<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 14-a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
i2 Technologies, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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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.
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[ ] 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
PRELIMINARY PROXY STATEMENT
[i2 LOGO]
i2 TECHNOLOGIES, INC.
909 E. LAS COLINAS BLVD., 16TH FLOOR
IRVING, TEXAS 75039
April [24], 1998
Dear Stockholder:
You are cordially invited to attend the 1998 annual meeting of
stockholders of i2 Technologies, Inc., which will be held at the Omni Mandalay
Hotel, 221 East Las Colinas Boulevard, Irving, Texas on Tuesday, May 26, 1998 at
9:30 a.m. (Central Time).
Details of the business to be conducted at the annual meeting are given
in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals set forth in the Proxy Statement and
recommends that you vote for each such proposal.
In order for us to have an efficient meeting, please sign, date and
return the enclosed proxy promptly in the accompanying reply envelope. If you
are able to attend the annual meeting and wish to change your proxy vote, you
may do so simply by voting in person at the annual meeting.
We look forward to seeing you at the annual meeting.
Sincerely,
SANJIV S. SIDHU
Chairman of the Board and
Chief Executive Officer
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YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope. No postage need be affixed if mailed in the United
States.
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<PAGE> 3
i2 TECHNOLOGIES, INC.
909 E. LAS COLINAS BLVD., 16TH FLOOR
IRVING, TEXAS 75039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1998
The 1998 annual meeting of stockholders of i2 Technologies, Inc. (the
"Company") will be held at the Omni Mandalay Hotel, 221 East Las Colinas
Boulevard, Irving, Texas on Tuesday, May 26, 1998 at 9:30 a.m. (Central Time)
for the following purposes:
1. To elect one director to serve until the annual stockholders'
meeting in 2001, or until his or her successor has been
elected and qualified.
2. To approve an amendment to the Company's 1995 Stock
Option/Stock Issuance Plan (the "1995 Plan") to: (i) increase
the number of shares of Common Stock authorized to be issued
under the 1995 Plan by 3,500,000 shares; (ii) allow members of
the Compensation Committee which administers the 1995 Plan to
receive discretionary grants and stock issuances under the
Discretionary Option Grant and Stock Issuance Programs of the
1995 Plan; (iii) allow the shares issued under the 1995 Plan
which are subsequently reacquired by the Company pursuant to
the Company's exercise of its repurchase rights to be added
back to the share reserve available for future issuance under
the 1995 Plan; (iv) require stockholder approval of future
amendments to the 1995 Plan only to the extent necessary to
satisfy applicable laws or regulations; (v) provide that either
the Board or the Compensation Committee may administer the
1995 Plan with respect to directors and officers subject to the
"short-swing" profit liabilities of Section 16E of the
Securities Exchange Act of 1934; (vi) allow non-statutory
options granted under the 1995 Plan to be transferred to family
members or trusts established for family members in connection
with the optionee's estate planning; (vii) eliminate the
six-month holding period requirement for the exercise of
limited stock appreciation rights in connection with a hostile
take-over; and (viii) remove the six-month limitation on the
frequency with which amendments may be made to the Automatic
Option Grant Program of the 1995 Plan.
3. To approve an amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of
Common Stock of the Company from 50,000,000 to 200,000,000.
4. To ratify the appointment of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 1998.
5. To act upon such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 8, 1998
are entitled to notice of and to vote at the meeting. A list of stockholders
entitled to vote at the meeting will be available for inspection at the offices
of the Company. Whether or not you plan to attend the meeting in person, please
sign, date and return the enclosed proxy card in the reply envelope provided. If
you attend the meeting and vote by ballot, your proxy will be revoked
automatically and only your vote at the meeting will be counted. The prompt
return of your proxy card will assist us in preparing for the meeting.
By Order of the Board of Directors,
KANNA N. SHARMA
Secretary
<PAGE> 4
i2 TECHNOLOGIES, INC.
909 E. LAS COLINAS BLVD., 16TH FLOOR
IRVING, TEXAS 75039
---------------
PROXY STATEMENT
---------------
These proxy materials and the enclosed proxy card are being mailed in
connection with the solicitation of proxies by the Board of Directors of i2
Technologies, Inc., a Delaware corporation (the "Company"), for the 1998 Annual
Meeting of Stockholders to be held on Tuesday, May 26, 1998 at 9:30 a.m.
(Central Time), and at any adjournment or postponement thereof (the "Annual
Meeting") at the Omni Mandalay Hotel, 221 East Las Colinas, Irving, Texas. These
proxy materials were first mailed to stockholders of record beginning on
approximately April [29], 1998.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Any stockholder executing a proxy pursuant to this solicitation may
revoke it at any time prior to its exercise by delivering written notice of such
revocation to the Secretary of the Company before the Annual Meeting or by
properly executing and delivering a proxy bearing a later date. Proxies may also
be revoked by any stockholder present at the Annual Meeting who elects to vote
his, her or its shares in person. The cost of soliciting proxies will be paid by
the Company and may include reimbursement paid to brokerage firms and others for
their expense in forwarding solicitation materials as well as the expense of
preparing, assembling, photocopying and mailing this Proxy Statement.
Solicitation will be made primarily through the use of the mail, however,
regular employees of the Company may, without additional remuneration, solicit
proxies personally by telephone or telegram.
The Company's annual report to stockholders for the year ended December
31, 1997 (the "Annual Report") has been mailed concurrently with the mailing of
the Notice of the Annual Meeting and this Proxy Statement to all stockholders
entitled to notice of, and to vote at, the Annual Meeting. The Annual Report is
not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
The Company has fixed April 8, 1998 as the record date for determining
those stockholders who are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on the record date, the Company had 32,853,191
outstanding shares of Common Stock, par value $0.00025 per share (the "Common
Stock"). Each stockholder is entitled to one vote for each share of Common Stock
held by such stockholder as of the record date. If a choice as to the matters
coming before the Annual Meeting has been specified by a stockholder on the
proxy, the shares will be voted accordingly. If no choice is specified on the
returned proxy, the shares will be voted in favor of the approval of the
proposals described in the Notice of Annual Meeting and in this Proxy Statement.
Abstentions and broker non-votes (i.e., the submission of a proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the matter) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions will be counted towards the
tabulation of votes
<PAGE> 5
cast on proposals presented to the stockholders and will have the same effect as
negative votes, whereas broker non-votes will not be counted for purposes of
determining whether or not a proposal has been approved.
As of January 31, 1998, directors and executive officers of the Company
beneficially owned an aggregate of approximately 19,800,000 shares of Common
Stock (not including shares of Common Stock issuable upon exercise of
outstanding stock options) constituting approximately 61.1% of the shares of
Common Stock outstanding. It is expected that such directors and executive
officers will vote or direct the vote of all shares of Common Stock held or
owned by such persons, or over which such persons have voting control, in favor
of all of the proposals described herein. Nonetheless, the approval of the
proposals is not assured. See "Principal Stockholders."
PROPOSAL 1
ELECTION OF DIRECTOR
The Company currently has the following five directors serving on its
Board: Sanjiv S. Sidhu, Kanna N. Sharma, Harvey B. Cash, Sandeep R. Tungare and
Thomas J. Meredith. The Board of Directors is divided into three classes that
are as nearly equal in size as is practicable, designated Class I, Class II and
Class III. The term of office of the Class I director (Thomas J. Meredith)
expires at this Annual Meeting, the term of office of the Class II directors
(Harvey B. Cash and Sandeep R. Tungare) expires at the 1999 annual meeting of
stockholders, and the term of office of the Class III directors (Sanjiv S. Sidhu
and Kanna N. Sharma) expires at the 2000 annual meeting of stockholders, or in
each case until their successors have been elected and qualified. Directors to
replace those of a class whose terms expire at a given annual meeting shall be
elected to hold office until the third succeeding annual meeting or until their
respective successors have been elected and qualified.
VOTE REQUIRED
One director is to be elected at the Annual Meeting to hold office
until the 2001 annual meeting of stockholders, or until his successor is elected
and has qualified. The nominee receiving the affirmative vote of a majority of
the shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors shall be elected to the Board of
Directors.
Unless otherwise instructed, the persons named in the accompanying
proxy card will vote the proxies received by them for the Company's nominee,
Thomas J. Meredith. If Mr. Meredith is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for the nominee who
is designated by the present Board of Directors to fill the vacancy. It is not
expected that Mr. Meredith will be unable or will decline to serve as a
director.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THOMAS J. MEREDITH, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
CLASS I NOMINEE
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION
- ---- -------------- --- --------
<S> <C> <C> <C>
Thomas J. Meredith.............. 1996 47 Director
</TABLE>
- -----------------
Mr. Meredith has served as a director of the Company since July 1996.
Mr. Meredith has served as the Senior Vice President and Chief Financial
Officer for Dell Computer Corporation ("Dell") since November 1992. From 1990
until joining Dell, Mr. Meredith was Vice President and Treasurer of Sun
Microsystems, Inc. Prior thereto, he was co-founder and general manager of
Amdahl Capital Corporation, a captive financing company for Amdahl Corporation,
a mainframe computer manufacturer. Mr. Meredith holds a B.S. in political
science from
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<PAGE> 6
St. Francis College, a J.D. from Duquesne University of Law and an L.L.M. in
taxation from Georgetown University.
DIRECTOR COMPENSATION AND INDEMNIFICATION ARRANGEMENTS
Directors are not paid any fees or additional compensation for services
as members of the Board of Directors or any committee thereof, but are
reimbursed for all out-of-pocket expenses incurred in attending meetings of the
Board of Directors and committees thereof on which such directors serve. In
addition, directors who are not employees of the Company or any of its
subsidiaries periodically receive automatic grants of non-qualified stock
options under the 1995 Plan. See "Automatic Option Grant Program" under Proposal
2 below. The Company maintains directors' and officers' liability insurance and
its Bylaws provide for mandatory indemnification of directors to the fullest
extent permitted by Delaware law. The Company has entered into indemnification
agreements with all of its directors. In addition, the Company's Certificate of
Incorporation limits the liability of directors of the Company to the Company or
its stockholders for breaches of the directors' fiduciary duties to the fullest
extent permitted by Delaware law.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met five times during 1997, and acted
a number of times by written consent. The director nominated for reelection
attended at least 75% of the aggregate of (i) the total meetings of the Board
and (ii) the total number of meetings held by all committees of the Board on
which he served.
The Company has a standing Compensation Committee currently composed of
Messrs. Cash and Meredith. The Compensation Committee met one time in 1997. The
Compensation Committee administers the Company's 1995 Stock Option/Stock
Issuance Plan (the "1995 Plan"). The Compensation Committee has the
responsibility for establishing the compensation payable to the Company's Chief
Executive Officer and is responsible for establishing the compensation payable
to other executive officers of the Company based on recommendations made by the
Chief Executive Officer. The Compensation Committee is also responsible for the
overall administration of the Company's employee benefit plans, including the
Company's Employee Stock Purchase Plans. The Company also has a standing Audit
Committee composed of Messrs. Cash and Meredith. The Audit Committee met four
times in 1997. The Audit Committee assists in the selection of the Company's
independent auditors and is responsible for designating those services to be
performed by and maintaining effective communication with the auditors. A
Pricing Committee was formed for the limited purpose of determining certain
terms and conditions of the Company's December 1997 public offering of Common
Stock. The Company does not have a standing Nominating Committee or any other
committee performing similar functions, and such matters are considered at
meetings of the full Board of Directors.
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1995 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve an amendment to
the 1995 Stock Option/Stock Issuance Plan (the "1995 Plan"). The proposed
amendment is set forth in its entirety as Appendix A hereto provides for the
following changes:
(i) increase the number of shares of Common Stock available for
issuance under the 1995 Plan from 12,000,000 shares to
15,500,000 shares;
(ii) allow members of the Compensation Committee which administers
the 1995 Plan to receive discretionary grants and stock
issuances under the Discretionary Option Grant and Stock
Issuance Programs of the 1995 Plan;
(iii) allow the shares issued under the 1995 Plan which are
subsequently reacquired by the Company pursuant to the
Company's exercise of its repurchase rights to be added back
to the share reserve available for future issuance under the
1995 Plan;
(iv) require stockholder approval of future amendments to the 1995
Plan only to the extent necessary to satisfy applicable laws
or regulations;
(v) provide that either the Compensation Committee or the Board may
administer the 1995 Plan with respect to directors and officers
subject to the "short-swing" profit liabilities of Section 16 of
the Securities Exchange Act of 1934 ("Section 16");
(vi) allow non-statutory options granted under the 1995 Plan to be
transferred to family members or trusts established for family
members in connection with the optionee's estate planning;
(vii) eliminate the six-month holding period requirement for the
exercise of limited stock appreciation rights in connection
with a hostile take-over; and
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<PAGE> 7
(viii) remove the six-month limitation on the frequency with which
amendments may be made to the Automatic Option Grant Program
of the 1995 Plan.
The 3,500,000-share increase was approved by the Board on July 1,
1997, subject to stockholder approval. The other changes to the 1995 Plan were
adopted by the Board on April 1, 1998, subject to stockholder approval at the
Annual Meeting. The Board believes it is in the best interests of the Company to
increase the share reserve so that the Company can continue to attract and
retain the services of those persons essential to the Company's growth and
financial success. The purpose of the remaining changes to the 1995 Plan is to
provide the administrator of the 1995 Plan with more flexibility as is allowed
under recent changes to the regulations governing employee option plans such as
the 1995 Plan.
The following is a summary of the principal features of the 1995 Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the 1995 Plan. Any stockholder of the Company who wishes to obtain
a copy of the actual plan document may do so upon written request to the
Corporate Secretary at the Company's principal executive offices in Irving,
Texas.
EQUITY INCENTIVE PROGRAMS
The 1995 Plan contains three separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) a Stock Issuance Program and (iii) an
Automatic Option Grant Program. The principal features of these programs are
described below. The Compensation Committee and the Board each have separate but
concurrent authority to administer the Stock Issuance Program and the
Discretionary Option Grant Program with respect to officers subject to Section
16 and with respect to option grants in excess of 100,000 shares during any
twelve consecutive months to any other individual. The Board has delegated to
Mr. Sidhu the authority to grant options for up to 100,000 shares during any
twelve consecutive months under the Discretionary Option Grant Program to each
individual not subject to Section 16. The term "Plan Administrator," as used in
this summary, will mean either the Compensation Committee, the Board or Mr.
Sidhu, to the extent each such entity or person is acting within the scope of
its administrative jurisdiction under the 1995 Plan. The Plan Administrator will
have complete discretion (subject to the provisions of the 1995 Plan) to
authorize option grants and direct stock issuances under the 1995 Plan. However,
all grants under the Automatic Option Grant Program will be made in strict
compliance with the provisions of that program, and no administrative discretion
will be exercised by the Plan Administrator with respect to the grants made
thereunder.
SHARE RESERVE
A total of 15,500,000 shares of Common Stock (including the share
increase subject to stockholder approval under this proposal) has been reserved
for issuance over the ten year term of the 1995 Plan. In no event may any one
participant in the 1995 Plan be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances for more than 500,000
shares per calendar year. Stockholder approval of this proposal will constitute
re-approval of such share limitation.
In the event any change is made to the outstanding shares of Common
Stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to the securities issuable (in the aggregate and to each
participant) under the 1995 Plan and to the securities and exercise price under
each outstanding option.
Shares subject to any outstanding options under the 1995 Plan which
expire or otherwise terminate prior to exercise will be available for subsequent
issuance. If this proposal is approved, unvested shares issued under the 1995
Plan and subsequently repurchased by the Company, at the option exercise or
direct issue price paid per share, pursuant to the Company's repurchase rights
under the 1995 Plan will also be available for reissuance.
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<PAGE> 8
ELIGIBILITY
Officers and other employees of the Company and its parent or
subsidiaries (whether now existing or subsequently established), non-employee
members of the Board (including, assuming the approval of this proposal, those
serving as members of the Compensation Committee) and the board of directors of
its parent or subsidiaries and consultants and independent advisors of the
Company and its parent and subsidiaries will be eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Only non-employee
members of the Board will be eligible to participate in the Automatic Option
Grant Program.
As of January 31, 1998, approximately 5 executive officers, 1,057 other
employees and two non-employee Board members were eligible to participate in the
1995 Plan, and two non-employee Board members were eligible to participate in
the Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date
under the 1995 Plan will be the closing selling price per share on that date on
the Nasdaq National Market. On December 31, 1997, the closing selling price per
share was $52.75.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at
an exercise price per share not less than 85% of the fair market value per share
of Common Stock on the option grant date. No granted option will have a term in
excess of ten years.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the
right to surrender their options for an appreciation distribution from
the Company equal in amount to the excess of (a) the fair market value
of the vested shares of Common Stock subject to the surrendered option
over (b) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of Common Stock.
Limited stock appreciation rights may be granted to officers
of the Company as part of their option grants. Assuming the approval of
this proposal, any option with such a limited stock appreciation right
in effect may be surrendered to the Company upon the successful
completion of a hostile take-over of the Company. In return for the
surrendered option, the officer will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the
excess of (a) the take-over price per share over (b) the exercise price
payable for such share.
The Plan Administrator will have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant Program
which have exercise prices in excess of the then current market price of
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<PAGE> 9
Common Stock and to issue replacement options with an exercise price based on
the market price of Common Stock at the time of the new grant.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per
share not less than 85% of fair market value per share of Common Stock, payable
in cash or through a promissory note payable to the Company.
Shares may also be issued solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or
subject to a vesting schedule tied to the performance of service or the
attainment of performance goals. The Plan Administrator will, however, have the
discretionary authority at any time to accelerate the vesting of any unvested
shares.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who was
serving as a non-employee Board member on the effective date of the initial
public offering of the Common Stock was automatically granted at that time an
option for 1,000 shares of Common Stock. Each individual who first becomes a
non-employee Board member after such date, will automatically be granted at that
time an option for 1,000 shares of Common Stock. In addition, on the date of
each annual stockholders meeting beginning with the 1996 Annual Meeting, each
individual who continues to serve as a non-employee Board member after such
meeting will automatically be granted, on the date of that meeting, an option to
purchase 1,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months. Stockholder approval of
the 3,500,000-share increase subject to this proposal will constitute
pre-approval of each option granted on or after the date of the 1998 Annual
Meeting pursuant to the provisions of the Automatic Option Grant Program as the
basis of such increase and the subsequent exercise of that option in accordance
with its terms.
Each option will have an exercise price per share equal to 100% of the
fair market value per share of Common Stock on the option grant date and a
maximum term of ten years measured from the option grant date.
Each option will be immediately exercisable for all the option shares,
but any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service.
Each option grant will vest (and the Company's repurchase rights will lapse) in
four (4) equal annual installments over the optionee's period of Board service,
with the first such installment to vest one (1) year from the option grant date.
The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company by merger or asset sale or a hostile change in control of the Company
(whether by successful tender offer for more than 50% of the outstanding voting
stock or by proxy contest for the election of Board members). In addition
(assuming the approval of this proposal), upon the successful completion of a
hostile take-over, each automatic option grant may be surrendered to the Company
for a cash distribution per surrendered option share in an amount equal to the
excess of (a) the take-over price per share over (b) the exercise price payable
for such share.
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<PAGE> 10
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate in full, and all unvested shares under the Stock
Issuance Program will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. Any options assumed or replaced in connection with such
acquisition will be subject to immediate acceleration, and any unvested shares
which do not vest at the time of such acquisition will be subject to full and
immediate vesting, in the event the individual's service is subsequently
involuntarily terminated within 18 months following the acquisition. In
connection with a hostile change in control of the Company (whether by
successful tender offer for more than 50% of the outstanding voting stock or by
proxy contest for the election of Board members), the Plan Administrator will
have the discretionary authority to provide for automatic acceleration of
outstanding options under the Discretionary Grant Program and the automatic
vesting of outstanding shares under the Stock Issuance Program either at the
time of such change in control or upon the subsequent involuntary termination of
the individual's service.
The acceleration of vesting in the event of a change in the ownership
or control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of shares under the
1995 Plan by delivering a promissory note payable in installments. The Plan
Administrator will determine the terms of any such promissory note. However, the
maximum amount of financing provided any participant may not exceed the cash
consideration payable for the issued shares plus all applicable taxes incurred
in connection with the acquisition of the shares. Any such promissory note may
be subject to forgiveness in whole or in part, at the discretion of the Plan
Administrator, over the participant's period of service.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1995 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 1995 Plan at any time, and the 1995 Plan will in all events terminate on
September 20, 2005.
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<PAGE> 11
STOCK AWARDS
The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table and the various indicated individuals
and groups, the number of shares of Common Stock subject to options granted
between September 21, 1995 and January 31, 1998 under the 1995 Plan together
with the weighted average exercise price payable per share.
<TABLE>
<CAPTION>
===========================================================================================================
OPTION TRANSACTIONS
- ---------------------------------------------------------- -------------------- -------------------------
Weighted
Number of Average
Name Option Shares Exercise Price
- ---------------------------------------------------------- -------------------- -------------------------
<S> <C> <C>
Sanjiv S. Sidhu, -- --
Chairman of the Board
and Chief Executive Officer
- ---------------------------------------------------------- -------------------- -------------------------
Kanna N. Sharma, -- --
Vice Chairman of the Board, Executive Vice President and
Secretary
- ---------------------------------------------------------- -------------------- -------------------------
Sandeep R. Tungare, -- --
Director and President, Demand Management
- ---------------------------------------------------------- -------------------- -------------------------
Gregory A. Brady, 316,667 $26.59
President, Worldwide Operations
- ---------------------------------------------------------- -------------------- -------------------------
David F. Cary, 75,714 $20.89
Vice President and Chief Financial Officer
- ---------------------------------------------------------- -------------------- -------------------------
All current executive officers as a group 392,381 $25.49
(Five persons)
- ---------------------------------------------------------- -------------------- -------------------------
Harvey B. Cash, 21,000 $2.93
Director
- ---------------------------------------------------------- -------------------- -------------------------
Thomas J. Meredith, 31,000 $30.67
Director
- ---------------------------------------------------------- -------------------- -------------------------
All non-employee directors as a group 52,000 $19.47
(Two persons)
- ---------------------------------------------------------- -------------------- -------------------------
All employees, including current officers who are not 3,677,758 $26.88
executive officers as a group
(590 persons)
===========================================================================================================
</TABLE>
8
<PAGE> 12
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1995 Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
9
<PAGE> 13
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the 1995
Plan will be substantially the same as those summarized above for the exercise
of non-statutory option grants.
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any charge to
the Company's earnings. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis. Under the new Financial Accounting Standards
Board release, footnote disclosure will be required as to the impact the
outstanding options under the 1995 Plan would have upon the Company's reported
earnings were those options appropriately valued as compensation expense.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendment to the 1995 Plan. Should such stockholder
approval not be obtained, then the share reserve will not be increased, unvested
shares repurchased by the Company pursuant to the Company's repurchase right
will not be added back to the share reserve available for future issuances and
the members of the Compensation Committee will not become eligible to receive
option grants under the Discretionary Option Grant Program or receive issuances
under the Stock Issuance Program and all options previously granted under the
1995 Plan on the basis of the share increase will terminate without becoming
exercisable for any of the shares of Common Stock subject to those options. The
1995 Plan will, however, continue to remain in effect, and option grants and
stock issuances may continue to be made pursuant to the provisions of the 1995
Plan prior to its amendment until the available reserve of Common Stock under
such plan is issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE 1995 PLAN, AND PROXIES EXECUTED AND RETURNED
WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON. THE BOARD
BELIEVES THAT IT IS IN THE BEST INTERESTS OF THE COMPANY TO CONTINUE TO HAVE A
COMPREHENSIVE EQUITY INCENTIVE PROGRAM FOR THE COMPANY WHICH WILL PROVIDE A
MEANINGFUL OPPORTUNITY FOR OFFICERS, EMPLOYEES AND NON-EMPLOYEE BOARD MEMBERS TO
ACQUIRE A SUBSTANTIAL PROPRIETARY INTEREST IN THE ENTERPRISE AND THEREBY
ENCOURAGE SUCH INDIVIDUALS TO REMAIN IN THE COMPANY'S SERVICE AND MORE CLOSELY
ALIGN THEIR INTERESTS WITH THOSE OF THE STOCKHOLDERS.
10
<PAGE> 14
NEW PLAN BENEFITS
The following table sets forth certain information regarding the
options granted through January 31, 1998 under the 1995 Plan on the basis of the
3,500,000-share increase, together with the option exercise price payable per
share. In addition, each of Messrs. Cash and Meredith will be granted an option
to purchase 1,000 shares of Common Stock under the Automatic Option Grant
Program on the date of the Annual Meeting at an exercise price per share equal
to the closing selling price per share of Common Stock on that date on the
Nasdaq National Market.
<TABLE>
<CAPTION>
===========================================================================================================
OPTION TRANSACTIONS
- ---------------------------------------------------------- ------------------- -------------------------
Weighted
Number of Average
Name Option Shares Exercise Price
- ---------------------------------------------------------- ------------------- -------------------------
<S> <C> <C>
Sanjiv S. Sidhu, -- --
Chairman of the Board
and Chief Executive Officer
- ---------------------------------------------------------- ------------------- -------------------------
Kanna N. Sharma, -- --
Vice Chairman of the Board, Executive Vice President and
Secretary
- ---------------------------------------------------------- ------------------- -------------------------
Sandeep R. Tungare, -- --
Director and President, Demand Management
- ---------------------------------------------------------- ------------------- -------------------------
Gregory A. Brady, -- --
President, Worldwide Operations
- ---------------------------------------------------------- ------------------- -------------------------
David F. Cary, 30,714 $40.88
Vice President and Chief Financial Officer
- ---------------------------------------------------------- ------------------- -------------------------
All current executive officers as a group 30,714 $40.88
(Five persons)
- ---------------------------------------------------------- ------------------- -------------------------
Harvey B. Cash, -- --
Director
- ---------------------------------------------------------- ------------------- -------------------------
Thomas J. Meredith, 10,000 $40.88
Director
- ---------------------------------------------------------- ------------------- -------------------------
All non-employee directors as a group 10,000 $40.88
(Two persons)
- ---------------------------------------------------------- ------------------- -------------------------
All employees, including current officers who are not 642,678 $41.58
executive officers as a group
(183 persons)
========================================================== ==================== =========================
</TABLE>
11
<PAGE> 15
PROPOSAL 3
APPROVAL OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 50,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock. The Board of
Directors believes this capital structure is inadequate for the present and
future needs of the Company. Therefore, the Board of Directors has unanimously
approved the amendment of the Company's Certificate of Incorporation (the
"Certificate") to increase the authorized number of shares of Common Stock from
50,000,000 to 200,000,000 shares. The Board believes this capital structure more
appropriately reflects the present and future needs of the Company and
recommends such amendment to the Company's stockholders for adoption. The
undesignated Preferred Stock may be issued from time to time in one or more
series with such rights, preferences and privileges as may be determined by the
Board of Directors. On April 8, 1998, 32,853,191 shares of Common Stock and no
shares of Preferred Stock were outstanding. The proposed amendment of the
Certificate was approved by unanimous written consent of the directors of the
Company on April 1, 1998.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
Authorizing an additional 150,000,000 shares of Common Stock would give
the Board of Directors the authority, without further action of the
stockholders, to issue such Common Stock from time to time as the Board of
Directors deems necessary. The Board of Directors believes it is necessary to
have the ability to issue such additional shares of Common Stock for general
corporate purposes. Potential uses of the additional authorized shares may
include acquisition transactions, equity financings, stock dividends or
distributions, in each case without further action by the stockholders, unless
such stockholder action is specifically required by applicable law or the rules
of the Nasdaq National Market or any stock exchange on which the Company's
securities may then be listed.
The proposed increase in the authorized number of shares of Common
Stock could have a number of effects on the Company's stockholders depending
upon the exact nature and circumstances of any actual issuances of authorized
but unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal. In addition, an issuance of additional shares by the Company could have
an effect on the potential realizable value of a stockholder's investment. In
the absence of a proportionate increase in the Company's earnings and book
value, an increase in the aggregate number of outstanding shares of the Company
would dilute the earnings per share and book value per share of all outstanding
shares of the Company's Common Stock. If such factors were reflected in the
price per share of Common Stock, the potential realizable value of a
stockholder's investment could be adversely affected. The Common Stock carries
no preemptive rights to purchase additional shares.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the Company's outstanding voting
shares is required for approval of the amendment of the Certificate. The Board
of Directors has adopted a restatement of the Certificate to restate and
integrate the Certificate as amended, including the amendment contemplated by
this proposal. If this proposal is approved at the Annual Meeting, the proposed
amendment would become effective upon filing such restated certificate of
incorporation with the Secretary of State of Delaware, which filing is expected
to take place shortly after such stockholder approval.
12
<PAGE> 16
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION AND APPROVAL OF THE AMENDMENT OF THE CERTIFICATE AUTHORIZING
150,000,000 ADDITIONAL SHARES OF COMMON STOCK, AND PROXIES EXECUTED AND RETURNED
WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
PROPOSAL 4
APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the selection of Ernst
& Young LLP as the Company's independent public auditors for the year ending
December 31, 1998. In the event that the stockholders fail to ratify the
appointment, the Board of Directors will reconsider its selection. Even if the
selection is ratified, the Board of Directors, in its discretion, may direct the
appointment of a different independent accounting firm at any time during the
year if the Board of Directors believes that such change would be in the
Company's and its stockholders' best interests.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to your questions and will have the opportunity to
make a statement if they desire to do so.
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the Annual Meeting is
required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION AND APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1998 by (i) each
person who is known by the Company to own beneficially more than five percent of
the Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's officers named in the Summary Compensation Table below, and (iv) all
current executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
- ------------------------------------------------ ----------------- ----------
<S> <C> <C>
Sanjiv S. Sidhu...................................... 16,450,000 (2) 50.7%
909 E. Las Colinas Blvd.
16th Floor
Irving, Texas 75039
Sidhu-Singh Family Investments, Ltd.................. 3,355,000 10.3
909 E. Las Colinas Blvd.
16th Floor
Irving, Texas 75039
Kanna N. Sharma...................................... 1,895,334 (3) 5.8
909 E. Las Colinas Blvd.
16th Floor
Irving, Texas 75039
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
- ------------------------------------------------ ----------------- ----------
<S> <C> <C>
The K-B Sharma Limited Partnership.................... 1,540,000 4.7
909 E. Las Colinas Blvd.
16th Floor
Irving, Texas 75039
Sandeep R. Tungare.................................... 961,716 (4) 3.0
Gregory A. Brady...................................... 360,563 (5) 1.1
David F. Cary......................................... 155,563 (6) *
Harvey B. Cash........................................ 21,000 (7) *
Thomas J. Meredith.................................... 11,750 (8) *
All directors and executive officers as a group ...... 19,855,926 (9) 61.1
(seven persons)
Alberto W. Villar..................................... 2,030,200 (10) 6.3
One Embarcadero Center,
Suite 2300
San Francisco, California 94111
Gary A. Tanaka........................................ 2,030,200 (10) 6.3
One Embarcadero Center,
Suite 2300
San Francisco, California 94111
Amerindo Investment Advisors Inc...................... 1,925,200 (10) 5.9
One Embarcadero Center,
Suite 2300
San Francisco, California 94111
</TABLE>
- ------------------
* Indicates less than 1%.
(1) Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission in accordance with Rule 13d-3(d)(1).
In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of Common Stock subject
to options held by that person that are currently exercisable or become
exercisable within 60 days following January 31, 1998 are deemed
outstanding. However, such shares are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Includes 3,355,000 shares held by Sidhu-Singh Family Investments, Ltd.,
of which Mr. Sidhu is a general partner. Also includes 500,000 shares
held by the Kanna N. Sharma Inter Vivos QTIP, 100,000 shares held by
the Nathan S. Sharma Exempt 1997 Trust, and 100,000 shares held by the
Stefan M. Sharma Exempt 1997 Trust (collectively, the "Trusts"). Mr.
Sidhu serves as the sole trustee of each of the Trusts, and in such
capacity holds the sole power to vote and dispose of the shares owned
by such Trusts. Mr. Sidhu disclaims beneficial ownership of all shares
held by the Trusts.
(3) Includes 1,540,000 shares held by The K-B Sharma Limited Partnership
and 22,000 shares held by the Bianca D. Sharma Charitable Remainder
Trust One. Mr. Sharma's spouse is the sole manager of the general
partner of The K-B Sharma Limited Partnership and the sole trustee of
the Bianca D. Sharma
14
<PAGE> 18
Charitable Remainder Trust One, and in such capacities holds the sole
power to vote and dispose of the shares owned by such entities.
(4) Includes 17,195 shares purchasable upon the exercise of options owned
by the Tungare Manohar Family Foundation, Inc. (the "Tungare
Foundation"), 443,817 shares owned by his spouse and 27,805 shares
owned by the Tungare Foundation. Mr. Tungare and his spouse are the
sole directors of the Tungare Foundation and, in such capacity, share
the power to vote and dispose of the shares held by the Tungare
Foundation.
(5) Includes 173,334 shares that were unvested as of January 31, 1998, and
therefore subject to a right of repurchase in favor of the Company.
(6) Includes 28,750 shares that were unvested as of January 31, 1998, and
therefore subject to a right of repurchase in favor of the Company.
Also includes 2,501 shares subject to options exercisable within 60
days of January 31, 1998.
(7) Represents shares subject to options exercisable as of January 31,
1998. If such options are exercised, 11,000 of these shares would be
unvested and therefore subject to a right of repurchase in favor of the
Company.
(8) Represents 6,750 shares subject to options exercisable as of January
31, 1998 and 5,000 shares owned by a trust for the benefit of Mr.
Meredith's family. If such options are exercised, 1,750 of these shares
would be unvested and therefore subject to a right of repurchase in
favor of the Company.
(9) See notes (2) through (8).
(10) All information regarding Messrs. Villar and Tanaka, Amerindo
Investment Advisors Inc. ("Amerindo") and Amerindo Investment Advisors,
Inc. ("Amerindo Panama") is derived from the Schedule 13G jointly filed
by such persons with the Securities and Exchange Commission with
respect to shares owned as of December 31, 1997. According to such
Schedule 13G, Messrs. Villar and Tanaka are the sole shareholders and
directors of Amerindo (which owns 1,925,200 shares) and Amerindo Panama
(which owns 105,000 shares). Accordingly, Messrs. Villar and Tanaka
share investment and dispositive power with respect to, and may be
deemed the beneficial owners of, the shares owned by Amerindo and
Amerindo Panama. Messrs. Villar and Tanaka and Amerindo and Amerindo
Panama each expressly disclaims beneficial ownership of such shares.
15
<PAGE> 19
EXECUTIVE COMPENSATION
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
Sanjiv S. Sidhu................... 40 Chairman of the Board and Chief Executive Officer
Kanna N. Sharma................... 57 Vice Chairman of the Board, Executive Vice President
and Secretary
Sandeep R. Tungare................ 41 Director and President, Demand Management
Gregory A. Brady.................. 37 President, Worldwide Operations
David F. Cary..................... 42 Vice President and Chief Financial Officer
Harvey B. Cash.................... 59 Director
Thomas J. Meredith................ 47 Director
</TABLE>
Mr. Sidhu founded the Company in 1988 and has served as its Chairman of
the Board since its incorporation in 1989. Mr. Sidhu has served as the Company's
Chief Executive Officer since December 1994, and previously served in various
other executive capacities with the Company. Before founding the Company,
Mr. Sidhu held various positions with Texas Instruments Incorporated ("Texas
Instruments"), a publicly held electronics manufacturer, most recently as a
member of the technical staff of Texas Instruments' Artificial Intelligence
Laboratory. Mr. Sidhu holds a B.S. in chemical engineering from Osmania
University and a M.S. in chemical engineering from Oklahoma State University.
Mr. Sharma joined the Company in July 1990. Since June 1995, Mr. Sharma
has served as the Company's Vice Chairman of the Board, Executive Vice President
and Secretary and previously served in a variety of senior management positions
with the Company. Before joining the Company, Mr. Sharma served as Vice
President and co-founder of Business Technology Management, Inc., a management
consulting company for manufacturing companies, from July 1987 to July 1990;
Executive Vice President of Operations at Creative Output, Inc., a supplier of
planning and scheduling software, from March 1982 to July 1987; and in various
positions with Texas Instruments from November 1966 to February 1982, most
recently as Department Manager of Information Systems and Services. Mr. Sharma
holds a B.S. in electrical engineering from the Benares Hindu University
Institute of Technology.
Mr. Tungare joined the Company in May 19997 as President, Demand
Management following the merger of the Company and Think Systems Corporation.
Mr. Tungare founded Think in 1986 and served as its President and Chief
Executive Officer until it was acquired by the Company in May 1997. Mr. Tungare
was appointed to the Company's Board of Directors in May 1997 in connection with
the Think acquisition. Mr. Tungare holds a B.S. in science from Bombay
University and an M.B.A. from Rutgers University.
Mr. Brady joined the Company in December 1994 as President, Field
Operations, and became President, Worldwide Operations in September 1996. From
1988 until joining the Company, Mr. Brady held a variety of positions with
Oracle Corporation, an enterprise application software vendor, most recently
serving as Vice President of Worldwide Applications Marketing. Mr. Brady holds a
B.S. in business from the University of Indiana.
Mr. Cary joined the Company in July 1992 and has served as its Vice
President and Chief Financial Officer since April 1994. Mr. Cary served in
various other capacities with the Company between July 1992 and April 1994.
Before joining the Company, Mr. Cary was an Accounting System Controller for
ComputerLand Texas, a distributor of computer equipment, from December 1991 to
June 1992. Mr. Cary is a Certified Public Accountant
16
<PAGE> 20
and holds a B.S. in accounting from San Francisco State University and an M.B.A.
from Southern Methodist University.
Mr. Cash has served as a director of the Company since January 1996.
Mr. Cash has served as general or limited partner of various venture capital
companies affiliated with InterWest Partners, a venture capital firm, since
1985. Mr. Cash currently serves on the board of directors of the following
public companies: Benchmarq Microelectronics, Inc., a developer of chips and
chipsets for portable electronic devices; AMX Corporation, a manufacturer of
remote control systems; Ciena Corporation, a manufacturer of systems for long
distance fiberoptic networks; and Liberte Investors Inc., an investment company.
In addition, Mr. Cash is a director of several privately held companies.
Mr. Cash holds a B.S. in electrical engineering from Texas A&M University and an
M.B.A. from Western Michigan University.
Certain biographical information concerning Mr. Meredith is set forth
under "Proposal 1 -- Election of Director."
17
<PAGE> 21
EMPLOYMENT CONTRACTS; CHANGE-IN-CONTROL AND INDEMNIFICATION ARRANGEMENTS
The executive officers serve at the discretion of the Board. The
Company does not presently have an employment contract in effect with any of its
executive officers. Although no specific cash compensatory arrangements have
been made for the executive officers of the Company, certain provisions of the
1995 Plan may have the effect of discouraging, delaying or preventing a change
in control of the Company or unsolicited acquisition proposals. The Company has
entered into indemnification agreements with all of its executive officers. The
Company maintains directors' and officers' liability insurance and its Bylaws
provided for mandatory indemnification of officers to the fullest extent
permitted by Delaware law.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation earned by the Company's Chief Executive Officer and the other
executive officers of the Company (collectively, the "Named Officers") whose
salary and bonus exceeded $100,000 for services rendered in all capacities to
the Company during 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------- OPTIONS ALL OTHER
NAME AND POSITION(S) YEAR SALARY BONUS OTHER (1) (# OF SHARES) COMPENSATION (2)
- --------------------------- ---- ------- ------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu............ 1997 150,000 75,000 -- -- 925
Chairman of the Board 1996 150,000 75,000 40,308(3) -- 771
and Chief Executive 1995 150,000 75,000 -- -- 771
Officer
Kanna N. Sharma............ 1997 150,000 75,000 84,100(4) -- 1,542
Vice Chairman of the 1996 150,000 75,000 59,032(4) -- 925
Board, Executive Vice 1995 150,000 75,000 -- -- 925
President and Secretary
Sandeep R. Tungare (5)..... 1997 200,000 25,000 -- -- --
President, Demand 1996 200,000 100,000 -- 17,195(6) --
Management 1995 150,000 108,000 -- -- --
Gregory A. Brady........... 1997 150,000 349,380 -- 300,000 --
President, Worldwide 1996 150,000 353,721 -- -- --
Operations 1995 150,000 300,000 -- 16,667 --
David F. Cary.............. 1997 110,004 -- -- 30,714 --
Vice President and 1996 110,004 75,000 -- 25,000 --
Chief Financial Officer 1995 83,417 20,000 -- 20,000 --
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits for officers other
than Messrs. Sidhu and Sharma because the aggregate amounts thereof do
not exceed 10% of such officers' total salary and bonus.
(2) Represents premiums paid by the Company in 1997 and 1996 with respect
to term life insurance policies on the lives of Messrs. Sidhu and
Sharma. All of the proceeds of such policies are payable to Mr. Sidhu's
and Mr. Sharma's respective designated beneficiaries.
(3) Includes $34,800 for expenses relating to tax and estate planning for
the benefit of Mr. Sidhu and his family.
(4) Includes $58,302 and $59,032 for expenses relating to tax and estate
planning in 1997 and 1996, respectively, for the benefit of Mr. Sharma
and his family.
18
<PAGE> 22
(5) Mr. Tungare became an officer of the Company on May 15, 1997 in
connection with the Company's acquisition of Think Systems Corporation.
Prior to such date, Mr. Tungare was employed and compensated by Think
Systems Corporation.
(6) These options were granted to Mr. Tungare and subsequently transferred
to the Tungare Manohar Family Foundation, Inc.
OPTION GRANTS IN 1997
The following table sets forth certain information concerning stock options
granted to each of the Named Officers during 1997. No stock appreciation rights
("SARs") were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM (3)
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------------
NAME GRANTED(1) IN 1997 PER SHARE (2) DATE 5% 10%
- ------------------- ---------- ---------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu....... -- -- -- -- -- --
Kanna N. Sharma....... -- -- -- -- -- --
Sandeep R. Tungare.... -- -- -- -- -- --
Gregory A. Brady...... 300,000 9.90% $28.00 6/22/07 $5,282,715 $13,387,437
David F. Cary......... 30,714 1.01% $40.88 12/14/07 $789,536 $ 2,000,840
</TABLE>
- --------------
(1) Options vest over a four-year period, and in certain cases may be exercised
prior to vesting subject to a right of the Company to repurchase at cost
any unvested shares purchased prior to vesting in the event of the
optionee's termination of employment. Each option expires on the earlier of
ten (10) years from the date of grant or within a specified period
following termination of the optionee's employment with the Company.
(2) The exercise price may be paid in cash or through a promissory note payable
to the Company.
(3) Future value assumes appreciation of 5% and 10% per year over the ten (10)
year option period in the value of the Common Stock as mandated by the
rules and regulations of the Securities and Exchange Commission and does
not represent the Company's estimate or projection of the future value of
the Common Stock. The actual value realized may be greater than or less
than the potential realizable values set forth in the table.
19
<PAGE> 23
AGGREGATE OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION VALUES
The following table sets forth certain information concerning options
exercised during 1997 and option holdings at December 31, 1997 with respect to
each of the Named Officers. No SARs were exercised during 1997 and none were
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1997(2) AT DECEMBER 31, 1997(2)(3)
ACQUIRED ON ------------------------------- --------------------------
NAME EXERCISE VALUE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu........ -- -- -- -- -- --
Kanna N. Sharma........ -- -- -- -- -- --
Sandeep R. Tungare..... -- -- 17,195(4) -- $869,207 --
Gregory A. Brady....... -- -- -- 300,000 -- $7,425,000
David F. Cary.......... 15,833 $546,956 -- 36,548 -- $ 671,947
</TABLE>
- ---------------
(1) Determined by subtracting the exercise price from the market value of
the Common Stock on the exercise date, multiplied by the number of
shares acquired on exercise.
(2) "Exercisable" refers to those options which were both exercisable and
vested, while "Unexercisable" refers to those options which were
unvested.
(3) Value is determined by subtracting the exercise price from the fair
market value of the Common Stock at December 31, 1997 ($52.75 per
share), based upon the closing sale price of the Common Stock on the
Nasdaq National Market on such date.
(4) These options are owned by the Tungare Manohar Family Foundation, Inc.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cash and Meredith served on the Compensation Committee during
1997.
DIRECTOR COMPENSATION
Directors are not compensated for serving on the Board of Directors,
except that non-employee directors periodically receive stock option awards
under the Automatic Option Grant Program of the 1995 Plan. The Company will
reimburse directors who are not also full-time employees of the Company for
reasonable travel expenses incurred in attending meetings of the Board or
committees of the Board.
REPORT ON EXECUTIVE COMPENSATION
During 1997, compensation decisions concerning the Company's executive
officers were made by the Compensation Committee. The following report describes
the procedures employed by the Compensation Committee in formulating the
compensation policy for the Company's executive officers during 1997.
GENERAL
The Company's primary objective is to maximize the value of the
Company's shares over time. Accomplishing this objective requires developing and
marketing superior products and services that provide cost-effective solutions
for the Company's customers. The overall goal of the Compensation Committee is
to develop compensation practices that will allow the Company to attract and
retain the people needed to define, create, manufacture and market leading-edge
products and services.
20
<PAGE> 24
The Company compensates its executive officers with a combination of
salary and incentives designed to focus their efforts on maximizing both the
near-term and long-term financial performance of the Company. In addition, the
Company's compensation structure also rewards individual performance that
furthers Company goals. Elements of each executive officer's compensation
include the following:
o Base Salary
o Annual Incentives
o Equity Incentives
o Benefits
Each executive officer's compensation package is designed to provide an
appropriately weighted mix of these elements which cumulatively provide a level
of compensation roughly equivalent to that paid by the top quartile of companies
of similar size and complexity.
BASE SALARY
Base Salary and increases in base salary are determined by individual
performance. In adjusting these base salaries, both qualitative and quantitative
factors relating to corporate and individual performance are examined. In many
instances, the qualitative factors necessarily involve a subjective assessment
by the Compensation Committee. The Compensation Committee considers a mix of
factors and evaluates individual performance against that mix both in absolute
terms and in relation to the executive's peers within the Company. To assist in
recruiting highly qualified management, the Compensation Committee generally
targets base salaries paid to executive officers at competitive levels,
depending on individual qualifications and experience.
ANNUAL INCENTIVES
The Company maintains annual cash incentive bonus programs to reward
executive officers and other key employees for attaining defined performance
goals. For most of the executive officers and other key employees, bonuses are
based primarily on Company-wide performance targets. For senior management
personnel, Company-wide performance is a factor; however, significant weight is
also given to individual performance and performance factors of particular
operation groups within the Company.
In setting performance targets, the Company considered its historical
performance and underlying business model, and external as well as internal
expectations related to 1997 operating profits. Incentive compensation was
subject to further adjustment based on a combination of financial factors,
including the Company's contracting activity, total revenues, operating income
and earnings per share. The financial factors were derived from 1997 budget
data, historical performance and median expectations of those industry analysts
who publish earnings forecasts for the Company and otherwise actively follow the
Company.
EQUITY INCENTIVES
The Company utilizes its 1995 Plan to further align the interests of
stockholders and management by creating common incentives related to the
possession by management of a substantial economic interest in the long-term
appreciation of the Company's stock. Generally, options under the 1995 Plan are
granted with exercise prices set at the fair market value of the underlying
stock on the date of grant, have a term of ten (10) years, and are subject to
vesting over four (4) years. In determining the size of an option to be granted
to an executive officer, the Compensation Committee takes into account the
executive officer's position and level of responsibility within the Company, the
executive officer's existing stock and unvested option holdings, the potential
reward to the executive officer if the stock price appreciates in the public
market, and the competitiveness of the executive officer's overall compensation
arrangements, including stock options, although outstanding performance by an
individual may also be taken into consideration. Option grants may also be made
to new executives upon
21
<PAGE> 25
commencement of employment and, on occasion, to executives in connection with a
significant change in job responsibility.
The 1995 Plan was adopted by the Company's Board of Directors and
approved by its stockholders in 1995, and is administered by the Compensation
Committee. After considering the criteria discussed above, in 1997 the
Compensation Committee granted to Messrs. Cary and Brady options to purchase
30,714 and 300,000 shares of Common Stock, respectively. In determining the size
of each grant, the Board focused in particular on its conclusion, based on
experience and informal information subjectively evaluated, that the stock and
option holdings of Messrs. Cary and Brady were below the levels needed to
provide appropriate equity incentives.
The Board of Directors adopted and the stockholders approved an
Employee Stock Purchase Plan (the "Purchase Plan") in 1996. The Purchase Plan is
designed to allow eligible employees of the Company to purchase shares of Common
Stock through periodic payroll deductions under the Purchase Plan, and a reserve
of 400,000 shares of Common Stock has been established for this purpose. Payroll
deductions may not exceed 15% of a participant's base salary for each purchase
period. The purchase price per share will be 85% of the lesser of the fair
market value of the Common Stock on the start of the purchase period or the fair
market value on the semi-annual purchase date. Messrs. Cary and Brady purchased
252 and 354 shares, respectively, on April 30, 1997, and 244 and 296 shares,
respectively, on October 31, 1997 through the Purchase Plan.
COMPLIANCE WITH THE INTERNAL REVENUE CODE
Section 162(m) of the Code imposes a limit on tax deductions for annual
compensation (other than performance based compensation) in excess of one
million dollars paid by a corporation to its chief executive officer and the
other four most highly compensated executive officers of a corporation. The
Company has not established a policy with regard to Section 162(m) of the Code,
since the Company has not and does not currently anticipate paying cash
compensation in excess of one million dollars per annum to any employee. None of
the compensation paid by the Company in 1997 was subject to the limitation on
deductibility. The Board of Directors will continue to assess the impact of
Section 162(m) of the Code on its compensation practices and determine what
further action, if any, is appropriate.
BENEFITS
Benefits offered to the Company's executive officers serve as a safety
net of protection against the financial catastrophes that can result from
illness, disability or death. Benefits offered to the Company's executive
officers are substantially the same as those offered to all of the Company's
regular employees.
In 1994, the Company established a tax-qualified deferred compensation
plan (the "401(k) Savings Plan") covering all of the Company's eligible
full-time employees. Under the plan, participants may elect to contribute,
through salary reductions, up to 18% of their annual compensation subject to a
statutory maximum. The Company does not currently provide additional matching
contributions under the 401(k) Savings Plan, but may do so in the future. The
401(k) Savings Plan is designed to qualify under Section 401 of the Code so that
contributions by employees or by the Company to the plan, and income earned on
plan contributions, are not taxable to employees until withdrawn from the 401(k)
Savings Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made. The trustee under the plan, at the
direction of each plan participant, currently invests the assets of the 401(k)
Savings Plan in eight investment options.
CEO COMPENSATION
In setting compensation payable to the Company's Chief Executive
Officer, Mr. Sidhu, the Compensation Committee has sought to be competitive with
companies of similar size within the industry. Mr. Sidhu's base salary is tied
to the performance of the Company and to his personal performance. The largest
portion of Mr. Sidhu's incentive compensation under the 1995 Plan is dependent
upon the Company's performance and the smaller portion
22
<PAGE> 26
is related to an evaluation of his personal performance. No incentive
compensation is paid to Mr. Sidhu for Company or personal performance unless
specific Company and personal performance goals are achieved during the fiscal
year.
In 1997, Mr. Sidhu earned a base salary of $150,000 and cash bonus of
$75,000. The bonus for 1997 approximated 50% of his base salary and was based on
the performance of the Company and Mr. Sidhu's significant contribution to that
performance in terms of both leadership and strategic vision.
Compensation Committee:
HARVEY B. CASH
THOMAS J. MEREDITH
STOCK PERFORMANCE GRAPH
The graph below depicts the Company's stock price as an index assuming
$100 invested on April 25, 1996 (the date of the Company's initial public
offering), along with the composite prices of companies listed in the Nasdaq
Computer and Data Processing Services Group Index and Nasdaq Stock Market (U.S.
Companies) Index. This information has been provided to the Company by the
Nasdaq Stock Market. The comparisons in the graph are required by regulations of
the Securities Exchange Commission and are not intended to forecast or to be
indicative of the possible future performance of the Common Stock.
[Graph]
<TABLE>
<CAPTION>
4/25/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
i2 Technologies 100 214 190 191 165 155 208 264
NASDAQ Stock Market - US 100 100 104 109 103 122 142 134
NASDAQ Computer & Data Processing 100 100 102 106 99 126 138 130
</TABLE>
The preceding Report on Executive Compensation and the Stock
Performance Graph shall not be deemed incorporated by reference into any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate filings
made by the Company under those Acts, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those Acts, except to the extent that the Company specifically incorporates this
information by reference.
CERTAIN TRANSACTIONS WITH MANAGEMENT
A registration rights agreement, dated April 1, 1996, among the
Company, Mr. Sidhu and Sidhu-Singh Family Investments, Ltd. (of which Mr. Sidhu
is a general partner) provides Mr. Sidhu and Sidhu-Singh Family Investments,
Ltd. with piggyback rights to include their respective shares of Common Stock
(currently an aggregate of 15,750,000 shares) in any Company-initiated
registered offering on or prior to June 1, 2001. Under such registration rights
agreement, the Company has agreed to bear all expenses associated with offerings
in which shares held by holders of piggyback rights are included, other than
underwriting discounts and commissions attributable to the sale of such shares.
In May 1997, the Company acquired Think Systems Corporation, a New
Jersey corporation ("Think"). During 1997, the Company acquired majority
ownership of Think Systems Private Limited, an Indian corporation ("Think
India"). The Think acquisitions culminate an ongoing relationship commenced
pursuant to a January 1996 agreement between the Company and Think to integrate
Think's demand management decision support software and the Company's Rhythm
suite of planning and optimization software products. Approximately 3.8 million
shares of Common Stock have been issued or are issuable to the former Think and
Think India shareholders and optionholders in exchange for all of the capital
stock of Think and Think India and all unexpired and unexercised
23
<PAGE> 27
options to acquire Think capital stock. Mr. Tungare, a former principal
shareholder of Think and Think India, and his spouse received an aggregate of
1,070,947 shares of Common Stock in exchange for their shares of Think and Think
India capital stock, and Mr. Tungare's options to acquire Think common stock
were converted into options to acquire 17,195 shares of the Company's Common
Stock. Upon the closing of the Think acquisition, Mr. Tungare resigned as
President and director of Think, and was appointed to the Company's Board of
Directors. Pursuant to a registration rights agreement entered into by the
Company and each of the former shareholders of Think as a condition to the Think
acquisition, the Company has granted the former shareholders of Think (including
the Tungares) certain demand and piggy back rights to include their respective
shares of Common Stock for certain registered offerings on or before MayE15,
2000. Under such registration rights agreement, the Company has agreed to bear
substantially all expenses associated with offerings in which shares held by
holders of such registration rights are included, other than underwriting
discounts and commissions, brokerage fees and stock transfer and other taxes
attributable to the sale of such shares.
In November 1996, Mr. Tungare and his spouse borrowed an aggregate of
$500,000 from Think pursuant to promissory notes bearing interest at 6.78% per
annum. The largest aggregate amount outstanding on such loans since January 1,
1997 was $516,950. The principal of such notes and interest were repaid in
May 1997 prior to the acquisition of Think.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% 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
and the Nasdaq Stock Market. Executive officers, directors and greater than 10%
beneficial owners are required by Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company or written representations from certain reporting persons that no Forms
5 were required, the Company believes that, during 1997, its executive officers,
directors and greater than 10% beneficial owners complied with all applicable
Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS
Under the present rules of the Securities and Exchange Commission and
the Bylaws of the Company, the deadline for stockholders to submit proposals to
be considered for inclusion in the Company's Proxy Statement for next year's
Annual Meeting of Stockholders is expected to be 120 days prior to April [24],
1999. Such proposals may be included in next year's Proxy Statement if they
comply with certain rules and regulations promulgated by the Securities and
Exchange Commission and the procedure set forth in the Bylaws of the Company.
FORM 10-K
THE COMPANY WILL MAIL TO ANY STOCKHOLDER WITHOUT CHARGE, UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF
EXHIBITS. REQUESTS SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS, AT THE
COMPANY'S EXECUTIVE OFFICES LOCATED AT 909 E. LAS COLINAS BLVD., 16TH FLOOR,
IRVING, TEXAS 75039.
24
<PAGE> 28
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Annual Meeting other than the matters set forth in this Proxy
Statement. Should any other matter requiring a vote of the stockholders arise,
the persons named as proxies on the enclosed proxy card will vote the shares
represented thereby in accordance with their best judgment in the interest of
the Company. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy card.
By Order of the Board of Directors,
KANNA N. SHARMA
Secretary
April [24], 1998
25
<PAGE> 29
APPENDIX A
AMENDMENT TO 1995 STOCK OPTION/STOCK ISSUANCE PLAN
26
<PAGE> 30
i2 TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(As Amended and Restated through April 1, 1998)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to
promote the interests of i2 Technologies, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
(i) the Discretionary Option Grant
Program under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common
Stock,
(ii) the Stock Issuance Program under
which eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program
under which Eligible Directors shall automatically receive option
grants at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply
to all equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Board shall have the authority to administer the
Discretionary Option Grant and Stock Issuance Programs but may delegate such
authority in whole or in part to the Committee.
<PAGE> 31
B. Members of the Committee shall serve for such period
of time as the Board may determine and may be removed by the Board at any time.
The Board may also at any time terminate the functions of the Committee and
reassume all powers and authority previously delegated to such Committee.
C. The Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it
may deem appropriate for proper administration of the Discretionary Option
Grant and Stock Issuance Programs and to make such determinations under, and
issue such interpretations of, the provisions of such programs and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant or Stock
Issuance Program under its jurisdiction or any option or stock issuance
thereunder.
D. Service on the Committee shall constitute service as
a Board member, and members of the Committee shall accordingly be entitled to
full indemnification and reimbursement as Board members for their service on
such committee. No member of the Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.
E. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms of that program, and the
Plan Administrator shall exercise no discretionary functions with respect to
option grants made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board
(or the board of directors of any Parent or Subsidiary), and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the
2
<PAGE> 32
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuances, the time or times when such issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration to be paid for such
shares.
C. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.
D. The individuals eligible to participate in the
Automatic Option Grant Program shall be (i) those individuals who are serving
as non-employee Board members on the Automatic Option Grant Program Effective
Date or who are first elected or appointed as non-employee Board members after
such date, whether through appointment by the Board or election by the
Corporation's stockholders, and (ii) those individuals who continue to serve as
non-employee Board members after one or more Annual Stockholders Meetings held
after the Automatic Option Grant Program Effective Date.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 15,500,000 shares. Such authorized share reserve is comprised of (i)
the number of shares which remained available for issuance, as of the Plan
Effective Date, under the Predecessor Plan as last approved by the
Corporation's stockholders prior to such date, including the shares subject to
the outstanding options incorporated into the Plan and any other shares which
would have been available for future option grants under the Predecessor Plan,
(ii) an increase of 801,576 shares authorized by the Board and approved by the
stockholders prior to the Plan Effective Date, (iii) an increase of 2,000,000
shares authorized by the Board and approved by the stockholders at the 1997
Annual Meeting, plus (iv) an additional increase of 3,500,000 shares approved
by the Board on July 1, 1997, subject to approval by the stockholders at the
1998 Annual Meeting.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 500,000 shares of Common Stock in the aggregate per
calendar year, beginning with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plan) expire
or terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan (including unvested shares issued
under the Predecessor Plan) and subsequently repurchased by the Corporation, at
the original exercise or
3
<PAGE> 33
issue price paid per share, pursuant to the Corporation's repurchase rights
under the Plan, shall be added back to the number of shares of Common Stock
reserved for issuance under the Plan and shall accordingly be available for
reissuance through one or more subsequent options or direct stock issuances
under the Plan. Shares subject to any stock appreciation rights exercised
under the Plan shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Common Stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net number of
shares of Common Stock issued to the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances per calendar year, (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made per Eligible Director under the Automatic Option Grant
Program and (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option (including any option
incorporated from the Predecessor Plan) in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
4
<PAGE> 34
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Five and the documents evidencing the option, be payable in one or
more of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
5
<PAGE> 35
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:
(i) Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or
in part by the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's estate or
by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and
distribution.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent it is not exercisable for vested shares on the date of
such cessation of Service.
(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(v) In the event of an Involuntary
Termination following a Corporate Transaction, the provisions of
Section III of this Article Two shall govern the period for which the
outstanding options are to remain exercisable following the Optionee's
cessation of Service and shall supersede any provisions to the
contrary in this section.
2. The Plan Administrator shall have the
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
6
<PAGE> 36
(i) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments
in which the Optionee would have vested under the option had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. Limited Transferability of Options. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death. Non-Statutory
Options may, to the extent permitted by the Plan Administrator, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section
II.
A. Eligibility. Incentive Options may only be granted
to Employees.
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B. Exercise Price. The exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value
of the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an
Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall NOT
so accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation (or parent thereof), (ii)
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii)
the acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
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C. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction and (ii) the exercise price payable
per share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. Any options which are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time shall
automatically accelerate (and any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate
Transaction shall automatically terminate and the shares of Common Stock
subject to those terminated rights shall immediately vest in full) in the event
the Optionee's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction. Any options so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.
F. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of
one or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Change in
Control or (ii) condition any such option acceleration (and the termination of
any outstanding repurchase rights) upon the subsequent Involuntary Termination
of the Optionee's Service within a specified period following the effective
date of such Change in Control. Any options accelerated in connection with a
Change in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
H. The grant of options under the Discretionary Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change
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its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options incorporated
from the Predecessor Plan) and to grant in substitution new options covering
the same or different number of shares of Common Stock but with an exercise
price per share based on the Fair Market Value per share of Common Stock on the
new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights
and/or limited stock appreciation rights.
B. The following terms shall govern the grant and
exercise of tandem stock appreciation rights:
(i) One or more Optionees may be granted
the right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the
excess of (A) the Fair Market Value (on the option surrender date) of
the number of shares in which the Optionee is at the time vested under
the surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in
shares and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (A) five (5)
business days after the receipt of the rejection notice or (B) the
last day on which the option is otherwise exercisable in accordance
with the terms of the documents evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the
option grant date.
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C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:
(i) One or more Section 16 Insiders may
be granted limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each such individual holding one or more options with such
a limited stock appreciation right shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile
Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for vested shares of
Common Stock. In return for the surrendered option, the Optionee
shall receive a cash distribution from the Corporation in an amount
equal to the excess of (A) the Take-Over Price of the shares of Common
Stock which are at the time vested under each surrendered option (or
surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
(iv) The balance of the option (if any)
shall continue in full force and effect in accordance with the
documents evidencing such option.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price
1. The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of
Article Five, shares of Common Stock may be issued under the Stock Issuance
Program for one or both of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).
B. Vesting Provisions
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed
by the Participant or the performance objectives to be attained,
(ii) the number of installments in which
the shares are to vest,
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<PAGE> 42
(iii) the interval or intervals (if any)
which are to lapse between installments, and
(iv) the effect which death, Permanent
Disability or other event designated by the Plan Administrator is to
have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further stockholder rights with respect to
those shares. To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the cessation of the Participant's Service or the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
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<PAGE> 43
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated vesting
is precluded by other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretion,
exercisable either at the time the unvested shares are issued or at any time
while the Corporation's repurchase right remains outstanding, to provide for
the automatic termination of one or more outstanding repurchase rights, and the
immediate vesting of the shares of Common Stock subject to those rights, upon
the occurrence of a Corporate Transaction, whether or not those repurchase
rights are assigned in connection with the Corporate Transaction.
C. Any repurchase rights that are assigned in the
Corporate Transaction shall automatically terminate, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event the Optionee's Service should subsequently terminate by reason of
an Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction.
D. The Plan Administrator shall have the discretion,
exercisable either at the time the unvested shares are issued or at any time
while the Corporation's repurchase right remains outstanding, to (i) provide
for the automatic termination of one or more outstanding repurchase rights and
the immediate vesting of the shares of Common Stock subject to those rights
upon the occurrence of a Change in Control or (ii) condition any such
accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the
dates specified below:
1. Each Eligible Director who is a non-employee
Board member on the Automatic Option Grant Program Effective Date and each
Eligible Director who is first elected or appointed as a non-employee Board
member after such date shall automatically be granted, on the Automatic Option
Grant Program Effective Date or on the date of such initial election or
appointment (as the case may be), a Non-Statutory Option to purchase 1,000
shares of Common Stock.
2. On the date of each Annual Stockholders
Meeting, beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who is to continue to serve as an Eligible
Director after such meeting, shall automatically be granted, whether or not
such individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 1,000 shares of
Common Stock, provided such individual has served as a non-employee Board
member for at least six (6) months prior to the date of such Annual Meeting.
There shall be no limit on the number of such annual 1,000-share option grants
any one Eligible Director may receive over his or her period of Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall be payable in one or
more of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten
(10) years measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall
be immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each option
grant, whether
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<PAGE> 45
an initial or an annual grant, shall vest, and the Corporation's repurchase
right shall lapse, in a series of four (4) equal and successive annual
installments over the Optionee's period of continued service as a Board member,
with the first such installment to vest upon the Optionee's completion of one
(1) year of Board service measured from the option grant date.
E. EFFECT OF TERMINATION OF BOARD SERVICE. The
following provisions shall govern the exercise of any options held by the
Optionee at the time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of such shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares on
the date of such cessation of Board service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of such
shares as fully-vested shares
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<PAGE> 46
of Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully- vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or sooner
termination of the option term or the surrender of the option in connection
with a Hostile Take- Over.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding automatic options. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board shall be required in
connection with such option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more installments.
The terms of any such promissory note (including the interest rate and the
terms of repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price
or purchase price payable for the purchased shares plus (ii) any Federal, state
and local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to
forgiveness by the Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or stock appreciation rights or upon
the issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan (other than the options granted or the shares
issued under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of
their shares. Such right may be provided to any such holder in either or both
of the following formats:
(i) Stock Withholding: The election to
have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such Non-Statutory Option or
the vesting of such shares, a portion of those shares with an
aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
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<PAGE> 48
(ii) Stock Delivery: The election to
deliver to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common Stock
previously acquired by such holder (other than in connection with the
option exercise or share vesting triggering the Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance
Programs became effective on the Plan Effective Date. The Automatic Option
Grant Program became effective on the Automatic Option Grant Program Effective
Date, and the initial options under the Automatic Option Grant Program were
made to the Eligible Directors at that time. The Plan was approved by the
Corporation's stockholders in September 1995.
On May 11, 1996, the Board adopted an amendment (the "1996
Amendment") which (i) imposed a maximum limit, for purposes of Section 162(m)
of the Code, on the number of shares for which any one person may be granted
options, separately exercisable stock appreciation rights and direct stock
issuances per calendar year under the Plan and (ii) increased the number of
shares of Common Stock issuable under the Plan by an additional 2,000,000
shares. The 1996 Amendment became effective immediately upon adoption by the
Board and was approved by the Corporation's stockholders at the 1997 Annual
Meeting.
On July 1, 1997, the board amended the Plan to increase the
number of shares of Common Stock available for issuance under the Plan by
3,500,000 shares, subject to stockholder approval at the 1998 Annual
Stockholders Meeting.
The Plan was amended and restated on April 1, 1998 to effect
the following changes: (i) render the non-employee Board members who serve as
the Plan Administrator eligible to receive option grants and direct stock
issuances under the Discretionary Option Grant and Stock Issuance Programs,
(ii) eliminate certain restrictions on the eligibility of non-employee Board
members to serve as Plan Administrator, (iii) allow shares issued under the
Plan and subsequently reacquired by the Corporation to be added back to the
share reserve available for future issuance under the Plan and (iv) effect a
series of technical changes to the provisions of the Plan (including the
stockholder approval requirements) in order to take advantage of the amendments
to Rule 16b-3 of the Securities and Exchange Commission which exempt certain
officer and director transactions under the Plan from the short-swing liability
provisions of the Federal securities laws. If such stockholder approval is not
obtained at the 1998 Annual Meeting, then (i) any options previously granted on
the basis of the 3,500,000-share increase shall terminate, and no further
options based on such increase shall be granted, (ii) non-employee Board
members who serve as the Plan Administrator shall not be eligible to receive
option grants or direct stock issuances under the Discretionary Option Grant or
Stock Issuance Programs and (iii) shares of Common Stock reacquired by the
Corporation shall not be added back to the reserve available for issuance under
the Plan. Those options granted under the Plan which are
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<PAGE> 49
not based on such increase shall remain outstanding in accordance with the
terms and conditions of the respective agreements evidencing such options,
whether or not the requisite stockholder approval of the share increase is
obtained. Subject to the foregoing limitations, the Plan Administrator may
grant options under the Plan at any time before the date fixed herein for
termination of the Plan.
B. The Plan shall serve as the successor to the
Predecessor Plan, and no further option grants shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan as of such date shall, immediately upon approval of the
Plan by the Corporations's stockholders, be incorporated into the Plan and
treated as outstanding options under the Plan. However, each outstanding
option so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including
(without limitation) the option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i)
September 20, 2005, (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise of the options
or the issuance of shares (whether vested or unvested) under the Plan or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all options and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such
options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to options, stock appreciation rights or unvested stock issuances
at the time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments
may require stockholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program and shares of Common Stock
may be issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs are held in
escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess
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issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of
Common Stock (i) upon the exercise of any option or stock appreciation right or
(ii) under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it. No
shares of Common Stock or other assets shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws and any applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or
of the Optionee or the Participant, which rights are hereby expressly reserved
by each, to terminate such person's Service at any time for any reason, with or
without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.
B. AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the
date on which the Underwriting Agreement is executed and the initial public
offering price of the Common Stock is established.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the
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Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those immediately prior to
such transaction; or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
H. CORPORATION shall mean i2 Technologies, Inc., a Delaware
corporation.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance
with the eligibility provisions of Article One.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
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(iii) For purposes of option grants made on the
date the Underwriting Agreement is executed and the initial public
offering price of the Common Stock is established, the Fair Market
Value shall be deemed to be equal to the established initial offering
price per share. For purposes of option grants made prior to such
date, the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
N. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and any non-discretionary and objective-standard
incentive payment or bonus award) by more than fifteen percent (15%)
or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's
consent.
Q. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
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R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
V. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more. However, solely for the purposes of the Automatic
Option Grant Program, Permanent Disability or Permanently Disabled shall mean
the inability of the non-employee Board member to perform his or her usual
duties as a Board member by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration
of twelve (12) months or more.
X. PLAN shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Board or the Committee, which is authorized to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions under those programs with respect to the persons under its
jurisdiction.
Z. PLAN EFFECTIVE DATE shall mean the date on which the Plan is
adopted by the Board.
AA. PREDECESSOR PLAN shall mean the Corporation's existing 1992
Stock Plan.
AB. COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan.
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AC. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AD. SECTION 12(G) REGISTRATION DATE shall mean the first date on
which the Common Stock is registered under Section 12(g) of the 1934 Act.
AE. SERVICE shall mean the provision of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.
AF. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
AI. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
AJ. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AK. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of such
holder's options or the vesting of his or her shares.
AL. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
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PROXY
i2 TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Sanjiv S. Sidhu and David F. Cary, and each
of them, with full power of substitution, attorneys and proxies of the
undersigned to vote the shares of Common Stock, par value $0.00025 per share, of
i2 Technologies, Inc. ("i2"), which the undersigned could vote, and with all
power the undersigned would possess, if personally present at the Annual Meeting
of Stockholders of i2 to be held at the Omni Mandalay Hotel, 221 East Las
Colinas Boulevard, Irving, Texas on Tuesday, May 26, 1998 at 9:30 a.m. (Central
Time), and any adjournment thereof.
1. The election of a Class I director.
[ ] FOR Thomas J. Meredith.
[ ] WITHHOLD AUTHORITY to vote for Thomas J. Meredith.
2. Approval of the amendment to the 1995 Stock Option/Stock Incentive
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment of the Certificate of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the appointment of Ernst & Young LLP as independent
auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, to act upon any matters incidental to the
foregoing and such other business as may properly come before the
Annual Meeting, or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR Items 1, 2, 3 and 4. Any holder who wishes to withhold the
discretionary authority referred to in Item 5 above should mark a line through
the entire item.
Receipt of the Proxy Statement dated April [24], 1998, is hereby
acknowledged.
Dated: , 1998
------------------------------
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Signature(s)
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(Please sign exactly and as fully as your
name appears on your stock certificate. If
shares are held jointly, each stockholder
should sign.)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY, USING THE ENCLOSED ENVELOPE.
