<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
i2 TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[i2 Technologies, Inc. LOGO]
i2 TECHNOLOGIES, INC.
909 E. LAS COLINAS BLVD., 16TH FLOOR
IRVING, TEXAS 75039
April 26, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 annual meeting of stockholders
of i2 Technologies, Inc., which will be held at the La Cima Club, The Towers at
Williams Square, 5215 North O'Connor Road, Irving, Texas on Monday, May 24, 1999
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 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,
/s/ SANJIV S. SIDHU
SANJIV S. SIDHU
Chairman of the Board and
Chief Executive Officer
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.
<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 24, 1999
The 1999 annual meeting of stockholders of i2 Technologies, Inc. (the
"Company") will be held at the La Cima Club, The Towers at Williams Square, 5215
North O'Connor Road, Irving, Texas on Monday, May 24, 1999 at 9:30 a.m. (Central
Time) for the following purposes:
1. To elect two Class II directors to serve until the annual stockholders'
meeting in 2002, or until their successors have been elected and
qualified.
2. To approve an amendment to the Company's 1995 Stock Option/Stock
Issuance Plan (the "1995 Plan") to increase the number of shares of the
Company's common stock authorized to be issued under the 1995 Plan by
12,000,000 shares.
3. To approve an amendment to the Company's Employee Stock Purchase Plan
(the "Purchase Plan") to increase the number of shares of the Company's
common stock authorized to be issued in the aggregate under the Purchase
Plan and the International Employee Stock Purchase Plan by 1,500,000
shares.
4. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common
stock of the Company from 200,000,000 to 500,000,000.
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 23, 1999 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,
/s/ KANNA N. SHARMA
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 1999 Annual
Meeting of Stockholders to be held on Monday, May 24, 1999 at 9:30 a.m. (Central
Time), and at any adjournment or postponement thereof (the "Annual Meeting") at
the La Cima Club, The Towers at Williams Square, 5215 North O'Connor Road,
Irving, Texas. These proxy materials were first mailed to stockholders of record
beginning on approximately April 30, 1999.
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 Internet.
The Company's annual report to stockholders for the year ended December 31,
1998 (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 23, 1999 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 72,303,030
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.
As of January 31, 1999, directors and executive officers of the Company
beneficially owned an aggregate of approximately 39.5 million shares of Common
Stock (not including shares of Common Stock issuable upon exercise of
outstanding stock options) constituting approximately 55% 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
<PAGE> 5
of the proposals described herein. Nonetheless, the approval of the proposals is
not assured. See "Principal Stockholders."
PROPOSAL 1
ELECTION OF DIRECTORS
The Company currently has the following five directors serving on its
Board: Sanjiv S. Sidhu, Kanna N. Sharma, Sandeep R. Tungare, Harvey B. Cash, 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 II directors (Sandeep R. Tungare and
Harvey B. Cash) expires at this Annual Meeting, the term of office of the Class
III directors (Sanjiv S. Sidhu and Kanna N. Sharma) expires at the 2000 annual
meeting of stockholders and the term of office of the Class I director (Thomas
J. Meredith) expires at the 2001 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
Two Class II directors are to be elected at the Annual Meeting to hold
office until the 2002 annual meeting of stockholders, or until their successors
are elected and have qualified. The two nominees receiving the greatest number
of votes of 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, even if they receive less than a majority of such
shares. Abstentions will not be counted towards the tabulation of votes cast for
the election of any director.
Unless otherwise instructed, the persons named in the accompanying proxy
card will vote the proxies received by them for the Company's nominees, Sandeep
R. Tungare and Harvey B. Cash. If Mr. Tungare or Mr. Cash is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for the nominee or nominees who are designated by the present Board of
Directors to fill the vacancy. It is not expected that Mr. Tungare or Mr. Cash
will be unable or will decline to serve as a director.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" SANDEEP R. TUNGARE
AND HARVEY B. CASH, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
CLASS II NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION(S)
---- -------------- --- -----------
<S> <C> <C> <C>
Sandeep R. Tungare.......................... 1997 42 Director and President,
Demand Management
Harvey B. Cash.............................. 1996 60 Director
</TABLE>
- ---------------------
Mr. Tungare joined the Company in May 1997 as President, Demand Management
following the merger of the Company and Think Systems Corporation ("Think"). Mr.
Tungare founded Think in 1986 and served as its President and Chief Executive
Officer until it merged with the Company in May 1997. Mr. Tungare was appointed
to the Company's Board of Directors in May 1997 in connection with the Think
merger. Mr. Tungare holds a B.S. in science from Bombay University and an M.B.A.
from Rutgers 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
1986. Mr. Cash currently serves on the board of directors of the following
public companies: AMX Corporation, a manufacturer of remote control systems;
Ciena Corporation, a designer and manufacturer of dense wavelength division
multiplexing systems for fiber optic networks; and Liberte Investors Inc., an
2
<PAGE> 6
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.
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 Restated
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 seven times during 1998, and acted a
number of times by written consent. Each incumbent director attended at least
75% of the aggregate of (i) the total number of meetings of the Board and (ii)
the total number of meetings held by all committees of the Board on which such
director served.
The Company has a standing Compensation Committee currently composed of
Messrs. Cash and Meredith. The Compensation Committee met one time in 1998. The
Compensation Committee administers the Company's stock plans. The Compensation
Committee has the responsibility 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 1998. 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. 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") that will increase the
number of shares of Common Stock available for issuance under the 1995 Plan from
31,000,000 shares to 43,000,000 shares. The 12,000,000-share increase was
approved by the Board on April 11, 1999, subject to stockholder approval at the
Annual Meeting. The Board believes it is in the best interest 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.
SUMMARY OF THE 1995 STOCK OPTION/STOCK ISSUANCE 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.
3
<PAGE> 7
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 Discretionary Option Grant and Stock
Issuance Programs. The Board has delegated Mr. Sidhu the authority to grant
options for up to 100,000 shares in any calendar year under the Discretionary
Option Grant Program to each individual not subject to Section 16 of the
Securities Exchange Act of 1934. 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 individual is acting within the scope of its or
his 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
An aggregate of 43,000,000 shares of Common Stock (including the share
increase subject to stockholder approval under this proposal) have 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 1,000,000
shares per calendar year. Stockholder approval of this proposal will constitute
re-approval of such share limitation. As of December 31, 1998, there were
14,547,432 shares of Common Stock issuable upon exercise of outstanding stock
options.
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 and 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 be available for reissuance.
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 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, 1999, seven executive officers, approximately 2,338 other
employees and two non-employee Board members were eligible to participate in the
1995 Plan.
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. As of January 31, 1999, the closing selling price per
share was $34.875.
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.
4
<PAGE> 8
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. 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 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 the 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
Each individual who first becomes a non-employee Board member will
automatically be granted at that time an option for 2,000 shares of Common
Stock. In addition, on the date of each annual stockholders 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 2,000 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 12,000,000-share increase subject to this proposal will constitute
pre-approval of each option granted on or after the date of the Annual Meeting
pursuant to the provisions of the Automatic Option Grant Program on 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 equal
5
<PAGE> 9
annual installments over the optionee's period of Board service, with the first
such installment to vest one 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, 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.
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.
Stock Awards. The table below shows, as to each of the Company's executive
officers named in the Summary Compensation Table contained elsewhere in this
Proxy Statement and the various indicated individuals and groups, the number of
shares of Common Stock subject to options granted between January 1,
6
<PAGE> 10
1998 and January 31, 1999 under the 1995 Plan together with the weighted-average
exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
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.......................................... 550,000 $15.18
President, Worldwide Operations
David F. Cary............................................. 20,000 13.94
Chief Financial Officer
All current executive officers as a group (four
persons)................................................ 780,000 14.93
Harvey B. Cash............................................ 2,000 27.53
Director
Thomas J. Meredith........................................ 2,000 27.53
Director
All non-employee directors as a group (two persons)....... 4,000 27.53
All employees, including current officers who are not
executive officers as a group (1,053 persons)........... 8,990,787(1) 17.89
</TABLE>
- ---------------------
(1) Includes 3,757,685 options granted with an exercise price per share of
$13.94 pursuant to the repricing of options. The original exercise prices
per share of such options ranged from $14.00 to $32.81.
NEW PLAN BENEFITS
As of January 31, 1999, no options had been granted and no direct stock
issuances had been made, on the basis of the 12,000,000-share increase which
forms part of this Proposal 2. At the 1999 Annual Meeting, each individual who
will continue to serve as a non-employee Board member will receive an option
grant under the Automatic Option Grant Program to purchase 2,000 shares of
Common Stock at an exercise price per share equal to the fair market value per
share of Common Stock on the grant date.
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 of
1986 (the "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
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<PAGE> 11
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 generally 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 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 generally 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.
Direct Stock Issuances
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.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with the disqualifying disposition of incentive stock option shares
or the exercise of non-statutory options granted with exercise prices equal to
the fair market value of the shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
under the 1995 Plan with respect to such dispositions or exercises will remain
deductible by the Company without limitation under Code Section 162(m).
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
compensation expense to the Company 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 amounts will
8
<PAGE> 12
be expensed 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 diluted basis. Under Statement
of Financial Accounting Standards No. 123, footnote disclosure is required as to
the impact the outstanding options under the 1995 Plan would have upon the
Company's reported earnings were those options valued as compensation expense
for book accounting purposes.
Under a recently-proposed amendment to the current accounting principles,
option grants made to non-employee Board members or consultants after December
15, 1998 will result in a direct charge to the Company's reported earnings based
upon the fair value of the option measured on the vesting date of each
installment of the underlying option shares. Such charge will accordingly
include the appreciation in the value of the option shares over the period
between the grant date of the option (or, if later, the effective date of the
final amendment) and the vesting date of each installment of the option shares.
In addition, if the proposed amendment is adopted, any options which are
repriced after December 15, 1998 will also trigger a direct charge to the
Company's reported earnings measured by the appreciation in the value of the
underlying shares over the period between the grant date of the repriced option
(or, if later, the effective date of the final amendment) and the date the
option is exercised.
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 compensation expense to the
Company.
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. Abstentions will be
counted towards the tabulation of votes cast on this proposal and will have the
same effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether or not the proposal has been approved. Should
such stockholder approval not be obtained, then the share reserve will not be
increased, 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 COMPANY AND THEREBY ENCOURAGE
SUCH INDIVIDUALS TO REMAIN IN THE COMPANY'S SERVICE AND MORE CLOSELY ALIGN THEIR
INTERESTS WITH THOSE OF THE STOCKHOLDERS.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are also being asked to approve an amendment to
the Employee Stock Purchase Plan (the "Purchase Plan"), which will increase the
share reserve under the Purchase Plan and the Company's International Employee
Stock Purchase Plan (the "International Plan") by an additional 1,500,000 shares
to 2,500,000 shares. The proposed 1,500,000-share increase was approved by the
Board on April 11, 1999, subject to stockholder approval at the Annual Meeting.
The purpose of the share increase is to ensure that the Company will
continue to have a sufficient reserve of Common Stock available under the
Purchase Plan and the International Plan to provide eligible employees
9
<PAGE> 13
of the Company and its participating affiliates with the opportunity to acquire
a proprietary interest in the Company through participation in a
payroll-deduction based employee stock purchase plan under Section 423 of the
Code.
The Purchase Plan was adopted by the Board of Directors in March 1996 and
was subsequently approved by the stockholders. The Purchase Plan became
effective on April 25, 1996 in connection with the initial public offering of
the Company's Common Stock.
SUMMARY OF THE EMPLOYEE STOCK PURCHASE PLAN
The following is a summary of the principal features of the Purchase Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the Purchase 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
Company's Secretary at the Company's principal executive offices in Irving,
Texas.
Share Reserve
An aggregate of 2,500,000 shares of Common Stock (including the share
increase subject to stockholder approval under this proposal) have been reserved
for issuance over the respective ten-year terms of the Purchase Plan and the
International Plan. This share reserve will also be used to fund all stock
purchases under the International Employee Stock Purchase Plan (the
"International Plan") which the Company has established for employees of its
foreign subsidiaries. The provisions of the International Plan are substantially
the same as those which are in effect for the Purchase Plan, except to the
extent certain modifications may be necessary to satisfy legal or regulatory
requirements of the applicable foreign jurisdictions.
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 (i) the maximum number and class of securities issuable in the aggregate
under the Purchase Plan and the International Plan, (ii) the maximum number and
class of securities purchasable per participant on any one purchase date, and
(iii) the class and maximum number of securities subject to each outstanding
purchase right and the purchase price payable per share thereunder.
Administration
The Purchase Plan is administered by the Compensation Committee of the
Board of Directors. Such committee, as Plan Administrator, has full authority to
adopt such rules and procedures as it may deem necessary for proper plan
administration and to interpret the provisions of the Purchase Plan. All costs
and expenses incurred in plan administration are paid by the Company without
charge to participants.
Purchase Periods
Under the Purchase Plan, shares are issued through a series of successive
purchase periods, each of a duration of six (6) months. Purchase periods run
from the first business day in May to the last business day in October each year
and from the first business day in November each year to the last business day
in April of the following year.
Each participant is granted a separate right to purchase shares of Common
Stock for each purchase period in which he or she participates. The purchase
right is granted on the start date of the purchase period and is automatically
exercised on the last business day of that purchase period. Each purchase right
entitles the participant to purchase the whole number of shares of Common Stock
obtained by dividing the participant's payroll deductions for the purchase
period by the purchase price in effect for such period.
Eligibility
Any individual who customarily works for more than twenty hours per week
for more than five months per calendar year in the employ of the Company or any
participating affiliate is eligible to participate in the
10
<PAGE> 14
Purchase Plan. An eligible employee may join the Purchase Plan on the start date
of any purchase period after completion of thirty (30) days of service to the
Company or any affiliate.
Participating affiliates include any parent or subsidiary corporation of
the Company, whether now existing or hereafter organized, which elect, with the
approval of the Plan Administrator, to extend the benefits of the Purchase Plan
to its eligible employees.
As of January 31, 1999, 1,889,848 shares were available for future issuance
under the Purchase Plan and the International Plan, assuming approval of this
Proposal 3. As of January 31, 1999, approximately 2,202 employees, including
five executive officers, were eligible to participate in the Purchase Plan and
the International Plan.
Payroll Deductions
Each participant may authorize periodic payroll deductions in any multiple
of 1% of his or her base salary, up to a maximum of 15%. The payroll deductions
of each participant are automatically applied on each semi-annual purchase date
(the last business day in April and October of each year) to the purchase of
whole shares of Common Stock at the purchase price in effect for the participant
for that purchase date.
Purchase Price
The purchase price per share at which Common Stock is purchased on the
participant's behalf on each purchase date is equal to eighty-five percent (85%)
of the lower of (i) the fair market value per share of Common Stock on the start
date of the purchase period during which the purchase date occurs or (ii) the
fair market value per share of Common Stock on that purchase date.
The fair market value of the Common Stock on any relevant date under the
Purchase Plan is deemed to be equal to the closing selling price per share on
such date on the Nasdaq National Market. On October 30, 1998, the fair market
value per share of Common Stock determined on such basis was $18.625.
Purchase Provisions
On the last business day of each purchase period, the accumulated payroll
deductions of each participant are automatically applied to the purchase of
whole shares of Common Stock at the purchase price in effect for the participant
for that purchase period. The Purchase Plan imposes certain limitations upon a
participant's rights to acquire Common Stock, including the following:
(i) No participant may, on any one purchase date, purchase more than
2,000 shares of Common Stock, subject to periodic adjustments in the event
of certain changes in the Company's capitalization.
(ii) No purchase right granted to a participant may permit such
individual to purchase more than $25,000 worth of Common Stock (valued at
the time such purchase right is granted) for each calendar year those
purchase rights are outstanding.
(iii) No purchase rights may be granted to any individual who owns
stock (including stock purchasable under any outstanding options or
purchase rights) possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company or its
affiliates.
Termination of Purchase Rights
The participant may withdraw from the Purchase Plan at any time, and his or
her accumulated payroll deductions will, at the participant's election, either
be refunded immediately or applied to the purchase of Common Stock on the next
semi-annual purchase date.
11
<PAGE> 15
The purchase right will immediately terminate upon the participant's loss
of eligible employee status or upon a participant's affirmative withdrawal from
the purchase period and all payroll deductions collected for the purchase period
in which the purchase right terminates will be refunded.
Stockholder Rights
No participant will have any stockholder rights with respect to the shares
of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
Assignability
No purchase right is assignable or transferable other than in connection
with the participant's death and is exercisable only by the participant during
his or her lifetime.
Acquisition
Should the Company be acquired by merger or asset sale during a purchase
period, all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of such acquisition. The purchase price
will be 85% of the lower of (i) the fair market value per share of Common Stock
on the participant's entry date into the purchase period during which the
acquisition occurs or (ii) the fair market value per share of Common Stock
immediately prior to such acquisition.
Share Pro-Ration
Should the total number of shares of Common Stock to be purchased pursuant
to outstanding purchase rights on any particular date exceed the number of
shares at the time available for issuance under the Purchase Plan, then the Plan
Administrator will make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the payroll deductions of each
participant, to the extent in excess of the aggregate purchase price payable for
the Common Stock allocated to such individual, will be refunded.
Amendment and Termination
The Purchase Plan will terminate upon the earliest to occur of (i) April
24, 2006, (ii) the date on which all available shares are issued or (iii) the
date on which all outstanding purchase rights are exercised in connection with
an acquisition of the Company.
The Board of Directors may at any time alter, suspend or discontinue the
Purchase Plan. However, the Board of Directors may not, without stockholder
approval, (i) increase the number of shares issuable under the Purchase Plan or
the maximum number of purchasable shares by any participant on any one purchase
date except in connection with certain changes in the Company's capital
structure, (ii) alter the purchase price formula so as to reduce the purchase
price or (iii) modify the requirements for eligibility to participate in the
Purchase Plan.
STOCK ISSUANCES
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table contained elsewhere in this Proxy Statement
and the various indicated groups, the number of shares of Common Stock purchased
under the Purchase Plan between April 25, 1996 (the effective
12
<PAGE> 16
date of the Purchase Plan) and the October 30, 1998 purchase date, together with
the weighted-average purchase price paid per share.
PURCHASE PLAN TRANSACTIONS
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-
PURCHASED AVERAGE
NAME SHARES PURCHASE 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............................................ 2,669 $14.81
President, Worldwide Operations
David F. Cary............................................... 3,005 13.76
Chief Financial Officer
All current executive officers as a group (four persons).... 8,791 14.00
All employees, including current officers who are not
executive officers as a group (984 persons)(1)............ 601,361 15.26
</TABLE>
- ---------------------
(1) Includes an aggregate of 59,131 shares issued to persons under the
International Plan at a weighted-average purchase price per share of $16.74.
NEW PLAN BENEFITS
No purchase rights have been granted, and no shares of Common Stock have
been issued, under the Purchase Plan on the basis of the 1,500,000-share
increase for which stockholder approval is sought under this Proposal 3.
FEDERAL INCOME TAX CONSEQUENCES
The Purchase Plan is intended to be an employee stock purchase plan within
the meaning of Section 423 of the Code. Under a plan which so qualifies, no
taxable income will be recognized by a participant, and no deductions will be
allowable to the Company, in connection with the grant or the exercise of an
outstanding purchase right. Taxable income will not be recognized until there is
a sale or other disposition of the shares acquired under the Purchase Plan or in
the event the participant should die while still owning the purchased shares.
If the participant sells or otherwise disposes of the purchased shares
within two years after the start date of the purchase period in which such
shares were acquired, then the participant will recognize ordinary income in the
year of sale or disposition equal to the amount by which the fair market value
of the shares on the purchase date exceeded the purchase price paid for those
shares, and the Company will be entitled to an income tax deduction, for the
taxable year in which such sale or disposition occurs, equal in amount to such
excess.
If the participant sells or disposes of the purchased shares more than two
years after the start date of the purchase period in which such shares were
acquired, then the participant will recognize ordinary income in the year of
sale or disposition equal to the lesser of (i) the amount by which the fair
market value of the shares on the sale or disposition date exceeded the purchase
price paid for those shares or (ii) 15% of the fair market value of the shares
on the start date of that purchase period, and any additional gain upon the
disposition will
13
<PAGE> 17
be taxed as a long-term capital gain. The Company will not be entitled to any
income tax deduction with respect to such sale or disposition.
If the participant still owns the purchased shares at the time of death,
the lesser of (i) the amount by which the fair market value of the shares on the
date of death exceeds the purchase price or (ii) 15% of the fair market value of
the shares on the start date of the purchase period in which those shares were
acquired will constitute ordinary income in the year of death.
ACCOUNTING TREATMENT
Under current accounting rules, the issuance of Common Stock under the
Purchase Plan does not result in compensation expense to the Company. However,
the Company must disclose, in pro forma statements to the Company's financial
statements, the impact the purchase rights granted under the Purchase Plan would
have upon the Company's reported earnings were the value of those purchase
rights treated as compensation expense.
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 1,500,000-share increase to the Purchase Plan.
Abstentions will be counted towards the tabulation of votes cast on this
proposal and will have the same effect as negative votes, whereas broker
non-votes will not be counted for purposes of determining whether or not this
proposal has been approved. Should such stockholder approval not be obtained,
then the 1,500,000-share increase will not be implemented, no purchase rights
will be granted on the basis of such share increase, and the Purchase Plan will
terminate once the existing share reserve has been issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE PURCHASE 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 COMPANY AND THEREBY
ENCOURAGE SUCH INDIVIDUALS TO REMAIN IN THE COMPANY'S SERVICE AND MORE CLOSELY
ALIGN THEIR INTERESTS WITH THOSE OF THE STOCKHOLDERS.
PROPOSAL 4
APPROVAL OF AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 200,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock. The Board of Directors
believes that this capital structure is inadequate for the present and future
needs of the Company. Therefore, the Board of Directors has approved the
amendment of the Company's Restated Certificate of Incorporation (the
"Certificate") to increase the authorized number of shares of Common Stock from
200,000,000 to 500,000,000 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 23, 1999, 72,303,030 shares of Common Stock and no
shares of Preferred Stock were outstanding. The proposed amendment of the
Certificate was approved by the Board on April 11, 1999, subject to stockholder
approval at the Annual Meeting.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
Authorizing an additional 300,000,000 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
14
<PAGE> 18
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 Company has no current plans to issue such additional authorized
shares of Common Stock. The Company has a sufficient number of currently
authorized shares of Common Stock so that approval of Proposal 2 regarding the
increase of Common Stock authorized for issuance under the 1995 Plan is not
contingent upon approval of this Proposal 4.
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. The Board of Directors is not aware of any attempt, or contemplated
attempt, to acquire control of the Company, and this proposal is not being
presented with the intent that it be utilized as a type of anti-takeover device.
STOCKHOLDER APPROVAL
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
The affirmative vote of a majority of the Company's outstanding voting
shares is required for approval of the amendment to the Certificate. Abstentions
and broker non-votes will be counted towards the tabulation of votes cast on
this proposal and will have the same effect as negative votes. If this proposal
is approved at the Annual Meeting, the proposed amendment would become effective
upon filing a certificate of amendment to the Certificate with the Secretary of
State of Delaware, which filing is expected to take place shortly after such
stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT OF THE CERTIFICATE AUTHORIZING 300,000,000 ADDITIONAL SHARES OF COMMON
STOCK, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
15
<PAGE> 19
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1999 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 executive officers named in the Summary Compensation Table below, and
(iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1) CLASS
---- ----------------- ----------
<S> <C> <C>
Sanjiv S. Sidhu(2)..................................... 31,890,600(3) 44.4%
Sidhu-Singh Family Investments, Ltd.(2)................ 6,710,000 9.3
Kanna (Ken) N. Sharma(2)............................... 4,725,968(4) 6.6
Sandeep (Sandy) R. Tungare............................. 1,889,042(5) 2.6
Gregory A. Brady....................................... 872,003(6) 1.2
David F. Cary.......................................... 175,398(7) *
Harvey B. Cash......................................... 44,000(8) *
Thomas J. Meredith..................................... 40,000(9) *
All executive officers and directors as a group (nine
persons).......................................... 39,841,052(10) 55.2
</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 will become
exercisable within 60 days following January 31, 1999 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) The address for such person is 909 E. Las Colinas Blvd., 16th Floor,
Irving, Texas 75039.
(3) Includes 6,710,000 shares held by Sidhu-Singh Family Investments, Ltd., of
which Mr. Sidhu is a general partner. Also includes 200,000 shares held by
the Nathan S. Sharma Exempt 1997 Trust and 200,000 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.
(4) Includes 3,049,400 shares held by The K-B Sharma Limited Partnership,
977,500 shares held by Mr. Sharma's spouse and 44,000 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 Charitable Remainder Trust
One, and in such capacities holds the sole power to vote and dispose of the
shares owned by such entities.
(5) Includes 875,134 shares owned by his spouse and 80,610 shares owned by the
Tungare Manohar Family Foundation (the "Tungare Foundation"). Mr. Tungare
serves on the Board of Directors of the Tungare Foundation and, in such
capacity, shares the power to vote and dispose of the shares held by the
Tungare Foundation.
(6) Includes 150,000 shares subject to options.
(7) Includes 15,357 shares subject to options.
(8) Includes 44,000 shares subject to options.
(9) Includes 30,000 shares subject to options.
(10) Includes 372,775 shares subject to options.
16
<PAGE> 20
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...................................... 41 Chairman of the Board and Chief
Executive Officer
Kanna N. Sharma...................................... 58 Vice Chairman of the Board,
Executive Vice President and
Secretary
Sandeep R. Tungare................................... 42 Director and President, Demand
Management
Gregory A. Brady..................................... 38 President, Worldwide Operations
David F. Cary........................................ 43 Chief Financial Officer
William M. Beecher................................... 42 Executive Vice President,
Operations
Hiten D. Varia....................................... 42 Executive Vice President,
Worldwide Development
Harvey B. Cash....................................... 60 Director
Thomas J. Meredith................................... 48 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. 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 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 and holds a B.S. in accounting from San Francisco
State University and an M.B.A. from Southern Methodist University.
17
<PAGE> 21
Mr. Beecher joined the Company in May 1997 as Vice President, International
Operations and became Executive Vice President, Operations in September 1998.
From April 1996 until joining the Company, Mr. Beecher was the Chief Financial
Officer of Think Systems Corporation. Prior thereto, he practiced law at the law
offices of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen. Mr. Beecher is a
graduate of the Cornell Law School and received his undergraduate degree from
the State University of New York at Albany.
Mr. Varia joined the Company in July 1995 as Vice President, Worldwide
Consulting and became Executive Vice President, Worldwide Development in July
1998. From 1985 until joining the Company, Mr. Varia served in a variety of
positions at Electronic Data Systems. Mr. Varia holds a B.S. in electrical
engineering from MS University in Barode and a M.S. in electrical engineering
from the University of Kentucky.
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 currently serves on the board of directors
of i-Cube, an information technology business consultancy. Mr. Meredith holds a
B.S. in political science from St. Francis College, a J.D. from Duquesne
University of Law and an L.L.M. in taxation from Georgetown University.
Certain biographical information concerning Messrs. Tungare and Cash is set
forth under "Proposal 1 -- Election of Directors."
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.
18
<PAGE> 22
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation earned by the Company's Chief Executive Officer and the other four
most highly compensated executive officers of the Company (collectively, the
"Named Officers").
<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............................ 1998 $150,000 $ 75,000 -- -- $1,542
Chairman of the Board 1997 150,000 75,000 -- -- 1,597
and Chief Executive 1996 150,000 75,000 $40,308(3) -- 771
Officer
Kanna N. Sharma............................ 1998 150,000 75,000 192,930(4) -- 925
Vice Chairman of the 1997 150,000 75,000 84,100(4) -- 2,214
Board, Executive Vice 1996 150,000 75,000 59,032(4) -- 925
President and Secretary
Sandeep R. Tungare(5)...................... 1998 150,000 75,000 -- -- --
President, Demand 1997 200,000 25,000 -- -- --
Management 1996 200,000 100,000 -- 34,390(6) --
Gregory A. Brady........................... 1998 150,000 350,000 201,104(7) 550,000 --
President, Worldwide 1997 150,000 349,380 -- 600,000 --
Operations 1996 150,000 353,721 -- -- --
David F. Cary.............................. 1998 110,004 90,000 -- 20,000 --
Chief Financial Officer 1997 110,004 -- -- 61,428 --
1996 110,004 75,000 -- 50,000 --
</TABLE>
- ---------------------
(1) Excludes perquisites and other personal benefits for officers other than
Messrs. Sidhu, Sharma and Brady because the aggregate amounts thereof do not
exceed 10% of such officers' total salary and bonus.
(2) Represents premiums paid by the Company 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 Messrs. Sidhu's and Sharma's respective
designated beneficiaries.
(3) Includes $34,800 for expenses relating to tax and estate planning.
(4) Includes $189,330, $58,302 and $59,032 for expenses relating to tax and
estate planning in 1998, 1997 and 1996, respectively.
(5) Mr. Tungare became an officer of the Company on May 15, 1997 in connection
with the Company's merger with Think Systems Corporation. Prior to such
date, Mr. Tungare was employed and compensated by Think. Compensation for
1997 represents collective compensation from the Company and Think.
(6) These options were granted to Mr. Tungare and subsequently transferred to
the Tungare Manohar Family Foundation, Inc.
(7) The Company has an understanding with Mr. Brady whereby the Company has
agreed to pay the interest incurred in connection with a personal loan to
Mr. Brady from a commercial bank with a principal balance of $4,760,000 at
January 31, 1999. The loan bears interest at one-month LIBOR plus 2%. The
total interest paid by the Company on behalf of Mr. Brady in 1998 was
$174,133.
19
<PAGE> 23
OPTION GRANTS IN 1998
The following table sets forth certain information concerning stock options
granted to each of the Named Officers during 1998. No stock appreciation rights
("SARs") were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE APPRECIATION
UNDERLYING TO FOR OPTION TERM(3)
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ------------------------------
NAME GRANTED(1) IN 1998 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............. 50,000 0.52% $27.63 05/31/08 $ 868,818 $ 2,201,755
500,000 5.18% 13.94 10/20/08 4,383,396 11,108,385
David F. Cary................ 20,000 0.21% 13.94 10/20/08 175,336 444,335
</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 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-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.
AGGREGATE OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
The following table sets forth certain information concerning options
exercised during 1998 and option holdings at December 31, 1998 with respect to
each of the Named Officers. No SARs were exercised during 1998 and none were
outstanding at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998(2) DECEMBER 31, 1998(2)(3)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu......... -- -- -- -- -- --
Kanna N. Sharma......... -- -- -- -- -- --
Sandeep R. Tungare...... 34,390 $986,348 -- -- -- --
Gregory A. Brady........ -- -- 150,000 1,000,000 $2,456,250 $15,725,000
David F. Cary........... 11,668 338,063 15,357 66,071 152,610 786,581
</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, 1998 ($30.375 per share), based
upon the closing sale price of the Common Stock on the Nasdaq National
Market on such date.
20
<PAGE> 24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cash and Meredith served on the Compensation Committee during all
of 1998. None of such persons is an officer or employee, or former officer or
employee, of the Company or any of its subsidiaries. No interlocking
relationship exists between the members of the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
REPORT ON EXECUTIVE COMPENSATION
During 1998, 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 1998.
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.
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:
- Base Salary
- Annual Incentives
- Equity Incentives
- 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 1998 operating profits. Incentive
21
<PAGE> 25
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
1998 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 years, and are subject to vesting
over four 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 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.
In determining the size of each grant to executive officers, the Board focused
in particular on its conclusion, based on experience and informal information
subjectively evaluated, that the stock and option holdings of the executives
that received options 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
2,500,000 shares of Common Stock (assuming approval of Proposal 3 hereof) 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.
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 $1,000,000
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 $1,000,000 per annum to any employee. None of the compensation paid by
the Company in 1998 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
22
<PAGE> 26
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 taken into consideration his
significant ownership interest in the Company and has sought to be competitive
with companies of similar size within the industry, given that consideration.
Mr. Sidhu's base salary is tied to the performance of the Company and to his
personal performance. In 1998, Mr. Sidhu earned a based salary of $150,000 and
cash bonus of $75,000. The bonus for 1998 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
23
<PAGE> 27
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>
NASDAQ
NASDAQ Computer &
Measurement Period i2 Stock Market Data
(Fiscal Year Covered) Technologies -- US Processing
<S> <C> <C> <C>
4/25/96 100 100 100
6/30/96 214 100 100
12/31/96 191 109 106
6/30/97 155 122 126
12/31/97 264 134 130
6/30/98 351 161 191
12/31/98 304 188 233
</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 or the Securities Exchange Act
of 1934 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.
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 the
Common Stock, 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 1998, all of its executive officers,
directors and greater than 10% beneficial owners complied with all applicable
Section 16(a) filing requirements.
24
<PAGE> 28
INDEPENDENT AUDITORS
Effective April 16, 1999, the Board of Directors has selected Arthur
Andersen LLP as the Company's independent public auditors for the year ending
December 31, 1999. Notwithstanding this selection, 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 Arthur Andersen LLP are expected to be present at the Annual
Meeting to respond to appropriate questions and will have the opportunity to
make a statement if they desire to do so.
Ernst & Young LLP served as the Company's independent public auditors for
the year ended December 31, 1998. The Company plans to pursue a strategic
consulting agreement with Ernst & Young LLP to jointly market and deliver the
Company's electronic Business Process Optimization ("eBPO") solutions worldwide.
Given the potential conflict of interests this proposed new agreement could
present, Ernst & Young LLP resigned their role as the Company's independent
audit firm effective April 16, 1999. Representatives of Ernst & Young LLP are
not expected to be present at the Annual Meeting.
Ernst & Young LLP's report on the Company's financial statements during the
past two years contained no adverse opinion or disclaimer of opinion, and was
not qualified or modified as to the uncertainty, audit scope, or accounting
principles.
During the Company's two most recent years and subsequent interim periods
preceding the date hereof, there was no disagreement with Ernst & Young LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to Ernst & Young LLP's satisfaction, would have caused Ernst & Young LLP to make
reference to the subject matter of the disagreement in connection with its
report. In addition, none of the "reportable events" described in Item
304(a)(1)(v) of Regulation S-K occurred with respect to the Company during the
two most recent fiscal years and the subsequent interim periods to the date
hereof.
The engagement of Arthur Andersen LLP as the Company's auditors has been
approved by i2's Audit Committee.
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 26, 2000. 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, 1998, 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.
25
<PAGE> 29
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,
/s/ KANNA N. SHARMA
KANNA N. SHARMA
Secretary
April 26, 1999
26
<PAGE> 30
APPENDIX A
i2 TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(As Amended and Restated through April 11, 1999)
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 or the Primary Committee shall have the authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.
<PAGE> 31
B. Members of the Primary Committee or any Secondary 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 Primary Committee or the Secondary 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 Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such 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 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
2
<PAGE> 32
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 43,000,000(1)
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 1,603,152 shares
authorized by the Board and approved by the stockholders prior to the Plan
Effective Date, (iii) an increase of 4,000,000 shares authorized by the Board
and approved by the stockholders at the 1997 Annual Meeting, (iv) an increase of
7,000,000 shares approved by the Board on July 1, 1997, approved by the
stockholders at the 1998 Annual Meeting plus (v) an additional increase of
12,000,000 shares approved by the Board as of April 11, 1999, subject to
stockholder approval at the 1999 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 1,000,000 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 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
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(1) All share numbers have been adjusted to reflect the 2 for 1 stock split
effected on June 2, 1998.
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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.
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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.
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.
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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:
(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
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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.
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.
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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.
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
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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 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
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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.
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,
(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,
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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.
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.
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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 2,000 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 2,000 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 2,000-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 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.
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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 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
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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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<PAGE> 46
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.
(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.
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<PAGE> 47
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 4,000,000
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 7,000,000
shares (the "1997 Amendment"). The 1997 Amendment was approved by the
Stockholders at the 1998 Annual Stockholders Meeting.
The Plan was amended and restated on April 13, 1998 (the "1998
Amendment") 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. The 1998 Amendment was
approved by the stockholders at the 1998 annual meeting.
The Plan was amended and restated on April 11, 1999 (i) to
increase the number of shares of Common Stock issuable under the Plan by
12,000,000 shares, subject to stockholder approval at the 1999 Annual Meeting
and (ii) to give the Plan Administrator the discretion to provide a holder of a
Non-Statutory Option or unvested shares of Common Stock the right to use shares
of Common Stock only with respect to the withholding tax requirements applicable
in connection with the exercise of such option or the vesting of such shares. If
such stockholder approval is not obtained at the 1999 Annual Meeting, then any
options previously granted on the basis of the 12,000,000-share increase shall
terminate, and no further options based on such increase shall be granted. Those
options granted under the Plan which are 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.
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<PAGE> 48
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 Corporation'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 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.
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<PAGE> 49
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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<PAGE> 50
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
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those immediately prior to
such transaction; or
<PAGE> 51
(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.
(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.
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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).
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
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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, the Primary Committee or the Secondary 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.
BB. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
DD. 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.
EE. 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.
FF. 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.
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<PAGE> 54
GG. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
HH. 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.
II. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
JJ. 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.
KK. 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.
LL. TAXES shall mean the Federal, state and local income and
employment withholding 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.
MM. 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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APPENDIX B
i2 TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Through April 11, 1999)
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of i2 Technologies, Inc. by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased 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 2,500,000
shares(1).
B. 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 class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date and (iii) the number and class of
securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
IV. PURCHASE PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive purchase periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
- ----------------------
(1) Share numbers have been adjusted to reflect the 2 for 1 stock split
effected on June 2, 1998.
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B. Each purchase period shall have a duration of six (6) months.
Purchase periods shall run from the first business day in May to the last
business day in October and from the first business day in November to the last
business day in April. However, the first purchase period shall begin at the
Effective Time and end on the last business day in October 1996.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee at the Effective
Time may enter a purchase period under the Plan on the start date of such
purchase period, provided he or she remains an Eligible Employee on that date.
B. Each individual who becomes an Eligible Employee after the
Effective Time may enter a purchase period under the Plan after completion of
thirty (30) days of Service, provided he or she is an Eligible Employee on the
start date of such purchase period.
C. To participate in the Plan for a particular purchase period,
the Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization form) and file such forms with the Plan Administrator (or its
designate) on or before the start date of the purchase period.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during each
purchase period, up to a maximum of fifteen percent (15%). The deduction rate so
authorized shall continue in effect for the entire purchase period. The
Participant may not increase his or her rate of payroll deduction during a
purchase period. However, the Participant may, at any time during the purchase
period, reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
purchase period.
B. Payroll deductions shall begin on the first pay day following
the start date of the purchase period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the purchase period. The amounts so collected shall be credited
to the Participant's book account under the Plan, but no interest shall be paid
on the balance from time to time outstanding in such account. The amounts
collected from the Participant shall not be held in any segregated account or
trust fund and may be commingled with the general assets of the Corporation and
used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date.
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<PAGE> 57
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right on the start date of each purchase period in which he or
she participates. The purchase right shall provide the Participant with the
right to purchase shares of Common Stock on the Purchase Date upon the terms set
forth below. The Participant shall execute a stock purchase agreement embodying
such terms and such other provisions (not inconsistent with the Plan) as the
Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant (other than any
Participant whose payroll deductions have previously been refunded in accordance
with the Termination of Purchase Right provisions below) on such date. The
purchase shall be effected by applying the Participant's payroll deductions for
the purchase period ending on such Purchase Date to the purchase of shares of
Common Stock (subject to the limitation on the maximum number of shares
purchasable per Participant on any one Purchase Date) at the purchase price in
effect for that purchase period.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date shall
be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value
per share of Common Stock on the start date of the purchase period or (ii) the
Fair Market Value per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date shall be the number of
shares obtained by dividing the amount collected from the Participant through
payroll deductions during the purchase period ending with that Purchase Date by
the purchase price in effect for that Purchase Date. However, the maximum number
of shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed 2,000 shares, subject to periodic adjustments in the event of
certain changes in the Corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied
to the purchase of Common Stock by reason of the limitation on the maximum
number of shares purchasable by the Participant on the Purchase Date shall be
promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last day of
the purchase period, terminate his or her outstanding purchase right by
filing the appropriate form with the Plan Administrator (or its
designate), and no further
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<PAGE> 58
payroll deductions shall be collected from the Participant with respect
to the terminated purchase right. Any payroll deductions collected
during the purchase period in which such termination occurs shall, at
the Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii)The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
purchase period for which the terminated purchase right was granted. In
order to resume participation in any subsequent purchase period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before the start date of the new
purchase period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the purchase period in which the
purchase right so terminates shall be immediately refunded. However,
should the Participant cease to remain in active service by reason of
an approved unpaid leave of absence, then the Participant shall have
the right, exercisable up until the last business day of the purchase
period in which such leave commences, to (a) withdraw the payroll
deductions collected during such purchase period or (b) have such funds
held for the purchase of shares at the next scheduled Purchase Date. In
no event, however, shall any further payroll deductions be collected on
the Participant's behalf during such leave. Upon the Participant's
return to active service, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the purchase period in which such Corporate Transaction occurs to the
purchase of shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the start date of the purchase period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitation on the number of shares of Common Stock purchasable
per Participant shall continue to apply to any such purchase.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
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<PAGE> 59
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata allocation
of the available shares on a uniform and nondiscriminatory basis, and the
payroll deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value of such stock on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations, the
following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue on the Purchase Date in effect for the
purchase period for which such right is granted.
(ii)No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock
under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase right of
a Participant does not accrue for a particular purchase period, then the payroll
deductions which the Participant made during that purchase period with respect
to such purchase right shall be promptly refunded.
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D. In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board in March 1996 and shall
become effective at the Effective Time, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect and all sums collected from Participants during
the initial purchase period hereunder shall be refunded.
B. The Plan was amended and restated on April 11, 1999 to increase
the number of shares of common stock available under the Plan by 1,500,000
shares to 2,500,000 shares. No purchase rights shall be granted and no shares of
Common Stock shall be granted on the basis of such 1,500,000 share increase
unless and until the shareholders approve the increase at the 1999 Annual
Meeting.
C. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in April 2006, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at
any time to become effective immediately following the close of any purchase
period. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan, or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
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XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Texas without resort to that State's conflict-of-laws rules.
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<PAGE> 62
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
i2 Technologies, Inc.
i2 Technologies (Canada), Inc.
i2 Technologies, Limited
i2 Technologies GmbH
i2 Technologies Pte. Ltd.
InterTrans Logistics Solutions Limited
<PAGE> 63
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in the Plan, plus any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program now or hereafter established by the Corporation or
any Corporate Affiliate. The following items of compensation shall NOT be
included in Base Salary: (i) all overtime payments, bonuses, commissions (other
than those functioning as base salary equivalents), profit-sharing distributions
and other incentive-type payments and (ii) any and all contributions (other than
Code Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate under any employee benefit
or welfare plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424, whether now existing or subsequently established.
F. 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
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii)the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean i2 Technologies, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of i2 Technologies, Inc. which shall by appropriate
action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.
A-1
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I. ELIGIBLE EMPLOYEE shall mean any person who employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. 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.
(iii) For purposes of the initial purchase period which begins
at the Effective Time, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is sold in the
initial public offering pursuant to the Underwriting Agreement.
K. ACT shall mean the Securities Act of 1933, as amended.
L. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
M. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
N. PLAN shall mean the Corporation's Employee Stock Purchase Plan,
as set forth in this document.
O. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
P. PURCHASE DATE shall mean the last business day of each purchase
period.
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<PAGE> 65
Q. SERVICE shall mean an individual's performance of services for
the Corporation or any Corporate Affiliate as an employee, 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.
R. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
S. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3
<PAGE> 66
APPENDIX C
i2 TECHNOLOGIES, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Through April 11, 1999)
I. PURPOSE OF THE PLAN
This International Employee Stock Purchase Plan is intended to
promote the interests of i2 Technologies, Inc. by providing eligible employees
of the Corporation's Foreign Subsidiaries with the opportunity to acquire a
proprietary interest in the Corporation through the purchase of shares of the
Corporation's common stock at periodic intervals.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Plan
Administrator shall be final and binding on all parties having an interest in
the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan and the U.S. Plan shall not exceed
2,500,000 shares(1).
B. 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 class of securities issuable under
the Plan and the U.S. Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. PURCHASE PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive purchase periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
- -------------------
(1) Share numbers have be adjusted to reflect the 2 for 1 stock split
effected June 2, 1998.
<PAGE> 67
B. Each purchase period shall have a duration of six (6) months.
Purchase periods shall run from the first business day in May to the last
business day in October the same year and from the first business day in
November to the last business day in April of the following year. The first
purchase period shall begin on the Effective Date and end on the last business
day in October 1997.
V. ELIGIBILITY
A. Each Eligible Employee may enter a purchase period under the
Plan after completion of thirty (30) days of Service, provided he or she is an
Eligible Employee on the start date of such purchase period.
B. To participate in the Plan for a particular purchase period,
the Eligible Employee must complete the enrollment form(s) prescribed by the
Plan Administrator and file such form(s) with the Plan Administrator (or its
designate) on or before the start date of the purchase period. However, any
Employee of a Foreign Subsidiary who is a participant in the U.S. Plan
immediately prior to the Effective Date shall automatically become a Participant
in the initial purchase period under the Plan and such individual's payroll
deductions under the Plan shall continue at the same rate authorized under the
U.S. Plan immediately prior to the Effective Date unless the Participant shall
change such rate in accordance with Section VI.C.
VI. PAYROLL DEDUCTIONS
A. Except to the extent otherwise provided in the Plan (or any
addendum thereto) or authorized by the Plan Administrator, the purchase price
for the shares of Common Stock acquired under the Plan shall be paid from
accumulated payroll deductions authorized by the Participant.
B. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during each
purchase period, up to a maximum of fifteen percent (15%). The payroll deduction
authorized by the Participant shall be collected in the currency in which paid
by the Foreign Subsidiary. The payroll deductions collected during each calendar
month shall be converted into U.S. Dollars on the Monthly Exchange Date for that
month on the basis of the exchange rate in effect on that date. The Plan
Administrator shall have the absolute discretion to determine the applicable
exchange rate to be in effect for each Monthly Exchange Date by any reasonable
method which may be based on the exchange rate actually available in the
ordinary course of business on such date. Any changes or fluctuations in the
exchange rate at which the payroll deductions collected on the Participant's
behalf are converted into U.S. Dollars on each Monthly Exchange Date shall be
borne solely by the Participant.
C. The rate of payroll deduction authorized by each Participant
shall continue in effect from purchase period to purchase period, except to the
extent such rate is changed in accordance with the following guidelines.
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<PAGE> 68
(i) The Participant may not increase his or her rate of
payroll deduction during a purchase period.
(ii)The Participant may, at any time during the purchase
period, reduce his or her rate of payroll deduction to become effective
as soon as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one
(1) such reduction per purchase period.
D. Payroll deductions shall begin on the first pay day following
the start date of the purchase period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the purchase period. The amounts so collected shall be credited
to the Participant's book account under the Plan, initially in the currency in
which paid by the Foreign Subsidiary until converted into U.S. Dollars on the
applicable Monthly Exchange Date. Accordingly, all purchases of Common Stock
under the Plan are to be made with the U.S. Dollars into which the payroll
deductions for the purchase period have been converted on each applicable
Monthly Exchange Date within that purchase period. Except to the extent
otherwise provided by the Plan (including any addendum thereto) or by the Plan
Administrator, the amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
E. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
F. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right on the start date of each purchase period in which he or
she participates. The purchase right shall provide the Participant with the
right to purchase shares of Common Stock on the Purchase Date upon the terms set
forth below. The Participant shall execute a stock purchase agreement embodying
such terms and such other provisions (not inconsistent with the Plan) as the
Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (directly or indirectly within the meaning of Code Section 424(d)) or
hold outstanding options or other rights to purchase, stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant (other than any
Participant whose payroll deductions
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<PAGE> 69
have previously been refunded in accordance with the Termination of Purchase
Right provisions below) on such date. The purchase shall be effected by applying
the Participant's payroll deductions (as converted into U.S. Dollars) for the
purchase period ending on such Purchase Date to the purchase of shares of Common
Stock (subject to the limitation on the maximum number of shares purchasable per
Participant on any one Purchase Date) at the purchase price in effect for that
purchase period.
C. PURCHASE PRICE. The U.S. Dollar purchase price per share at
which Common Stock will be purchased on the Participant's behalf on each
Purchase Date shall be equal to eighty-five percent (85%) of the lower of (i)
the Fair Market Value per share of Common Stock on the start date of the
purchase period or (ii) the Fair Market Value per share of Common Stock on that
Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date shall be the number of
shares obtained by dividing the amount collected from the Participant through
payroll deductions (as converted into U.S. Dollars) during the purchase period
ending with that Purchase Date by the purchase price in effect for that Purchase
Date. However, the maximum number of shares of Common Stock purchasable per
Participant on any one Purchase Date shall not exceed 2,000 shares, subject to
periodic adjustments in the event of certain changes in the Corporation's
capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied
to the purchase of Common Stock by reason of the limitation on the maximum
number of shares purchasable by the Participant on the Purchase Date shall be
promptly refunded in the currency in which paid by the Foreign Subsidiary.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last day of
the purchase period, terminate his or her outstanding purchase right by
filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from
the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the purchase period in which such
termination occurs shall, at the Participant's election, be immediately
refunded in the currency in which paid by the Foreign Subsidiary or
held for the purchase of shares on the next Purchase Date. If no such
election is made at the time such purchase right is terminated, then
the payroll deductions collected with respect to the terminated right
shall be refunded as soon as possible.
(ii)The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
purchase period for which the terminated purchase right was granted. In
order to resume participation in any subsequent purchase period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment form(s)) on or before the start date of the new
purchase period.
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<PAGE> 70
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the purchase period in which the
purchase right so terminates shall be immediately refunded in the
currency in which paid by the Foreign Subsidiary. However, should the
Participant cease to remain in active service by reason of an approved
unpaid leave of absence, then the Participant shall have the right,
exercisable up until the last business day of the purchase period in
which such leave commences, to (a) withdraw the payroll deductions
collected during such purchase period or (b) have such funds held for
the purchase of shares at the next scheduled Purchase Date. In no
event, however, shall any further payroll deductions be collected on
the Participant's behalf during such leave. Upon the Participant's
return to active service, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began.
G. TRANSFER OF EMPLOYMENT. In the event that a Participant who is
an Employee of a Foreign Subsidiary is transferred and becomes an Employee of
the Corporation during a purchase period under the Plan, such individual shall
continue to remain a Participant in the Plan and payroll deductions shall
continue to be collected until the next purchase date as if the Participant had
remained an Employee of the Foreign Subsidiary.
In the event that an Employee of the Corporation who is a
participant in the U.S. Plan is transferred and becomes an Employee of a Foreign
Subsidiary during a purchase period in effect under the U.S. Plan, such
individual shall automatically become a Participant under the Plan for the
duration of the purchase period in effect at that time under the Plan and the
balance in such individual's book account maintained under the U.S. Plan shall
be transferred as a balance to a book account opened for such individual under
the Plan. Such balance, together with all other payroll deductions collected
from such individual by the Foreign Subsidiary for the remainder of the purchase
period under the Plan (as converted into U.S. Dollars), shall be applied on the
next purchase date to the purchase of Stock under the Plan.
H. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the purchase period in which such Corporate Transaction occurs, as converted
into U.S. Dollars on the applicable Monthly Exchange Dates and at the time of
the Corporate Transaction as set forth below, to the purchase of shares of
Common Stock at a purchase price per share equal to eighty-five percent (85%) of
the lower of (i) the Fair Market Value per share of Common Stock on the start
date of the purchase period in which such Corporate Transaction occurs or (ii)
the Fair Market Value per share of Common Stock immediately prior to the
effective date of such Corporate Transaction. However, the applicable limitation
on the number of shares of Common Stock purchasable per Participant shall
continue to apply to any such purchase. Payroll deductions not yet converted
into U.S. Dollars at the time of the Corporate Transaction shall be converted
from the currency in which paid by the Foreign Subsidiary into U.S. Dollars on
the basis of the exchange rate in effect at as determined by the Plan
Administrator at the time of the Corporate Transaction.
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<PAGE> 71
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
I. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan and the U.S. Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant (and each participant in
the U.S. Plan), to the extent in excess of the aggregate purchase price payable
for the Common Stock pro-rated to such individual, shall be refunded.
J. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
K. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans of the
Corporation or any Corporate Affiliate, would otherwise permit such Participant
to purchase more than Twenty-Five Thousand U.S. Dollars (U.S.$25,000) worth of
stock of the Corporation or any Corporate Affiliate (determined on the basis of
the Fair Market Value of such stock on the date or dates such rights are
granted) for each calendar year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the
following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue on the Purchase Date in effect for the
purchase period for which such right is granted.
(ii)No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock
under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand U.S. Dollars (U.S.$25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
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<PAGE> 72
C. If by reason of such accrual limitations, any purchase right of
a Participant does not accrue for a particular purchase period, then the payroll
deductions which the Participant made during that purchase period with respect
to such purchase right shall be promptly refunded in the currency in which paid
by the Foreign Subsidiary.
D. In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on November 20, 1996 and
shall become effective on the Effective Date, provided no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until the Corporation shall have complied with all
applicable requirements of the 1933 Act (including the registration of the
shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
compliance is not effected within twelve (12) months after the date on which the
Plan is adopted by the Board, the Plan shall terminate and have no further force
or effect and all sums collected from Participants during the initial purchase
period hereunder shall be refunded.
The Plan was amended and restated on April 11, 1999 to increase
the number of shares of Common Stock available under the Plan and the U.S. Plan
by 1,500,000 shares to 2,500,000 shares. No purchase rights shall be granted and
no shares of Common Stock shall be granted on the basis of such 1,500,000 shares
increase unless and until the shareholders approve the increase at the 1999
Annual Meeting.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in April 2006, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any purchase period.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation.
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B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. Except to the extent otherwise provided in any addendum to the
Plan, the provisions of the Plan shall be governed by the laws of the State of
Texas without resort to that State's conflict-of-laws rules.
D. A Foreign Subsidiary or the Plan Administrator, as the case may
be, shall have the right to deduct from any payment to be made under this Plan,
or to otherwise require, prior to the issuance or delivery of any shares of
Common Stock or the payment of any cash, payment by each Participant of any tax
required by applicable law to be withheld.
E. Additional provisions for individual Foreign Subsidiaries may
be incorporated in one or more Addenda to the Plan. Such Addenda shall have full
force and effect with respect to the Foreign Subsidiaries to which they apply.
In the event of a conflict between the provisions of such an Addendum and one or
more other provisions of the Plan, the provisions of the Addendum shall be
controlling.
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SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
i2 Technologies Pty Ltd.
i2 Technologies (Canada), Inc.
i2 Technologies, Limited
i2 Technologies GmbH
i2 Technologies N.V.
i2 Technologies A/S
i2 technologies SARL
i2 Technologies Japan K.K.
i2 Technologies Pte Ltd.
InterTrans Logistics Solutions Limited
<PAGE> 75
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Foreign Subsidiaries during such individual's period
of participation in the Plan. The following items of compensation shall NOT be
included in Base Salary: (i) all overtime payments, bonuses, commissions (other
than those functioning as base salary equivalents), profit-sharing distributions
and other incentive-type payments and (ii) any and all contributions made on the
Participant's behalf by the Corporation or any Corporate Affiliate under any
employee benefit or welfare plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the U.S. Internal Revenue Code of 1986, as
amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation whether now existing or subsequently established.
F. 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
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii)the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean i2 Technologies, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of i2 Technologies, Inc. which shall by appropriate
action adopt the Plan.
H. EFFECTIVE DATE shall mean May 1, 1997. Any Foreign Subsidiary
which elects, with the approval of the Board, to extend the benefits of this
Plan to its employees after such Effective Date shall designate a subsequent
Effective Date with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more
A-1
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than twenty (20) hours of service per week for more than five (5) months per
calendar year for earnings considered wages under Code Section 3401(a).
J. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(iii) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the U.S. Dollar
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 U.S.
Dollar closing selling price on the last preceding date for which such
quotation exists.
(iv)If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the U.S. Dollar 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 U.S.
Dollar closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the U.S. Dollar closing
selling price on the last preceding date for which such quotation
exists.
K. FOREIGN SUBSIDIARY shall mean any non-U.S. Corporate Affiliate
or Affiliates as may be authorized from time to time by the Board to extend the
benefits of the Plan to their Eligible Employees. The Foreign Subsidiaries
participating in the Plan as of the Effective Date are listed in attached
Schedule A.
L. MONTHLY EXCHANGE DATE shall mean the last U.S. business day of
each month during a purchase period, on which date the foreign currency payroll
deductions collected on behalf of the Participants during that month are to be
converted into U.S. Dollars.
M. 1933 ACT shall mean the Securities Act of 1933, as amended.
N. PARTICIPANT shall mean any Eligible Employee of a Foreign
Subsidiary who is actively participating in the Plan.
O. PLAN shall mean the Corporation's International Employee Stock
Purchase Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each purchase
period.
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R. SERVICE shall mean an individual's performance of services for
the Corporation or any Corporate Affiliate as an employee, 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.
S. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
T. U.S. PLAN shall mean the i2 Technologies, Inc. Employee Stock
Purchase Plan.
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ADDENDUM
PROVISIONS FOR AUSTRALIAN PARTICIPANTS
The following provisions shall apply with respect to Participants
(the "Australian Participants") who perform services for i2 Technologies Pty
Ltd.
1. The Corporation or Foreign Subsidiary employing one or more
Australian Participants shall establish an interest-bearing bank account (a
"Contributions Account") in Australia for such Participants. The account shall
be maintained solely for the purpose of depositing payroll deductions authorized
by such Participants under the Plan. Accordingly, all payroll deductions for
each Australian Participant shall be immediately deposited in the Contributions
Account and held in trust for that participant.
2. All interest accrued on behalf of an Australian Participant in
the Contributions Account shall be paid to such individual on each Purchase
Date. All payroll deductions accumulated in such account on behalf of each
Australian Participant prior to each Purchase Date shall be applied to the
purchase of shares of Common Stock on such Purchase Date in accordance with the
Plan.
3. Any payroll deductions that are refunded to an Australian
Participant in accordance with the Plan shall be refunded with any interest
accrued on the individual's behalf in the Contributions Account less any
government charges or fees deducted in respect of those moneys by the bank at
which the Contributions Account is established.
4. The Plan Administrator shall prescribe one enrollment form to
be completed by an Australian Participant to participate in the Plan. On such
enrollment form, the Australian Participant must (i) specify the percentage of
his or her Base Salary in accordance with Section VI.B that he or she elects to
have deducted and applied for the purchase of the Common Stock under the Plan
and (ii) authorize the Plan Administrator to apply the amount specified in the
preceding clause in accordance with the Plan.
5. The provisions of the Plan with respect to Australian
Participants shall be governed by the laws of New South Wales without resort to
that State's conflict of laws rules.
<PAGE> 79
PROXY
i2 TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 1999
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 La Cima Club, The Towers at Williams
Square, 5215 North O'Connor Road, Irving, Texas on Monday, May 24, 1999 at 9:30
a.m. (Central Time), and any adjournment thereof.
1. The election of Class II directors.
[ ] FOR Sandeep (Sandy) R. Tungare.
[ ] WITHHOLD AUTHORITY to vote for Sandeep R. Tungare.
[ ] FOR Harvey B. Cash.
[ ] WITHHOLD AUTHORITY to vote for Harvey B. Cash.
2. Approval of the amendment to the 1995 Stock Option/Stock
Issuance Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment to the Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the amendment to the Restated Certificate of
Incorporation.
[ ] 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 26, 1999, is hereby
acknowledged.
Dated: ,1999
---------------------
----------------------------------
Signature(s)
(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
