as of the date of
termination of employment or directorship for any reason will expire and become
unexercisable as of the date of such termination.
Changes in Capitalization.
In the event that the stock of the Company changes by reason of any stock
split, reverse stock split, stock dividend, combination, reclassification or
other similar change in the capital structure of the Company effected without
the receipt of consideration, appropriate adjustments will be made in the number
and class of shares of stock subject to the Stock Plan, and the number and class
of shares of stock subject to any option outstanding under the Stock Plan, and
the exercise price of any such outstanding option.
In the event of a liquidation or dissolution, any unexercised options will
terminate. The Administrator may, in its sole discretion, provide that each
optionee shall have the right to exercise all of the optionee's options,
including those not otherwise exercisable.
In connection with any merger, or sale of all or substantially all of the
Company's assets, each outstanding option may be assumed or an equivalent option
substituted by the successor corporation. If the successor corporation does not
assume the options or to substitute substantially equivalent options, the option
shall terminate as of the date of the closing of the merger.
Limitations on Transfer. No Stock Option granted under the Plan may be
transferred by an optionee other than by will or the laws of descent and
distribution and, during the lifetime of an optionee, the option will be
exercisable only by the optionee.
Exercise of Options. Stock Options shall be exercisable at such time and
under such conditions as determined by the Board. Stock Options are deemed to be
exercised upon receipt by the Company of written notice of such exercise and
full payment for the shares covered by the exercise. The exercise price is
payable
9
<PAGE> 12
by cash upon exercise of the Stock Option. An optionee may also exercise shares
of Common Stock using previously acquired Common Stock, subject to all
restrictions and limitations of applicable law and the terms of the Plan.
Amendment or Termination. The Plan provides that the Board may at any time
amend, alter, and/or terminate the Plan; provided, however (i) any amendment to
extend the term of the Plan, change the designation or class of persons eligible
to receive options or decrease the minimum price at which options may be granted
requires shareholder approval and (ii) the Board shall not amend the Plan in any
manner which would adversely affect Stock Options previously granted. To the
extent necessary to comply with Section 422(b) of the Code, the Company shall
obtain stockholders' approval of any amendment to the Plan in such a manner and
to such a degree as required.
Unless sooner terminated by the Board, the Plan will terminate in August,
2005, and no further options may be granted thereafter. Termination of the Plan
will not affect any right to purchase shares granted under the Plan prior to the
date of termination.
Certain United States Federal Income Tax Information.
The following is only a brief summary of the effect of federal income
taxation upon the participant and the Company under the Plan based upon the
Code. This summary does not purport to be complete and does not discuss the
income tax laws of any municipality, state or country outside of the United
States in which a participant may reside. The Plan advises each participant to
contact his or her own tax advisor concerning the application of tax laws.
If an option granted under the Plan is an Incentive Option, the optionee
will recognize no taxable income upon grant or exercise of the Incentive Option
unless the alternative minimum tax rules apply. Upon the resale or exchange of
the shares at least two years after grant of the Incentive Option and one year
after exercise by the optionee, any gain (or loss) will be taxed to the optionee
as capital gain (or loss). If the optionee fails to satisfy either of these two
holding periods prior to the resale or exchange of the shares (a "disqualifying
disposition"), then the optionee will generally recognize ordinary income equal
to the difference between the fair market value of the shares upon exercise (or,
if lower, the fair market value upon disposition) and the exercise price.
All options that do not qualify as Incentive Options are taxed as
Nonstatutory Options. An optionee will not recognize any taxable income at the
time he or she is granted a Nonstatutory Option. However, upon the exercise of a
Nonstatutory Option, the optionee will generally recognize ordinary income for
federal income tax purposes measured by the excess, if any, of the then fair
market value of the shares over the exercise price. The ordinary income
recognized upon exercise of a Nonstatutory Option by an optionee who is also an
employee of the Company will be treated as wages for tax purposes and will be
subject to tax withholding out of the current compensation, if any, paid to the
optionee. Upon resale of such shares by the optionee, any difference between the
sale price and fair market value on the date of exercise will be treated as
capital gain (or loss).
The Company will be entitled to a tax deduction (except that such deduction
may be limited or disallowed by Section 162(m) of the Code for certain highly
compensated executive officers) in the same amount as the ordinary income, if
any, recognized by the optionee (i) upon exercise of a Nonstatutory Option and
(ii) upon the sale of shares acquired by exercise of an Incentive Option in a
disqualifying disposition. The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an Incentive Option,
regardless of the applicability of the alternative minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE COMPANY'S 1995 STOCK PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER BY 300,000.
10
<PAGE> 13
PROPOSAL THREE
AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has adopted resolutions setting forth the proposed
amendment to the first sentence of Article 4 of the Company's Certificate of
Incorporation (the Amendment), the advisability of the Amendment, and a call for
submission of the Amendment for approval by the Company's stockholders at the
Annual Meeting. The following is the text of Article 4 of the Certificate of
Incorporation of the Company, as proposed to be amended:
"The Corporation is authorized to issue two classes of shares, to be
designated, respectively, Common Stock and Preferred Stock. The total number of
shares of Common Stock which the Corporation is authorized to issue is
100,000,000 shares, $0.001 par value per share, and the total number of shares
of Preferred Stock which the Corporation is authorized to issue is 3,000,000,
$0.001 par value per share."
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the Company's best interest
to increase the number of shares of Common Stock that it is authorized to issue
in order to give the Company the flexibility to issue Common Stock for proper
corporate purposes which may be identified in the future, such as to raise
equity capital, to make acquisitions through the use of stock, to establish
strategic relationships with other companies, to adopt additional employee
benefit plans or reserve additional shares for issuance under such plans and to
effect additional stock splits in the future. The Board of Directors has no
immediate plans, understandings, agreements or commitments to issue additional
Common Stock for any such purpose.
The Board of Directors believes that the proposed increase in the
authorized shares of Common Stock will make available sufficient shares to
effect a stock split in the future and should the Company decide to use its
shares for one or more of such previously mentioned purposes or otherwise. No
additional action or authorization by the Company's stockholders would be
necessary prior to the issuance of such additional shares, unless required by
applicable law or the rules of any stock exchange or national securities
association trading system on which the Common Stock is then listed or quoted.
The Company reserves the right to seek a further increase in authorized shares
from time to time in the future as considered appropriate by the Board of
Directors.
Under the Company's Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to Common Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on earnings per
share, voting power and share holdings of current stockholders.
The proposed amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of this proposal. For example, in the event
of a hostile attempt to take over control of the Company, it may be possible for
the Company to endeavor to impede the attempt by issuing shares of Common Stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost to acquire control of the Company. The proposed amendment
therefore may have the effect of discouraging unsolicited takeover attempts. By
potentially discouraging initiation of any such unsolicited takeover attempt,
the proposed amendment may limit the opportunity for the Company's stockholders
to dispose of their shares at the higher price generally available in takeover
attempts or that may be available under a merger proposal. The proposed
amendment may have the effect of permitting the Company's current management,
including the current Board of Directors, to retain its position, and place it
in a better position to resist changes that stockholders may wish to make if
they are dissatisfied with the conduct of the Company's business. However, the
Board of Directors is not aware of any attempt to take control of the Company
and the Board of Directors has not presented this proposal with the intent that
it be utilized as a type of anti-takeover device.
11
<PAGE> 14
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is necessary for approval of the proposed amendment. Therefore,
abstentions and broker non-votes (which may occur if a beneficial owner of stock
where shares are held in a brokerage or bank account fails to provide the broker
or the bank voting instructions as to such shares) effectively count as votes
against the proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 30,000,000 SHARES TO
100,000,000 SHARES.
12
<PAGE> 15
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
five next most highly compensated executive officers of the Company (the Named
Executive Officers) for services rendered in all capacities to the Company in
the fiscal year ended December 31, 1999. The entries under the column heading
All Other Compensation in the table represent the cost of term life insurance
for each Named Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY($)(A) BONUS($)(A) OPTIONS(#) COMPENSATION($)(A)
---------------------------- ------ ------------ ----------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Dirk Bartels....................... 1999 $214,793 $ 325 -- $ 433(e)
President and Chief Executive
Officer
Carol Curry(b)..................... 1999 130,000 34,032 -- 433(e)
Vice President of Marketing
David Guinther..................... 1999 231,419(c) 325 40,000 303(e)
Vice President of Sales
Michael Hogan...................... 1999 119,731 27,825 -- 433(e)
Vice President of Corporate
Development
Jochen Witte....................... 1999 162,618(d) 70,107 -- 14,000(f)
Chief Financial Officer,
Executive Vice President of
European Operations and General
Manager
Jerry Wong......................... 1999 150,000 325 20,000 433(e)
Executive Vice President of U.S.
Operations and Vice President of
Finance
</TABLE>
- ---------------
(a) For Mssrs. Bartels and Witte, such amounts include U.S. dollar amounts,
includes converted from Deutsche Mark based on an exchange rate of DM1.84 to
the dollar, the average exchange rate for 1999.
(b) Ms. Curry resigned as Vice President of Marketing effective December 31,
1999.
(c) Includes $106,419 earned as commissions.
(d) Includes $70,107 earned as commissions; entire amount converted from
Deutsche Mark based on an exchange rate of DM1.84 to the dollar, the average
exchange rate for 1999.
(e) Consists of premiums paid by us for term life insurance.
(f) Represents the dollar value of the benefit to the executive officer for the
company-sponsored automobile and of the remainder of a premium paid by us
for term life insurance.
Option Grants in Last Fiscal Year. The following table sets forth
information with respect to stock options granted to each of the named executive
officers during the fiscal year ended December 31, 1999. All of these options
were granted under our 1995 Stock Plan and have a term of 10 years, subject to
earlier termination in the event the optionees' services to us cease.
See -- Incentive Stock Plans for a description of material terms of these
options. In accordance with the rules of the U.S. Securities and Exchange
Commission, also shown below is the potential realizable value over the term of
the option, the period from the grant date to the expiration date, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are based on assumed rates of appreciation and do not represent our
13
<PAGE> 16
estimate of our future stock price. Actual gains, if any, on stock option
exercises will be dependent on the future performance of our common stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE FOR OPTION TERM(3)
OPTIONS DURING PRICE EXPIRATION ---------------------
NAME GRANTED(#) PERIOD(1) ($/SHARE)(2) DATE 5% 10%
---- ---------- ---------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dirk Bartels................ -- -- -- -- -- --
Carol Curry................. -- -- -- -- -- --
David Guinther.............. 20,000 3.8 0.70 1/25/09 $ 8,805 $ 22,312
20,000 3.8 5.00 7/13/09 $ 62,889 $159,374
Michael Hogan............... -- -- -- -- -- --
Jochen Witte(4)............. 500 * 5.00 7/13/09 $ 1,572 $ 3,984
Jerry Wong.................. 20,000 3.8 12.90 11/15/09 $162,255 $411,186
</TABLE>
- ---------------
* less than 1% of the total options granted to employees during the fiscal
year ended December 31, 1999.
(1) Based on an aggregate of 522,000 options we granted under the 1995 Stock
Plan during the fiscal year ended December 31, 1999, to employees of and
consultants to POET Holdings, including the named executive officers.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by reference to the closing price
reported on the Neuer Markt of the Frankfurt Stock Exchange or the date of
grant, or as determined by the Board of Directors prior to the Company's
securities being traded on the Neuer Markt of the Frankfurt Stock Exchange.
The Board of Directors based its determination on the Company's financial
results and prospects or the share price derived for arms-length
transactions.
(3) Potential realizable values are (i) net of exercise price before taxes, (ii)
based on the assumption that the Common Stock of the Company appreciates at
the annual rate shown (compounded annually) from the date of grant until the
expiration of the ten-year option term, (iii) based on the assumption that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price and converted from euros to U.S. dollars
at an exchange rate reported by The Wall Street Journal for December 31,
1999 of $1.007 per euro. These numbers are calculated based on the
requirements promulgated by the Commission and do not reflect the Company's
estimate of future stock price growth.
(4) Represents options granted to Mrs. Witte, an employee.
14
<PAGE> 17
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth stock option exercises and the value of
unexercised stock options held by the named executive officers during the last
fiscal year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES VALUE AT DECEMBER 31, 1999 DECEMBER 31, 1999(2)
ACQUIRED REALIZED -------------------- --------------------
NAME ON EXERCISE(#) ($)(1) VESTED UNVESTED VESTED UNVESTED
---- -------------- -------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dirk Bartels.............. -- $ -- -- -- $ -- $ --
Carol Curry............... 10,000 44,500 23,229 21,771 533,338 499,862
David Guinther............ -- -- 12,332 43,168 282,393 899,887
Michael Hogan............. 8,000 35,600 34,187 22,813 784,933 523,786
Jochen Witte(3)........... -- -- 250 750 5,740 9,255
Jerry Wong................ 20,000 99,835 26,250 33,750 606,000 527,900
</TABLE>
- ---------------
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Market value of the Company's Common Stock at fiscal year-end minus the
exercise price. The market value of the Company's Common Stock on December
31, 1999, was $23.51 per share, based on an exchange rate of $1.0041 per
1.00 euro, the exchange rate in effect on December 31, 1999, as reported by
The Wall Street Journal.
(3) Includes 1,000 options granted to Mrs. Witte, an employee.
CHANGE OF CONTROL AND SEVERANCE AGREEMENTS
We entered into an employment contract with Jorg Tewes on September 29,
1997, which provides that Mr. Tewes will serve as a managing director of POET
Software GmbH for a term ending on the last day of the month in which Mr. Tewes
turns 60 years old. Either Mr. Tewes or we may terminate this agreement at the
end of each calendar quarter by giving at least three months' written notice,
except that we can terminate Mr. Tewes' employment with us sooner if he
materially breaches his duties under this agreement. As part of his
remuneration, we granted Mr. Tewes options to purchase 20,000 shares of our
common stock, which vest over a four-year period beginning on July 1, 1998.
We entered into an employment contract with Jochen Witte on May 19, 1993,
which, as amended on September 10, 1998, provides that Mr. Witte will serve as
our managing director for a term ending on the last day of the month in which
Mr. Witte turns 60 years old. Either Mr. Witte or we may terminate this
agreement at the end of each calendar quarter by giving at least three months'
written notice, except that we can terminate Mr. Witte's employment with us
sooner if he materially breaches his duties under this agreement.
We entered into a Change of Control Severance Agreement with Michael Hogan
on April 2, 1997, which provides that in the event Mr. Hogan's employment is
terminated within 12 months of a change of control of POET Holdings, the vesting
of his stock options will accelerate as to that number of options equal to that
number of options that would vest over the next 12 months.
We entered into a Change of Control Severance Agreement with Carol Curry on
August 1, 1997, which provides that in the event Ms. Curry's employment is
terminated within 12 months of a change of control of POET Holdings, the vesting
of her stock options will accelerate as to that number of options equal to that
number of options that would vest over the next 12 months.
We entered into a Change of Control Severance Agreement with Jerry Wong on
November 14, 1995, which provides that in the event Mr. Wong's employment is
terminated within 12 months of a change of control of POET Holdings, the vesting
of his stock options will accelerate as to that number of options equal to that
number of options that would vest over the next 12 months.
15
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, none of the members of the compensation committee was
an officer or employee of the Company. No member of the compensation committee
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors.
16
<PAGE> 19
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the report of the Compensation Committee of the Board of
Directors with respect to the compensation paid to the Company's executive
officers during the fiscal year ended December 31, 1999. Actual compensation
earned during fiscal 1999 by the named executive officers is shown in the
Summary Compensation Table.
INTRODUCTION
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, and establishes the compensation
plans and specific compensation levels for executive officers. The Committee
strives to ensure that the Company's executive compensation programs will enable
the Company to attract and retain key people and motivate them to achieve or
exceed certain key objectives of the Company by making individual compensation
directly dependent on the Company's achievement of certain financial goals, such
as profitability and asset management and by providing rewards for exceeding
those goals.
COMPENSATION PROGRAMS
Base Salary. The Committee establishes base salaries for executive
officers. Base pay increases vary according to individual contributions to the
Company's success and comparisons to similar positions within the Company and at
other comparable companies.
Bonus Plans. Each executive officer participates in the Management Bonus
Plan which provides for the payment of a quarterly bonus determined by a formula
based on improvements of pre-tax profits and asset management over preset
threshold levels for each operating group or business unit.
Stock Options. The Committee believes that stock options provide additional
incentive to officers to work towards maximizing stockholder value. The
Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. Options granted by the Company to its executive
officers and other employees have exercise prices equal to the fair market value
at the time of grant. Options vest and become exercisable at such time as
determined by the Board. The initial option grant is designed to be competitive
with those of comparable companies for the level of the job that the executive
holds and is designed to motivate the officer to make the kind of decisions and
implement strategies and programs that will contribute to an increase in the
Company's stock price over time. Periodic additional stock options within the
comparable range for the job are granted to reflect the executives ongoing
contributions to the Company, to create an incentive to remain at the Company
and to provide a long-term incentive to achieve or exceed the Company's
financial goals.
Other. In addition to the foregoing, officers participate in compensation
plans available to all employees, such as a quarterly profit sharing plan and
participation in both the Company's 401(k) retirement plan and employee stock
purchase plan. See Executive Compensation -- Other Employee Benefit Plans.
17
<PAGE> 20
COMPENSATION LIMITATIONS
The Company has considered the potential future affects of Section 162(m)
of the Internal Revenue Code on the compensation paid to the Company's executive
officers. Under Section 162(m) of the Internal Revenue Code, adopted in August
1993, and regulations adopted thereunder by the Internal Revenue Service,
publicly-held companies may be precluded from deducting certain compensation
paid to an executive officer in excess of $1.0 million in a year. The
regulations exclude from this limit performance-based compensation and stock
options provided certain requirements, such as stockholder approval, are
satisfied. The Company plans to take actions, as necessary, to insure that its
stock option plans and executive annual cash bonus plans qualify for exclusion.
Respectfully Submitted By:
COMPENSATION COMMITTEE
Gert Kohler
Jerome Lecoeur
Dated: April 28, 2000
18
<PAGE> 21
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the Neuer Markt of the Frankfurt Stock Exchange and of the
NEMAX 50 and NEMAX All Share indices for the period commencing November 16, 1999
and ending on December 31, 1999. Returns for the indices are weighted based on
market capitalization at the beginning of each measurement point.
CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
POET HOLDINGS, INC. NEMAX 50 INDEX NEMAX ALL-SHARE INDEX
------------------- -------------- ---------------------
<S> <C> <C> <C>
11/16/99 100.00 100.00 100.00
11/30/99 95.06 108.15 107.14
12/31/99 181.47 119.09 132.10
</TABLE>
- ---------------
(1) The graph assumes that $100 was invested on November 16, 1999, in the
Company's Common Stock, in the NEMAX 50 Index and in the NEMAX All-Share
Index and that all dividends were reinvested. No dividends have been
declared or paid on the Company's Common Stock. Stockholder returns over the
indicated period should not be considered indicative of future stockholder
returns.
The information contained above under the captions Report of the Board of
Directors on Executive Compensation and Performance Graph shall not be deemed to
be soliciting material or to be filed with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the SEC). Such officers, directors and ten-percent stockholders are also
required by SEC rules to furnish the Company with copies of all forms that they
file pursuant to Section 16(a). A late report on Form 3 was filed in May 2000
with respect to distributions made to Robert Helgerth, by the Company in
November 1999. Based
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solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that, other
than the exceptions described in this paragraph, during fiscal 1999 all
executive officers and directors of the Company complied with all applicable
filing requirements.
RELATED PARTY TRANSACTIONS
In the Company's last fiscal year, there has not been nor is there
currently proposed any transaction or series of similar transactions to which
the Company was or is to be a party in which the amount involved exceeds $60,000
and in which any director, executive officer, holder of more than 5% of the
common stock of the Company or any member of the immediate family of any of the
foregoing persons had or will have a direct or indirect material interest other
than (1) compensation agreements and other arrangements, which are described
where required in Change of Control and Severance Agreements and (2) the
transactions described below.
On September 13, 1999, Technologie-Beteilligungsgesellschaft mBH converted
$3.9 million in convertible debt owed to the Company into 275,106 shares of the
Company's common stock at a per share price of $14.18. We entered into a
software license agreement with Novell, Inc. on November 14, 1996, which was
amended on December 31, 1996, September 30, 1997, February 26, 1998 and
September 30, 1999. Novell owns 459,307 shares of the Company's common stock,
representing approximately 4.32% of our outstanding stock. Pursuant to the
license agreement, as amended, Novell has a nonexclusive, perpetual license to
the Company's POET Object Server Suite Version 5.0, which at its sole option,
Novell may incorporate for use with Novell's product solutions foundation
product.
INDEMNIFICATION
The Company has entered into indemnification agreements with each of its
directors and officers. These indemnification agreements require the Company to
indemnify its directors and officers to the fullest extent permitted by Delaware
law.
CONFLICT OF INTEREST POLICY
The Company believes that all transactions with affiliates described above
were made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. The Company's policy is to require
that a majority of the independent and disinterested outside directors on the
Board approve all future transactions between POET and its officers, directors,
principal stockholders and their affiliates. Such transactions will continue to
be on terms no less favorable to the Company's than it could obtain from
unaffiliated third parties.
All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board, including a majority of the independent and
disinterested outside directors, and will continue to be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 2000, and recommends that stockholders vote for ratification
of such appointment. Although action by stockholders is not required by law, the
Board of Directors has determined that it is desirable to request approval of
this selection by the stockholders. Notwithstanding the selection or a
ratification, the Board of Directors, in its discretion, may direct the
appointment of new independent auditors at any time during the year, if the
Board of Directors determines
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that such a change would be in the best interest of the Company and its
stockholders. In the event of a negative vote or ratification, the Board of
Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements since
the fiscal year ended 1995. Representatives of Deloitte & Touche LLP are
expected to be present at the meeting and will be afforded the opportunity to
make a statement if they desire to do so. The representatives of Deloitte &
Touche LLP are also expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: May , 2000
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PROXY
POET HOLDINGS, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
JUNE 16, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of POET HOLDINGS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated May 12, 2000, and hereby appoints
Dirk Bartels and Jerry Wong each as proxy and attorney-in-fact, with full power
of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 2000 Annual Meeting of Stockholders of POET HOLDINGS, INC. to
be held on June 6, 2000 at 9:00 a.m. local time, at 999 Baker Way, Suite 200,
San Mateo, California, 94404, and at any adjournment or adjournments thereof,
and to vote all shares of common stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth on the
reverse side. (Continued, and to be signed on the other side.
1. ELECTION OF DIRECTORS: FOR WITHHOLD
NOMINEES: FOR ALL
Dirk Bartels [ ] [ ]
Gert Kohler [ ]
Jerome Lecoeur [ ]
----------------------
INSTRUCTION: To withhold
authority to vote for any
individual nominee, write
that nominee's name in the
space provided below.
2. Approval to amend the FOR AGAINST ABSTAIN
Company's 1995 Stock Plan
to increase the size of [ ] [ ] [ ]
the pool by 300,000
shares, from 1,410,942 to
1,710,942.
(continued and to be signed and dated on the other side)
<PAGE> 25
(continued from other side)
3. Approval of an amendment to FOR AGAINST ABSTAIN
The Company's Certificate of
Incorporation to increase the [ ] [ ] [ ]
authorized number of shares
of Common Stock by 70,000,000,
from 30,000,000 to
100,000,000.
4. Appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as independent
auditors of POET Holdings, [ ] [ ] [ ]
Inc. for the fiscal year
ending December 31, 2000.
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof. THIS PROXY
WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE
VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS, THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AND THE APPROVAL OF THE AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION, OR AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERTY COME BEFORE THE MEETING, INCLUDING, AMONG
OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING.
This proxy should be marked, dated and
signed by the stockholder(s) exactly as
his or her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a fiduciary
capacity should so indicate. If shares
are held by joint tenants or as
community property, both should sign.
Signature(s)
----------------------------
Dated , 2000
----------------------------
