<PAGE> 1
SCHEDULE 14(a) 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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential for use of the Commission
only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
JDA SOFTWARE GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
JDA SOFTWARE GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
- --------------------------------------------------------------------------------
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 in the amount on which
the filing fee is calculated and state how it was determined).
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total Fee paid
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE> 2
JDA SOFTWARE GROUP, INC.
14400 NORTH 87TH STREET
SCOTTSDALE, ARIZONA 85260
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1999
To The Stockholders:
The 1999 Annual Meeting of Stockholders of JDA Software Group, Inc. (the
"Company") will be held on Thursday, May 20, 1999, at 10:00 a.m., Scottsdale,
Arizona time, at the JDA Software Group, Inc. World Headquarters, 14400 North
87th Street, Scottsdale, Arizona 85260, for the following purposes:
1. To elect two Class III directors to serve a three-year term on the
Company's Board of Directors.
2. To approve adoption of the 1999 Employee Stock Purchase Plan which
provides for the issuance of up to 750,000 shares of common stock
annually to employees of the Company.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the year ending December 31, 1999.
4. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 9, 1999 are
entitled to notice of, and to vote at, the 1999 Annual Meeting of Stockholders
and any adjournments thereof. A Stockholder may only vote at the meeting if the
holder is present in person or represented by proxy. A copy of the Company's
1998 Annual Report to Stockholders, which includes certified financial
statements, is enclosed. Management cordially invites you to attend the 1999
Annual Meeting of Stockholders.
By order of the Board of Directors
/s/ Kristen L. Magnuson
Kristen L. Magnuson
Secretary
Phoenix, Arizona
April 19, 1999
IMPORTANT: STOCKHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND MAIL THE
ENCLOSED PROXY. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED
STATES.
<PAGE> 3
PROXY STATEMENT
JDA SOFTWARE GROUP, INC.
14400 NORTH 87TH STREET
SCOTTSDALE, ARIZONA 85260
SOLICITATION AND VOTING OF PROXIES
The accompanying proxy is solicited by the Board of Directors of JDA
Software Group, Inc., a Delaware corporation ("JDA" or the "Company"), for use
at the 1999 Annual Meeting of Stockholders to be held on Thursday, May 20, 1999,
at 10:00 a.m., Scottsdale, Arizona time (the "Annual Meeting"), or any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. These proxy materials and the Annual Report to
Stockholders for the year ended December 31, 1998, were first mailed on or about
April 19, 1999, to stockholders of record at the close of business on April 9,
1999 (the "Record Date"). The Company had 23,724,783 shares of common stock
outstanding, par value $.01 per share ("Common Stock"), as of the close of
business on the Record Date. Only stockholders of record on the Record Date will
be entitled to vote at the Annual Meeting. The holders of a majority of the
issued and outstanding Common Stock entitled to vote, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the Annual Meeting.
Each stockholder is entitled to one (1) vote per share on the proposals
presented in this Proxy Statement, as well as on all other matters that may be
properly considered at the Annual Meeting. All valid proxies received prior to
the Annual Meeting will be voted in accordance with the specifications or
directions indicated on the proxy. A stockholder giving the enclosed proxy has
the power to revoke it at any time prior to the time it is voted, by either (i)
attending the Annual Meeting and voting in person; (ii) duly executing and
delivering a proxy bearing a later date; or (iii) sending written notice of
revocation to the Secretary of the Company at 14400 North 87th Street,
Scottsdale, Arizona 85260. Votes cast by proxy or in person at the Annual
Meeting will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
counted for purposes of determining a quorum, but will not be counted for any
purpose in determining whether a matter has been approved.
The Company may retain an outside firm to assist in the solicitation of
proxies from brokers, nominees, institutions and individuals. The cost of
soliciting proxies will be borne by the Company, and is not expected to exceed
$7,500. The Company will request banks, brokers and other custodians, nominees
and fiduciaries, to solicit their customers who have stock of the Company
registered in the names of such persons, and will reimburse them for their
reasonable, out-of-pocket costs. In addition to soliciting stockholders by mail,
proxies may be solicited by the Company's officers and directors by personal
interview, telephone, or facsimile without additional compensation.
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<PAGE> 4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
Directors, (J. Michael Gullard and William C. Keiper), two Class II Directors
(Stephen A McConnell and Jock Patton), and two Class III Directors (James D.
Armstrong and Frederick M. Pakis), who will serve until the annual meetings of
stockholders to be held in 2000, 2001 and 1999, respectively, and until their
respective successors are duly elected and qualified. At each annual meeting of
stockholders, Directors are elected for a term of three years to succeed those
Directors whose terms expire on the annual meeting dates. The number of
Directors comprising the Board of Directors is currently set at six (6).
The term of the Class III Directors will expire on the date of the 1999
Annual Meeting of Stockholders. Two individuals are to be elected to serve as
Class III Directors of the Board of Directors at that meeting. Management's
nominees for election by the stockholders to these positions are James D.
Armstrong and Frederick M. Pakis. If elected, the nominees will serve as
Directors until the Company's annual meeting of stockholders in 2002, and until
their successors are elected and qualified. If either of the nominees decline to
serve or if a vacancy occurs before the election (although management knows of
no reason to anticipate that this will occur), the proxies may be voted for a
substitute nominee(s) by the Board of Directors.
If a quorum is present and voting, the nominees for Class III Directors
receiving the highest number of votes will be elected. Abstentions will have no
effect on the vote.
INFORMATION CONCERNING DIRECTORS AND NOMINEE
Information concerning the names, ages, terms, positions and offices held
with the Company, and business experience of the Company's current directors is
set forth below:
<TABLE>
<CAPTION>
TERM
NAME AGE TITLE CLASS EXPIRES
- ---- --- ----- ----- -------
<S> <C> <C> <C> <C>
James D. Armstrong......... 48 Co-Chairman and Co-Chief Executive Officer III 1999
Frederick M. Pakis......... 45 Co-Chairman and Co-Chief Executive Officer III 1999
J. Michael Gullard(1)...... 54 Director I 2000
William C. Keiper(1)....... 48 Director I 2000
Stephen A McConnell(2)..... 46 Director II 2001
Jock Patton(2)............. 53 Director II 2001
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
James D. Armstrong has been a Director of the Company since 1985 and
currently serves as Co-Chairman of the Board with Mr. Pakis. Mr. Armstrong has
also served as Co-Chief Executive Officer with Mr. Pakis since January 1999. Mr.
Armstrong co-founded the Company in 1985 and served as its Chief Executive
Officer until October 1997. Mr. Armstrong founded JDA Software Services, Ltd., a
Canadian software development company, in 1978 and served as its President until
1987. Mr. Armstrong currently serves on the Board of Directors of InfoImage,
Inc., a privately-held software and services provider based in Phoenix, Arizona.
Mr. Armstrong previously served as a Director of Mark's Work Wearhouse, a
publicly-held Canadian specialty retailing company from 1985 to 1987. Mr.
Armstrong attended Ryerson Polytechnic Institute in Toronto, Ontario.
Frederick M. Pakis has been a Director of the Company since 1985 and
currently serves as Co-Chairman of the Board with Mr. Armstrong. Mr. Pakis has
also served as Co-Chief Executive Officer with Mr. Armstrong since January 1999.
Mr. Pakis co-founded the Company in 1985 and served as its President until
October 1997. Mr. Pakis served as a Retail Consulting Manager with Touche Ross &
Co. from 1981 to 1985, and as Director of Corporate Planning for the Sherwin
Williams Company, a home improvement
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<PAGE> 5
specialty store company from 1976 to 1981. Mr. Pakis has served on the Board of
Directors of Advanced Food Systems, Inc., a privately-held food manufacturing
and distribution company since October 1997. Mr. Pakis attended the United
States Military Academy at West Point, received a Bachelor of Science Degree in
Operations Research from Case Western Reserve University, and a Master of
Business Administration Degree from the London School of Business, where he
studied as a Sloan Fellow.
J. Michael Gullard joined the Company as a Director on January 26, 1999.
Mr. Gullard has served as General Partner of Cornerstone Management, a venture
capital firm specializing in software and data communications companies, since
1984, and since 1996 as Chairman of Merant PLC (formerly Micro Focus Group
Ltd.), a publicly-held corporation headquartered in England with extensive
operations in the United States, that specializes in software application
development tools. Mr. Gullard also serves as a Director of three private
companies and has formerly served as a Director of seven high tech companies.
Mr. Gullard attended Stanford University and received a Bachelor of Arts Degree
in Economics and a Masters Degree from the Graduate School of Business.
William C. Keiper has served as a Director of the Company since April 1998.
Mr. Keiper has served as a Director and President of the Services and Publishing
Group of Martin Wolf Associates, Incorporated, a mergers and acquisitions firm
serving middle market information technology products and services companies
since 1998. Mr. Keiper previously served as a Managing Director of Software
Equity Group, L.L.C., a software and Internet technology mergers, acquisitions
and strategic consulting firm based in Phoenix, Arizona from 1997 to 1998. From
1993 to 1997, Mr. Keiper was an officer and member of the Board of Directors of
Artisoft, Inc., a publicly-held software company that develops and markets
networking and communications software. Mr. Keiper served as the President and
Chief Operating Officer of Artisoft, Inc. during 1993, as Chief Executive
Officer from 1993 to 1997, and as Chairman of the Board from 1995 to 1997. From
1986 to 1993, Mr. Keiper held various executive positions with MicroAge, Inc., a
publicly held distributor and integrator of information technology products and
services, including serving as President and Chief Operating Officer. Mr.
Keiper's education includes a Bachelor of Science Degree in Finance from Eastern
Illinois University; a law degree from Arizona State University; and a Master of
International Management Degree from the American Graduate School of
International Management.
Stephen A McConnell joined the Company as a Director on January 26, 1999.
Mr. McConnell formed and has served as President of Solano Ventures, a private
capital investments company, since 1991. Mr. McConnell has also served as
Chairman of G-L Industries, L.L.C., a Salt Lake City-based manufacturer of wood
glu-lam beams used in the construction industry since 1998, and as Chairman of
Mallco Lumber and Building Materials, Inc. from 1991 to 1997. Mr. McConnell
previously served as a Director, President and Chief Executive Officer of N-W
Group, Inc., a publicly-held real estate company, from 1985 to 1991. Mr.
McConnell currently serves on the Board of Directors of four other publicly-held
companies, including Pilgrim America Capital Corporation, Vodavi Technology,
Inc., Capital Title Group, Inc. and Mobile Mini, Inc., and four privately-held
companies. Mr. McConnell attended Harvard University and received a Bachelor of
Science Degree in Business Administration and a Master of Business
Administration Degree.
Jock Patton, a private investor, joined the Company as a Director on
January 26, 1999. From 1992 to 1997, Mr. Patton was a Director and President of
StockVal, Inc., an SEC registered investment advisor providing securities
analysis software and proprietary data to mutual funds, major money managers and
brokerage firms worldwide. From 1972 to 1992, Mr. Patton was a Partner and
Director in the law firm of Streich Lang where he founded and headed the
Corporate/Securities Practice Group. Mr. Patton currently serves on the Board of
Directors of Hypercom Corporation and Stuart Entertainment, Inc., both
publicly-held companies, and is Trustee of eight Pilgrim mutual funds with
aggregate invested assets of over $3.0 billion. Mr. Patton is also a Director of
several privately-held companies, including National Airlines, Inc., a Las
Vegas-based start-up airline funded with over $50 million of venture equity. Mr.
Patton has previously served on the Board of Directors of five other
publicly-held companies including Unison HealthCare Corporation, Artisoft, Inc.,
America West Airlines, Inc., Finalco Group, Inc., and Del E. Webb Corporation.
Mr. Patton attended the University of California at Berkeley and received an
A.B. Degree in Political Science and a law degree.
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<PAGE> 6
Crawford L Cole, Brent W. Lippman and Kurt R. Jaggers resigned from the
Company's Board of Directors effective April 22, 1998, January 4, 1999 and March
5, 1999, respectively.
Board of Directors' Meetings.
During the year ended December 31, 1998, the Board of Directors held 15
meetings and took action by written consent on five occasions. Each Director
attended all of the meetings of the Board of Directors and of the committees of
the Board of Directors on which he served.
The Company maintains an Audit Committee and a Compensation Committee. The
Company does not have a standing Nominating Committee.
The Audit Committee's function is to review with the Company's independent
public accountants and management the annual financial statements and
independent public accountants' opinion, review the scope and results of the
examination of the Company's financial statements by the independent public
accountants, approve all professional services performed by the independent
public accountants, recommend the retention of the independent public
accountants to the Board of Directors, subject to ratification by the
stockholders, and periodically review the Company's accounting policies and
internal accounting and financial controls. During the year ended December 31,
1998, Mr. Jaggers and Mr. Keiper served as members of the Audit Committee and
held four meetings.
The Compensation Committee's function is to review and approve salary and
bonus levels for senior management and stock option grants. Mr. Cole, Mr.
Jaggers and Mr. Keiper served as members of the Compensation Committee during
the year ended December 31, 1998. Mr. Keiper joined the Compensation Committee
in April 1998 upon Mr. Cole's resignation from the Board of Directors. During
the year ended December 31, 1998, the Compensation Committee held five meetings
and took action by written consent on three occasions. For additional
information concerning the Compensation Committee, see "Report of the
Compensation Committee of the Board of Directors on Executive Compensation" and
"Executive Compensation -- Compensation Committee Interlocks and Insider
Participation."
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast on the proposal at the
Annual Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present, either in person
or by proxy, is required for election of the Class III Directors. Votes for and
against, abstentions and broker non-votes will each be counted as present for
purposes of determining the presence of a quorum. Abstentions will have the same
effect as a negative vote on this proposal. Broker non-votes will have no effect
on the outcome of this vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF MESSRS.
ARMSTRONG AND PAKIS AS CLASS III DIRECTORS OF THE COMPANY.
4
<PAGE> 7
PROPOSAL NO. 2
APPROVAL OF ADOPTION OF 1999 EMPLOYEE STOCK PURCHASE PLAN
The Company currently maintains the JDA Software Group, Inc. 1998 Employee
Stock Purchase Plan (the "1998 Purchase Plan"), pursuant to which eligible
employees may purchase shares of the Company's Common Stock at a discount
through payroll deductions. As of February 28, 1999, only 190,025 shares
remained available for issuance under the 1998 Purchase Plan. The 1998 Purchase
Plan is implemented through offerings of approximately 24 months in duration,
and the Board of Directors determined that, at current levels of employee
participation, the number of shares available for issuance under the 1998
Purchase Plan will not be sufficient to cover anticipated share requirements for
the offerings which are currently in progress due to the present market
conditions impacting the price of the Company's Common Stock. As a result of
current interpretation of generally accepted accounting principles applicable to
certain employee stock purchase plans, the Company could have been required to
recognize compensation expense if the share reserve of the 1998 Purchase Plan
was increased and such additional shares were issued pursuant to offerings which
began prior to the date on which the stockholders approved the share reserve
increase. However, adoption of a new employee stock purchase plan under which
offerings do not begin until after the date that the stockholders approve the
plan will not cause the recognition of a compensation expense under current
generally accepted accounting principles.
Accordingly, in March 1999, the Board of Directors adopted the JDA Software
Group, Inc. 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"),
subject to stockholder approval, to become effective on August 16, 1999 (the
"Effective Date"). The 1999 Purchase Plan will be implemented through six-month
offerings in order to minimize any future impact of the change in the accounting
rules described above, and to make the plan easier to administer. A total of
750,000 shares of Common Stock will be reserved for issuance under the 1999
Purchase Plan.
The Board of Directors believes that adopting the 1999 Purchase Plan will
benefit the Company, since providing employees of the Company with an
opportunity to purchase shares of Common Stock pursuant to the 1999 Purchase
Plan is helpful in attracting, retaining, and motivating valued employees.
DESCRIPTION OF THE 1999 PURCHASE PLAN
The following summary of the 1999 Purchase Plan is qualified in its
entirety by the specific language of the 1999 Purchase Plan, a copy of which is
available to any stockholder upon request.
General. The 1999 Purchase Plan is intended to qualify as an "employee
stock purchase plan" under section 423 of the Code. Each participant in the 1999
Purchase Plan is granted at the beginning of each offering under the plan (an
"Offering") the right to purchase through accumulated payroll deductions up to a
number of shares of the Common Stock of the Company (a "Purchase Right")
determined on the first day of the Offering. The Purchase Right is automatically
exercised on the last day of each purchase period during the Offering unless the
participant has withdrawn from participation in the 1999 Purchase Plan prior to
such date.
Shares Subject to Plan. A maximum of 750,000 of the Company's authorized
but unissued or reacquired shares of Common Stock may be issued under the 1999
Purchase Plan, which amount will be increased on August 1 of each year by an
amount equal to the lesser of 750,000 shares or an amount determined by the
Board of Directors. The first annual increase in the share reserve described in
the preceding sentence will occur on August 1, 2000 and the last annual increase
will occur on August 1, 2009. The number of shares issuable under the 1999
Purchase Plan is subject to appropriate adjustment in the event of a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the Company's capital structure or in the
event of any merger, sale of assets or other reorganization of the Company. If
any Purchase Right expires or terminates, the shares subject to the unexercised
portion of such Purchase Right will again be available for issuance under the
1999 Purchase Plan.
Administration. The 1999 Purchase Plan is administered by the Board.
Subject to the provisions of the 1999 Purchase Plan, the Board determines the
terms and conditions of Purchase Rights granted under the plan. The Board will
interpret the 1999 Purchase Plan and Purchase Rights granted thereunder, and all
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<PAGE> 8
determinations of the Board will be final and binding on all persons having an
interest in the 1999 Purchase Plan or any Purchase Rights. The 1999 Purchase
Plan provides, subject to certain limitations, for indemnification by the
Company of any director, officer or employee against all reasonable expenses,
including attorney's fees, incurred in connection with any legal action arising
from such person's action or failure to act in administering the plan.
Eligibility. Any employee of the Company or of any present or future
parent or subsidiary corporation of the Company designated by the Board for
inclusion in the 1999 Purchase Plan is eligible to participate in an Offering
under the 1999 Purchase Plan so long as the employee is customarily employed for
at least 20 hours per week and 5 months per calendar year. However, no employee
who owns or holds options to purchase, or as a result of participation in the
1999 Purchase Plan would own or hold options to purchase, five percent or more
of the total combined voting power or value of all classes of stock of the
Company or of any parent or subsidiary corporation of the Company is entitled to
participate in the 1999 Purchase Plan. As of February 28, 1999, the Company had
approximately 1,100 employees that would be eligible to participate in the 1999
Purchase Plan.
Offerings. Generally, each Offering of Common Stock under the 1999
Purchase Plan is for a period of twenty-four months (an "Offering Period").
Offering Periods under the 1999 Purchase Plan are overlapping, with a new
Offering Period beginning every six months. Offering Periods will generally
commence on the sixteenth day of February and August of each year and end on the
fifteenth day of February and August twenty-four months later, respectively. The
first Offering Period will commence on the Effective Date and will end on August
15, 2001. Each Offering Period will generally be comprised of four six-month
purchase periods ("Purchase Periods"). The first Purchase Period of the first
Offering Period will commence on August 16, 1999 and end on February 15, 2000.
Shares are purchased on the last day of each Purchase Period (the "Purchase
Date"). The Board may establish a different term for one or more Offerings or
Purchase Periods or different commencement or ending dates for an Offering or a
Purchase Period.
Participation and Purchase of Shares. Participation in the 1999 Purchase
Plan is limited to eligible employees who authorize payroll deductions prior to
the start of an Offering Period. Payroll deductions may not exceed 10% (or such
other rate as the Board determines) of an employee's compensation for any pay
period during the Offering Period. Once an employee becomes a participant in the
1999 Purchase Plan, that employee will automatically participate in each
successive Offering Period until such time as that employee withdraws from the
1999 Purchase Plan, becomes ineligible to participate in the 1999 Purchase Plan,
or terminates employment.
Subject to certain limitations, each participant in an Offering has a
Purchase Right equal to the lesser of (i) that number of whole shares determined
by dividing $12,500 by the fair market value of a share of Common Stock on the
first day of the Offering Period or (ii) 1,250 shares, provided that these
dollar and share amounts will be prorated for any Offering Period that is other
than 24 months in duration. No participant may purchase under the 1999 Purchase
Plan shares of the Company's Common Stock having a fair market value exceeding
$25,000 in any calendar year (measured by the fair market value of the Company's
Common Stock on the first day of the Offering Period in which the shares are
purchased).
At the end of each Purchase Period, the Company issues to each participant
in the Offering the number of shares of the Company's Common Stock determined by
dividing the amount of payroll deductions accumulated for the participant during
that Offering Period by the purchase price, limited in any case by the number of
shares subject to the participant's Purchase Right for that Offering. The price
per share at which shares are sold at the end of a Purchase Period generally
equals 85% of the lesser of the fair market value per share of the Company's
Common Stock on the first day of the Offering Period or the Purchase Date. On
March 19, 1999, the closing price of a share of the Company's Common Stock was
$6 5/16, as reported on the Nasdaq Stock Market. Any payroll deductions under
the 1999 Purchase Plan not applied to the purchase of shares will be returned to
the participant, unless the amount remaining is less than the amount necessary
to purchase a whole share of Common Stock, in which case the remaining amount
may be applied to the next Purchase Period or Offering Period.
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A participant may withdraw from an Offering at any time without affecting
his or her eligibility to participate in future Offerings. However, once a
participant withdraws from an Offering, that participant may not again
participate in the same Offering.
Change in Control. The 1999 Purchase Plan provides that, in the event of
(i) a sale or exchange by the stockholders of more than 50% of the Company's
voting stock, (ii) a merger or consolidation in which the Company is a party,
(iii) the sale, exchange or transfer of all or substantially all of the assets
of the Company, or (iv) a liquidation or dissolution of the Company wherein,
upon any such event, the stockholders of the Company immediately before such
event do not retain direct or indirect beneficial ownership of at least 50% of
the total combined voting power of the voting stock of the Company, its
successor, or the corporation to which the assets of the Company were
transferred (a "Change in Control"), the acquiring or successor corporation may
assume the Company's rights and obligations under the 1999 Purchase Plan or
substitute substantially equivalent Purchase Rights for such corporation's
stock. If the acquiring or successor corporation elects not to assume or
substitute for the outstanding Purchase Rights, the Board may adjust the last
day of the Offering Period to a date on or before the date of the Change in
Control. Any Purchase Rights that are not assumed, substituted for, or exercised
prior to the Change in Control will terminate.
Termination or Amendment. The 1999 Purchase Plan will continue until
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may at any time amend or terminate the 1999
Purchase Plan, except that the approval of the Company's stockholders is
required within twelve months of the adoption of any amendment increasing the
number of shares authorized for issuance under the 1999 Purchase Plan, or
changing the definition of the corporations which may be designated by the Board
as corporations the employees of which may participate in the 1999 Purchase
Plan.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 1999 PURCHASE PLAN
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
1999 Purchase Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
A participant recognizes no taxable income either as a result of commencing
to participate in the 1999 Purchase Plan or purchasing shares of the Company's
Common Stock under the terms of the 1999 Purchase Plan.
If a participant disposes of shares purchased under the 1999 Purchase Plan
within two years from the first day of the applicable Offering Period or within
one year from the Purchase Date (a "disqualifying disposition"), the participant
will realize ordinary income in the year of such disposition equal to the amount
by which the fair market value of the shares on the purchase date exceeds the
purchase price. The amount of the ordinary income will be added to the
participant's basis in the shares, and any additional gain or resulting loss
recognized on the disposition of the shares will be a capital gain or loss. A
capital gain or loss will be mid-term or long-term if the participant's holding
period is more than twelve months.
If the participant disposes of shares purchased under the 1999 Purchase
Plan at least two years after the first day of the applicable Offering Period
and at least one year after the applicable Purchase Date, the participant will
realize ordinary income in the year of disposition equal to the lesser of (i)
the excess of the fair market value of the shares on the date of disposition
over the purchase price or (ii) 15% of the fair market value of the shares on
the first day of the applicable Offering Period. The amount of any ordinary
income will be added to the participant's basis in the shares, and any
additional gain recognized upon the disposition after such basis adjustment will
be a mid-term or long-term capital gain. If the fair market value of the shares
on the date of disposition is less than the purchase price, there will be no
ordinary income and any loss recognized will be a mid-term or long-term capital
loss.
If the participant still owns the shares at the time of death, the lesser
of (i) the excess of the fair market value of the shares on the date of death
over the purchase price or (ii) 15% of the fair market value of the
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shares on the first day of the Offering Period in which the shares were
purchased will constitute ordinary income in the year of death.
The Company should be entitled to a deduction in the year of a
disqualifying disposition equal to the amount of ordinary income recognized by
the participant as a result of the disposition, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. In all other cases, no deduction is allowed to the Company.
NEW PLAN BENEFITS
Benefits under the 1999 Purchase Plan will depend on employees' elections
to participate and the fair market value of the Company's Common Stock at
various future dates. Accordingly, it is not possible to determine the benefits
that will be received by executive officers and other employees if the 1999
Purchase Plan is approved by the stockholders. The number of shares of Common
Stock purchased by the Company's current executive officers under the 1998
Purchase Plan during the past fiscal year are as follows: Ms. Magnuson -- 3,178;
Mr. Bendokaitis -- 3,283; Mr. Brewer -- 3,766; Mr. Hines -- 416; and Mr.
Morrison -- 3,456. Mssrs. Armstrong, Charness, Pakis, and Tidmarsh did not
participate in the 1998 Purchase Plan. All current executive officers as a group
purchased 14,099 shares. All other current employees, including officers who are
not executive officers, as a group purchased 245,876 shares. Non-employee
Directors are not eligible to participate in the 1998 or 1999 Purchase Plans. In
addition, no person has purchased more than five percent of the total number of
shares issued under the 1998 Purchase Plan.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast on the proposal at the
Annual Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present, either in person
or by proxy, is required for approval of this proposal. Votes for and against,
abstentions and broker non-votes will each be counted as present for purposes of
determining the presence of a quorum. Abstentions will have the same effect as a
negative vote on this proposal. Broker non-votes will have no effect on the
outcome of this vote.
The Board of Directors believes that the adoption of the 1999 Purchase Plan
is in the best interests of the Company and its stockholders for the reasons
stated above. THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THIS PROPOSAL TO ADOPT THE 1999 PURCHASE PLAN WITH AN INITIAL SHARE RESERVE
OF 750,000 SHARES.
8
<PAGE> 11
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31, 1999,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each director of the Company, (ii) each executive officer of the Company, (iii)
all persons known by the Company to beneficially own more than 5% of the
outstanding Common Stock of the Company, and (iv) all Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OF CLASS
------------------------------------ ------------ ----------
<S> <C> <C>
James D. Armstrong(2)....................................... 1,851,348 7.8%
Frederick M. Pakis(3)....................................... 1,263,969 5.3%
J. Michael Gullard.......................................... 0 *
William C. Keiper(4)........................................ 6,770 *
Stephen A McConnell......................................... 9,000 *
Jock Patton................................................. 0 *
Kevin J. Bendokaitis(5)..................................... 12,257 *
Hamish N. Brewer(6)......................................... 25,782 *
Peter J. Charness........................................... 1,000 *
Scott D. Hines(7)........................................... 20,447 *
Kristen L. Magnuson(8)...................................... 29,338 *
Gregory L. Morrison(9)...................................... 15,103 *
David J. Tidmarsh........................................... 1,000 *
---------
All Directors and executives officers as a group (13
persons)(10)........................................... 3,236,014 13.5%
FMR Corporation(11)......................................... 1,751,450 7.4%
Massachusetts Financial Services Company(12)................ 1,232,239 5.2%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding Common Stock.
(1) The information regarding security ownership of the Company's Common Stock
is as of March 31, 1999, except for the security ownership information
regarding FMR Corporation ("FMR"), which is derived from a Schedule 13G
filed by FMR with the Securities and Exchange Commission on February 1,
1999; and Massachusetts Financial Services Company ("MFS"), which is
derived from a Schedule 13G filed by MFS with the Securities and Exchange
Commission on February 11, 1999. The percentage of class calculations are
based on the number of shares of JDA Software Group, Inc. Common Stock
outstanding on March 31, 1999 (23,724,783 shares) plus, where appropriate,
those shares subject to unexercised options which were exercisable on March
31, 1999, or within sixty days thereafter.
(2) Includes 48,331 shares subject to unexercised options.
(3) Includes 48,331 shares subject to unexercised options.
(4) Includes 6,770 shares subject to unexercised options.
(5) Includes 8,809 shares subject to unexercised options.
(6) Includes 20,623 shares subject to unexercised options.
(7) Includes 20,031 shares subject to unexercised options.
(8) Includes 21,560 shares subject to unexercised options.
(9) Includes 10,623 shares subject to unexercised options.
(10) Includes an aggregate of 185,078 shares subject to unexercised options.
(11) FMR Corporation is a Massachusetts-based investment advisor. The address of
FMR is 82 Devonshire Street, Boston, Massachusetts 02109-3614.
(12) Massachusetts Financial Services Company is a Massachusetts-based
investment advisor. The address of MFS is 500 Boylston Street, Boston,
Massachusetts 02116.
9
<PAGE> 12
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, and their ages as of March 31, 1999,
are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
James D. Armstrong........................ 48 Co-Chairman and Co-Chief Executive Officer
Frederick M. Pakis........................ 45 Co-Chairman and Co-Chief Executive Officer
Kristen L. Magnuson....................... 42 Senior Vice President and Chief Financial Officer
Kevin J. Bendokaitis...................... 44 Senior Vice President, In-store Systems
Hamish N. Brewer.......................... 36 Senior Vice President, Enterprise Systems
Peter J. Charness......................... 44 Senior Vice President, Marketing and Chief Product
Officer
Scott D. Hines............................ 35 Senior Vice President, Technology
Gregory L. Morrison....................... 51 Senior Vice President, Analytic Applications
David J. Tidmarsh......................... 47 Senior Vice President, Client Services
</TABLE>
A description of the business backgrounds of Mr. Armstrong and Mr. Pakis is
included under the caption "Proposal No. 1 -- Election of Directors."
KRISTEN L. MAGNUSON has served as the Company's Senior Vice President and
Chief Financial Officer since joining the Company in September 1997. Prior to
joining the Company, Ms. Magnuson served as Vice President of Finance and
Planning for Michaels Stores, Inc., a $1.4 billion publicly-held arts and craft
retailer from 1990 to 1997, as Senior Vice President and Controller of MeraBank
FSB, an $8 billion financial institution, from 1987 to 1990, and various
positions in the audit department of Ernst & Young from 1978 to 1987. Ms.
Magnuson is a Certified Public Accountant and received a Bachelor of Business
Administration Degree in Accounting from the University of Washington.
KEVIN J. BENDOKAITIS has served as the Company's Senior Vice President,
In-store Systems since February 1999. Mr. Bendokaitis previously served as the
Company's Senior Vice President for the Americas during 1998, as Vice President
of North American Sales from 1996 to 1998, and as Director of Sales for the
United States from 1992 to 1996. Prior to joining the Company, Mr. Bendokaitis
served as Vice President of Sales for Datavantage, Inc., a privately-held
software company, from 1990 to 1991, and as a Senior Sales Representative for
Sterling Software, a publicly-held software company, from 1981 to 1990. Mr.
Bendokaitis attended Kent State University and received a Bachelor of Science
Degree in Marketing.
HAMISH N. BREWER has served as the Company's Senior Vice President,
Enterprise Systems since February 1999. Mr. Brewer previously served as the
Company's Senior Vice President, International during 1998, as Director of the
Company's European, Middle East and African operations from 1996 to 1997, and as
a Marketing Representative from 1994 to 1996. Prior to joining the Company, Mr.
Brewer served as a Retail Marketing Specialist with IBM from 1986 to 1994, and
in various operational positions with a privately-held retail sales organization
located in England. Mr. Brewer received a Bachelor of Science and a Bachelor of
Commerce Degree from the University of Birmingham in England.
PETER J. CHARNESS has served as the Company's Senior Vice President,
Marketing and Chief Product Officer since March 1999. Mr. Charness previously
served as the Company's Vice President of Marketing and Strategy for the JDA
Arthur Division from 1998 to 1999. Prior to joining the Company, Mr. Charness
served as Vice President and General Manager of the Retail Division of Comshare,
Inc, a publicly-held software company, from 1996 to 1998, as Vice President,
Professional Services of Mitech Computer Systems, Inc., a publicly-held software
company, from 1995 to 1996, and in various management positions including Vice
President Logistics and Technology of Dylex Ltd., a publicly-held Canadian
retail sales company, from 1984 to 1995. Mr. Charness' education includes a
CEGEP Diploma from McGill University in Montreal, Quebec, a Bachelor of Arts
Degree from York University in Toronto, Ontario, and a Master of Business
Administration Degree from the University of Western Ontario.
SCOTT D. HINES has served as the Company's Senior Vice President,
Technology since February 1999. Mr. Hines previously served as the Company's
Vice President of In-store Systems from 1997 to 1998, as
10
<PAGE> 13
Director of Store Systems Product Development from 1996 to 1997, and as
Associate Director of Store Systems Product Development from 1993 to 1996. Prior
to joining the Company, Mr. Hines served as Director of MIS for US Hosiery
Corporation, a publicly-held retail sales company, from 1991 to 1993, and as
President of DataWorks, Inc., a privately-held software development company,
from 1987 to 1991. Mr. Hines attended Carnegie Mellon University and received a
Bachelor of Science Degree in Molecular Biology.
GREGORY L. MORRISON has served as the Company's Senior Vice President,
Analytic Applications since February 1999. Mr. Morrison previously served as the
Company's Senior Vice President and Managing Director, JDA Arthur during 1998,
as Vice President of Latin American Operations from 1996 to 1998, as Director of
Latin American Operations from 1995 to 1996, and as Sales Manager, Latin America
from 1994 to 1995. Prior to joining the Company, Mr. Morrison served as a
Regional Manager with Retail Interactive, a division of First Financial
Management Corporation (now known as First Data Corporation), a publicly-held
financial services provider, from 1992 to 1995, and various positions in the
audit department of KPMG Peat Marwick from 1984 to 1992. Mr. Morrison attended
California State University -- Northridge and received a Bachelor of Science
Degree in Business Administration -- Accounting.
DAVID J. TIDMARSH has served as the Company's Senior Vice President, Client
Services since February 1999. Prior to joining the Company, Mr. Tidmarsh served
as Vice President of Business Development with HNC Retek, a business unit of HNC
Software Inc., a publicly-held software solutions provider, from 1997 to 1998,
as Chief Information Officer and Vice President of Logistics with Wilsons The
Leather Experts, a retail sales company, from 1993 to 1997, as Chief Operating
Officer of Page-Com, a publicly-held direct mail marketer of communication
equipment, and as Vice President of Merchandise Planning, Allocation and
Logistics with Pier One Imports, a specialty retail company, from 1987 to 1992.
Mr. Tidmarsh attended Marquette University and received a Bachelor of
Administration Degree in Psychology.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to the Company during the
fiscal years ended December 31, 1998, 1997 and 1996, for those persons who
served as (i) chief executive officer during 1998; and (ii) the four most highly
compensated executive officers as of December 31, 1998 other than the Chief
Executive Officer. (the "Named Executive Officers")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ------------------
----------------- SECURITIES
SALARY BONUS OTHER ANNUAL UNDERLYING OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(1) (#)(2) COMPENSATION($)
- --------------------------- ---- ------- ------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Brent W. Lippman(3)............ 1998 287,500 125,222 0 127,500 1,728
Chief Executive Officer 1997 212,500 150,000 0 420,000 1,730
1996 150,000 100,000 0 30,000 1,673
Kristen L. Magnuson(4)......... 1998 187,500 78,750 0 45,000 1,728
Senior Vice President and 1997 47,228 16,667 0 45,000 1,059
Chief Financial Officer 1996 -- -- -- -- --
Kevin J. Bendokaitis(5)........ 1998 162,500 98,835 0 47,632 1,709
Senior Vice President 1997 150,000 42,803 0 11,250 1,674
In-store Systems 1996 100,000 61,314 0 0 1,527
Hamish N. Brewer(6)............ 1998 203,819 100,000 70,334 46,222 89
Senior Vice President 1997 154,537 457,593 0 30,000 7,145
Enterprise Systems 1996 79,033 249,806 0 0 0
Gregory L. Morrison(7)......... 1998 150,000 109,359 0 47,383 2,506
Senior Vice President 1997 150,000 31,625 0 11,250 2,592
Analytic Applications 1996 100,000 62,479 0 0 1,075
</TABLE>
- ---------------
(1) Unless otherwise noted, other annual compensation for the periods presented,
including moving expenses and other perquisites, was less than 10% of the
respective current or former executive officer's total annual salary and
bonus.
(2) The amounts shown in this column represent outstanding stock options granted
pursuant to the Company's 1996 Stock Option Plan and have been adjusted to
reflect the Company's three-for-two stock split effected in July 1998.
(3) Mr. Lippman terminated his employment with the Company on January 4, 1999.
The amounts shown for all other compensation include contributions under the
Company's 401(k) plan in 1998, 1997 and 1996 of $1,200, $1,140 and $1,140,
respectively, and group term life insurance premiums of $528, $590 and $533,
respectively.
(4) Ms. Magnuson joined the Company as Senior Vice President and Chief Financial
Officer in September 1997. The amounts shown for all other compensation
include contributions under the Company's 401(k) plan in 1998 and 1997 of
$1,200 and $875, respectively, and group term life insurance premiums of
$528 and $184, respectively.
(5) The amounts shown for all other compensation include contributions under the
Company's 401(k) plan in 1998, 1997, and 1996 of $1,200, $1,140, and $1,140,
respectively, and group term life insurance premiums of $509, $534, and
$387, respectively.
(6) The amount shown for other annual compensation represents relocation
allowances and certain other reimbursements paid to Mr. Brewer in 1998 in
connection with his relocation to Phoenix, Arizona. The amounts shown for
all other compensation in 1998 include group term life insurance premiums
and in 1997 include automobile expenses paid by the Company.
(7) The amounts shown for all other compensation include contributions under the
Company's 401(k) plan in 1998, 1997, and 1996 of $1,200, $1,140, and $544,
respectively, and group term life insurance premiums of $1,306, $1,452, and
$531, respectively.
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
JDA Software, Inc., a wholly-owned subsidiary of the Company, entered into
employment agreements with Mr. Armstrong and Mr. Pakis on January 1, 1998. Under
the terms of these agreements, they will each receive a
12
<PAGE> 15
base salary and a bonus determined by the Board of Directors or its Compensation
Committee. Each agreement continues unless terminated by either party upon the
giving of proper notice as specified in such agreement.
The Company has entered into indemnification agreements with each of its
directors and Named Executive Officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.
Effective as of May 22, 1998, the Compensation Committee of the Board
approved amendments to the stock option agreements previously granted to Mr.
Lippman under the Company's 1995 Stock Option Plan and the Company's 1996 Stock
Option Plan and to Ms. Magnuson under the Company's 1996 Stock Option Plan. The
amendments provide for the acceleration of vesting of the stock options upon (i)
a change of control (if the stock options are not expressly assumed by the
Company's successor), including a merger, sale of substantially all of the
assets, liquidation or dissolution of the Company or (ii) termination of
employment by the Company or its successors within 18 months of such a change in
control. All future options granted to Mr. Armstrong, Mr. Pakis and Ms. Magnuson
under the Company's 1996 Stock Option Plan will contain an identical provision.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers, directors and persons
who beneficially own more than 10% of the Company's Common Stock, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers. Executive
officers, directors and greater than 10% shareholders are required under
Exchange Act regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely upon the Company's review of the forms that have been
furnished, or the written representations from certain reporting persons that no
Form 5 was required, the Company believes that all Section 16(a) filing
requirements applicable to the Company's executive officers, directors and more
than 10% stockholders were complied with during the fiscal year ended December
31, 1998, except that Mr. Jaggers inadvertently filed a late Form 4 relating to
his 1998 annual grant of stock options pursuant to the Company's 1996 Outside
Director Stock Option Plan ("Directors Plan").
CERTAIN TRANSACTIONS
The Company renewed a lease effective January 1, 1998, with the
Pakis-Armstrong Venture, an Arizona General Partnership, the general partners of
which are Messrs. Armstrong and Pakis. The lease covers approximately 5,400
square feet of office space in Scottsdale, Arizona that the Company uses
primarily as a training facility. The lease calls for $67,500 in annual base
rent and the Company is required to pay all real property taxes, insurance and
ordinary maintenance on the premises and to name the Pakis-Armstrong Venture as
an additional insured on its general liability insurance policy. The lease will
terminate on December 31, 1999, unless otherwise extended by the parties. The
Company understands that all amounts to be paid by the Company to the
Pakis-Armstrong Venture for the lease described in this paragraph will be evenly
distributed to Messrs. Armstrong and Pakis. The Company believes that the terms
of the lease agreement with the Pakis-Armstrong Venture are at least as
favorable as those that would have been obtained for a similar lease of a
comparable property from unaffiliated third parties.
COMPENSATION OF DIRECTORS
Non-employee Directors receive an annual retainer of $15,000 plus $1,000
for attendance at regular Board of Director meetings (including same-day
committee meetings) and $500 for participation in scheduled telephonic board or
telephonic committee meetings. Non-employee Directors also receive reimbursement
for reasonable out-of-pocket expenses. Directors who are employees of the
Company do not receive any additional compensation for their service on the
Board of Directors. Non-employee Directors also participate in the Directors
Plan that provides for the automatic grant of non-qualified stock options to
non-employee Directors. Under the Directors Plan, each new non-employee Director
elected after March 15, 1996 is automatically granted an option to purchase
18,750 shares of the Company's Common Stock on the date of his or her election.
In addition, each continuing non-employee Director is automatically granted an
option to purchase 6,000 shares
13
<PAGE> 16
of the Company's Common Stock at each annual meeting of the stockholders after
their initial election. The exercise price of the options is equal to the fair
market value of the Common Stock on the date of grant. Generally, options
granted under the Directors Plan vest over three years and have a term of ten
years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998, outside directors, Messrs.
Cole, Jaggers and Keiper served on the Compensation Committee. Mr. Keiper joined
the Compensation Committee in April 1998 upon Mr. Cole's resignation from the
Board of Directors. There are no Compensation Committee interlocks between the
Company and other entities involving the Company's executive officers and board
members who serve as executive officers of such entities.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grants of stock
options pursuant to the Company's 1996 Stock Option Plan during the fiscal year
ended December 31, 1998 to the Named Executive Officers identified in the
Summary Compensation Table. No SARs were granted during 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS IN 1998(1) OPTION TERM(2)
------------------------------------------------------------- -----------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE PER EXPIRATION
NAME OPTIONS GRANTED(#) EMPLOYEES SHARE($/SH) DATE 5%($) 10%($)
---- ------------------ ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brent W.
Lippman(3)(4)......... 37,500 1.6% $19.542 1/27/2008 $ 460,850 $1,167,902
90,000 3.8% $26.959 7/7/2008 $1,525,795 $3,866,757
Kristen L.
Magnuson(3)........... 11,250 .5% $19.542 1/27/2008 $ 138,255 $ 350,371
33,750 1.4% $26.959 7/7/2008 $ 572,173 $1,450,034
Kevin J. Bendokaitis.... 13,882 .6% $19.542 1/27/2008 $ 170,600 $ 432,342
33,750 1.4% $26.959 7/7/2008 $ 572,173 $1,450,034
Hamish N. Brewer........ 23,722 1.0% $19.542 1/27/2008 $ 291,533 $ 738,815
22,500 .9% $26.959 7/7/2008 $ 381,449 $ 966,689
Gregory L. Morrison..... 11,758 .5% $19.542 1/27/2008 $ 144,498 $ 366,192
35,625 1.5% $26.959 7/7/2008 $ 603,961 $1,530,591
</TABLE>
- ---------------
(1) Incentive and nonstatutory stock options are granted under the Company's
1996 Stock Option Plan at prices not less than the fair market value of the
Common Stock at the date of grant. The options generally become exercisable
over a four-year period, commencing at the date of grant, and expire in ten
years.
(2) The 5% and 10% assumed compounded annual rates of stock price appreciation
are in accordance with the potential gains and are net of exercise price,
but before taxes associated with the exercise rules of the Securities and
Exchange Commission. These amounts and assumed rates of appreciation do not
represent the Company's estimate of future stock price. Actual gains, if
any, on stock option exercises will be dependent on future performance of
the Common Stock and overall market conditions as well as the option
holder's continued employment with the Company throughout the vesting
period. There can be no assurance that the actual stock price appreciation
over the ten-year option term will be at the assumed 5% and 10% levels or at
any other defined level.
(3) The stock options previously granted to Mr. Lippman and Ms. Magnuson under
the Company's 1996 Stock Option Plan were amended effective as of May 22,
1998, to provide for acceleration of vesting upon a change in control of the
Company. All stock options granted to Mr. Lippman and Ms. Magnuson
subsequent to that date contain a provision for acceleration of vesting of
such options in the event of a change of control of the Company.
(4) Mr. Lippman terminated his employment with the Company on January 4, 1999
and the outstanding stock options granted to Mr. Lippman during 1998 were
cancelled at that time.
14
<PAGE> 17
AGGREGATE OPTION EXERCISES DURING FISCAL 1998
AND YEAR END OPTION VALUES
The following table sets forth information concerning option exercises
during the year ended December 31, 1998, and unexercised options held as of
December 31, 1998, by the Named Executive Officers identified in the Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/98(#) 12/31/98($)(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brent W. Lippman(2)...... 17,250 $440,788 156,061 438,689 $106,738 $4
Kristen L. Magnuson...... 0 0 14,062 75,938 0 0
Kevin J. Bendokaitis..... 6,757 $115,696 3,889 50,861 0 0
Hamish N. Brewer......... 14,346 $268,236 12,498 60,627 $ 38,555 0
Gregory L. Morrison...... 5,195 $ 65,262 6,326 50,861 $ 25,703 0
</TABLE>
- ---------------
(1) Options are considered to be "in-the-money" if the fair market value of the
underlying securities exceeds the exercise price of the options on the
specified date. The amounts shown in these columns are based upon the
difference between the closing price of the Common Stock on December 31,
1998 ($9.688), and the exercise price of the options.
(2) Mr. Lippman terminated his employment with the Company on January 4, 1999.
Mr. Lippman subsequently exercised 17,250 in vested options at an exercise
price of $3.50. All other remaining outstanding stock options were
cancelled.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee 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 (the "Securities
Act") or the Exchange Act, except to the extent the Company specifically
incorporates it by reference into such filing.
During 1998, Messrs. Cole, Jaggers and Keiper, all three of whom were
non-employee Directors, served on the Compensation Committee. Mr. Keiper joined
the Compensation Committee in April 1998 upon Mr. Cole's resignation from the
Board of Directors. Mr. McConnell and Mr. Patton joined, and Mr. Keiper resigned
from, the Compensation Committee effective January 26, 1999. Mr. Jaggers
resigned from the Compensation Committee in connection with his resignation from
the Board of Directors on March 5, 1999. The Compensation Committee's primary
function is to review and recommend salary levels of, to approve bonus plans
for, and to approve stock option grants to executive officers, and to set the
compensation of the Co-Chief Executive Officers.
COMPENSATION PHILOSOPHY
The Compensation Committee strives to align executive compensation with the
value achieved by the executive team for the Company's stockholders. Toward that
goal, the Company's compensation program emphasizes both short- and long-term
incentives designed to attract, motivate, and retain highly qualified executives
who will effectively manage the Company and maximize stockholder value. The
Company uses salary, executive officer bonuses and stock options to motivate
executive officers to achieve the Company's business objectives and to align the
incentives of officers with the long-term interests of stockholders. The
Compensation Committee reviews and evaluates each executive officer's base and
variable compensation annually relative to corporate performance and comparative
market information.
In setting total compensation, the Compensation Committee considers
individual and Company performance, as well as market information in the form of
published survey data provided to the Compensation Committee by the Company's
human resources staff. In 1998, the Compensation Committee reviewed both the
preliminary and the final reports of an outside compensation consultant which
were provided in February and June, 1998, respectively. The reports compared
JDA's executive compensation practices and levels to those of a peer group
consisting of 21 publicly-traded enterprise software companies, and provided a
15
<PAGE> 18
comparative analysis of relative base salaries, target total cash compensation,
actual total cash compensation, target total compensation including equity
incentives, and actual total compensation including equity incentives. The
Compensation Committee's policy is to set JDA's compensation targets to
generally fall near the median of this peer group, with certain limited
exceptions based upon competitive circumstances in individual cases.
In preparing the performance graph for this Proxy Statement, the Company
has selected the Nasdaq Computer and Data Processing Index, and the Nasdaq Stock
Market-U.S. Index as its peer groups. The companies that the Company included in
its stratified salary surveys are not necessarily those included in the indices,
as such companies may not be competitive with the Company for executive talent.
The Compensation Committee has considered the potential impact of Section
162(m) of the Internal Revenue Code ("Section 162(m)") adopted under the Federal
Revenue Reconciliation Act of 1993. Section 162(m) disallows a tax deduction to
any publicly-held corporation for individual compensation exceeding $1 million
in any taxable year paid to the Chief Executive Officer or any of the four other
most highly compensated executive officers, unless compensation is
performance-based. Since the targeted cash compensation of each of the Named
Executive Officers is well below the $1 million threshold and the Company
believes that any options granted under the Option Plan currently meet the
requirement of being performance-based in accordance with the regulations under
Section 162(m), the Compensation Committee believes that Section 162(m) will not
reduce the tax deductions available to the Company for executive compensation in
1998. The Company's policy is to qualify to the extent reasonable its executive
officers' compensation for deductibility under applicable tax laws.
FORMS OF COMPENSATION
Salary. The Company strives to offer executive officers salaries that are
competitive with comparable companies in the technology sector generally and in
the vertical market enterprise software and general software industries. During
1998, Brent W. Lippman, Chief Executive Officer of the Company, following
consultation with the Compensation Committee, approved executive salaries at the
beginning of the year or at the time executives joined the Company.
Based upon survey data provided to management and the Compensation
Committee through 1998, the Compensation Committee believes its 1998 executive
officer salary levels were set generally at median competitive levels. The
Committee expects that annual salary adjustments will take into account
achievements of individual executive officers during the prior year towards key
Company-wide objectives set annually by the Committee, as well as the executive
officers' performance of their individual responsibilities.
Incentive Compensation. Cash incentive compensation is provided through
participation in the Company's executive bonus plan. For 1998 the Board
established distributions to executive officers under the executive bonus plan
following completion of the Company's fiscal year, based generally on the
Company's profitability targets. During 1998, the Company generally met or
exceeded profitability targets during the first two fiscal quarters, and failed
to meet such targets in the third and fourth quarters. The Compensation
Committee nevertheless determined to pay the Company's executive officers, other
than the Chief Executive Officer, the full individual target bonuses. This
decision was based upon (i) the Compensation Committee's determination that the
individuals involved had delivered strong individual performances, (ii) the
Compensation Committee's recognition that the equity component of these
individuals' compensation package was adversely impacted by the trading levels
in the Company's stock, and (iii) the Compensation Committee's concern over
retention of these key personnel.
Stock Options. The Compensation Committee believes that equity ownership
provides significant additional motivation to executive officers to maximize
value for the Company's stockholders, and therefore grants stock options under
the Company's 1996 Stock Option Plan at the commencement of an executive
officer's employment and, depending on that officer's performance and the
propriety, in the Committee's judgment, of additional awards to retain key
employees, periodically thereafter. Stock options are granted at the prevailing
market price, generally vest over a period of four years and will only have
value if the Company's stock price increases over the exercise price. Therefore,
the Compensation Committee believes that stock options serve to align the
interests of executive
16
<PAGE> 19
officers closely with other stockholders because of the direct benefit executive
officers receive through improved stock price performance. As a result of the
Compensation Committee's philosophy of using equity compensation as a
significant portion of an executive's overall compensation, and in an attempt to
attract, retain and motivate skilled personnel who are in demand, the
Compensation Committee set equity compensation levels in 1998 that were somewhat
above those of the peer group.
Other Compensation Plans. The Company has adopted certain broad-based
employee benefit plans in which executive officers have been permitted to
participate. The incremental cost to the Company of benefits provided to
executive officers under these life and health insurance plans and retirement
plans is less than 10% of the base salaries for executive officers for 1998.
Benefits under the broad-based plans are not directly or indirectly tied to
Company performance.
Most Company employees were, subject to certain limitations, eligible to
participate in the Company's 1998 Employee Stock Purchase Plan which allowed all
eligible Company employees (including executive officers, but excluding those
who beneficially own more than 5% of the outstanding Common Stock) to purchase
shares of the Company's Common Stock through payroll deductions at a purchase
price of the lower of 85% of the fair market value of the share on the first day
or the last day of the applicable offering period of the plan. The Compensation
Committee believes the stock purchase plans encourage broad-based equity
ownership throughout the Company's employee base, and thereby encourage
alignment of employee incentive with stockholder interests.
As of March 31, 1999 only 190,025 shares remained available for issuance
under the 1998 Employee Stock Purchase Plan. The Board of Directors is
recommending adoption of a 1999 Employee Stock Purchase Plan (see Proposal No.
2), which is designed to fulfill the objectives formerly served by the 1998
Employee Stock Purchase Plan.
CHIEF EXECUTIVE OFFICER
Brent W. Lippman served as the Company's Chief Executive Officer ("CEO")
throughout 1998 and until January 4, 1999, when he resigned. During 1998, Mr.
Lippman's salary was based upon the analysis performed by the Compensation
Committee in February 1998. Mr. Lippman's salary as CEO, as well as stock
options granted to Mr. Lippman under the 1996 Stock Option Plan, were
established based upon the same criteria and compensation philosophies outlined
above for other executive officers of the Company. The Compensation Committee
relied in part upon a comparison of Mr. Lippman's compensation with CEO
compensation levels at the vertical market enterprise software companies and
other software companies reviewed in the reports referenced above.
During 1998, Mr. Lippman accrued and drew down portions of his target bonus
on a quarterly basis based upon the Company's performance versus internal
budgets. As a result, in light of the shortfall in the Company's performance
versus budget in the fourth quarter of 1998, Mr. Lippman did not receive his
full targeted bonus for the fiscal year.
1998 COMPENSATION COMMITTEE
William C. Keiper
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<PAGE> 20
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's
Common Stock with the Nasdaq Stock Market index (U.S. companies) and the
cumulative total return of the Nasdaq Computer and Data Processing Stocks Index
for the period from March 15, 1996, the date of the Company's initial public
offering, to December 31, 1998. The comparison assumes that $100 was invested on
March 15, 1996 in the Company's Common Stock and in each of the comparison
indices, and assumes reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
JDA SOFTWARE GROUP, INC.
JDA SOFTWARE GRAPH
<TABLE>
<CAPTION>
JDA SOFTWARE GROUP, INC. COMPUTER AND DATA
------------------------ NASDAQ STOCK MARKET (US PROCESSING STOCKS (PEER
COMPANIES) GROUP)
----------------------- -----------------------
<S> <C> <C> <C>
3/15/96 100.00 100.00 100.00
12/31/96 219.22 117.88 151.52
12/31/97 269.22 144.62 332.32
12/31/98 111.78 203.29 133.26
</TABLE>
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<PAGE> 21
PROPOSAL NO. 3
RATIFY APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal year ended December 31, 1998 was Deloitte & Touche LLP. The
Board of Directors has selected Deloitte & Touche LLP as its independent public
accountants for fiscal 1999. A representative of Deloitte & Touche LLP will
attend the Annual Meeting for the purpose of responding to appropriate questions
and will be afforded an opportunity to make a statement if so desired.
STOCKHOLDER PROPOSALS
Stockholder proposals may be submitted for inclusion in the Company's 2000
proxy material after the 1999 Annual Meeting but no later than 5:00 p.m.,
Phoenix, Arizona time on December 15, 1999. Proposals must be in writing and
sent via registered, certified, or express mail to: Secretary, JDA Software
Group, Inc., 14400 North 87th Street, Scottsdale, Arizona 85260. Facsimile or
other forms of electronic submissions will not be accepted.
TRANSACTION OF OTHER BUSINESS
The Board of Directors does not know of or intend to present any matters at
the 1999 Annual Meeting other than those described herein and does not presently
know of any matters that will be presented by other parties. If however, any
other matters properly come before the meeting, it is intended that the proxies
in the accompanying form will be voted thereon in accordance with the judgment
of the persons voting such proxies.
By Order of the Board of Directors
/s/ Kristen L. Magnuson
Kristen L. Magnuson
Secretary
April 19, 1998
19
<PAGE> 22
PROXY
JDA SOFTWARE GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints James D. Armstrong and Kristen L. Magnuson, and
each of them, with full power of substitution to represent the undersigned and
to vote all of the shares of stock in JDA Software Group, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at the JDA Software Group, Inc. World Headquarters,
Scottsdale, Arizona on Thursday, May 20, 1999 at 10:00 a.m. Scottsdale, Arizona
time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed on the reverse side and as more particularly described in the
Company's Proxy Statement, receipt of which is hereby acknowledged, and (2) in
their discretion upon such other matters as may properly come before the
meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 23
Please mark [X]
votes as in
the sample.
A vote FOR the following proposals is recommended by the Board of Directors:
1. ELECTION OF DIRECTORS
FOR WITHHELD
Nominees: James D. Armstrong [ ] [ ]
FOR WITHHELD
Frederick M. Pakis [ ] [ ]
2. Approval of adoption of 1999 Employee
Stock Purchase Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratify appointment of independent public
accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW. [ ]
Even if you are planning to attend the meeting in person, you are urged to sign
and mail the Proxy in the return envelope so that your stock may be represented
at the meeting.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand on record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed by the President or Vice President
and the Secretary or Assistant Secretary, and the corporate seal should be
affixed thereto. Executors or administrators or other fiduciaries who execute
the above Proxy for a deceased stockholder should give their title. Please date
the Proxy.
Signature(s) Date
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- FOLD AND DETACH HERE -
