<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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
i2 Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[i2 LOGO]
i2 TECHNOLOGIES, INC.
ONE i2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
April 17, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 annual meeting of stockholders
of i2 Technologies, Inc., which will be held at the Omni Hotel at Park West,
1590 Lyndon B. Johnson Freeway, Dallas, Texas 75234 on Wednesday, May 31, 2000
at 10:30 a.m. (Central Time).
Details of the business to be conducted at this meeting are given in the
attached Notice of Annual Meeting of Stockholders and proxy statement.
After careful consideration, our Board of Directors has approved the
proposals set forth in the proxy statement and recommends that you vote for each
such proposal.
This year, you may vote your shares by telephone, by the Internet or by
signing, dating and returning the enclosed proxy promptly in the accompanying
reply envelope. Representation of your shares at the meeting is very important.
Accordingly, whether or not you plan to attend the meeting, we urge you to
submit your proxy promptly by one of the methods offered. If you are able to
attend this meeting and wish to change your proxy vote, you may be able to do so
by revoking your proxy and voting in person at the 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 THIS MEETING, YOU ARE REQUESTED TO
VOTE YOUR SHARES BY TELEPHONE, BY THE INTERNET OR BY COMPLETING, SIGNING AND
DATING THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURNING IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE> 3
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 4
i2 TECHNOLOGIES, INC.
ONE I2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2000
To the Stockholders of i2 Technologies, Inc.:
The 2000 Annual Meeting of Stockholders of i2 Technologies, Inc. will be
held at the Omni Hotel at Park West, 1590 Lyndon B. Johnson Freeway, Dallas,
Texas 75234 on Wednesday, May 31, 2000 at 10:30 a.m. (Central Time) for the
following purposes:
1. To elect one Class III director to serve until the annual
stockholders' meeting in 2003, or until his or her successor has been
elected and qualified.
2. To approve an amendment to our 1995 Stock Option/Stock Issuance
Plan to increase the number of shares of our common stock authorized to be
issued under the plan by 40,000,000 shares.
3. To act upon such other business as may properly come before this
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 14, 2000 are
entitled to notice of and to vote at this meeting. A list of stockholders
entitled to vote at this meeting will be available for inspection at our
offices. Whether or not you plan to attend this meeting in person, please vote
your shares by telephone, by the Internet or by signing, dating and returning
the enclosed proxy promptly in the accompanying reply envelope. The prompt
submission of your proxy by one of the three methods offered will assist us in
preparing for this meeting.
You may revoke your proxy in the manner described in the accompanying proxy
statement at any time before it has been voted at the meeting. It may be
possible for you to vote in person at the meeting even if you have returned a
proxy. Please review the proxy statement for more information.
By Order of the Board of Directors,
/s/ ROBERT C. DONOHOO
ROBERT C. DONOHOO
Secretary
April 17, 2000
<PAGE> 5
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 6
i2 TECHNOLOGIES, INC.
ONE i2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
------------------------
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, for the 2000 Annual Meeting of
Stockholders to be held on Wednesday, May 31, 2000 at 10:30 a.m. (Central Time),
and at any adjournment or postponement thereof at the Omni Hotel at Park West,
1590 Lyndon B. Johnson Freeway, Dallas, Texas 75234. These proxy materials were
first mailed to stockholders of record beginning on or about April 26, 2000.
On January 14, 2000, our Board of Directors declared a two-for-one split of
our common stock, effected as a dividend of one additional share of common stock
for each share of common stock outstanding on February 3, 2000. The stock
dividend was paid on February 17, 2000. All of the share-related data in this
proxy statement has been adjusted to take into account the stock split.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at this 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
The cost of soliciting proxies will be paid by us and may include
reimbursement paid to brokerage firms and others for their expense in forwarding
solicitation materials as well as the expense of preparing, assembling,
photocopying and mailing this proxy statement. Solicitation will be made
primarily through the use of the mail, however, our regular employees may,
without additional remuneration, solicit proxies personally by telephone or the
Internet.
Our annual report to stockholders for the year ended December 31, 1999 has
been mailed concurrently with the mailing of the Notice of Annual Meeting of
Stockholders and this proxy statement to all stockholders entitled to notice of,
and to vote at, this meeting. The annual report is not incorporated into this
proxy statement and is not considered proxy solicitation material.
We have fixed April 14, 2000 as the record date for determining those
stockholders who are entitled to notice of, and to vote at, this meeting. At the
close of business on the record date, we had 159,021,673 outstanding shares of
our common stock, par value $.00025 per share. The presence, in person or by
proxy, of the holders of a majority of the shares of our outstanding common
stock entitled to vote is necessary to constitute a quorum at this meeting. Each
of our stockholders is entitled to one vote for each share of our common stock
held by that stockholder as of the record date. Cumulative voting is not
permitted in the election of directors. 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.
A stockholder executing a proxy pursuant to this solicitation may revoke
his or her proxy at any time prior to its use:
- by delivering to the Secretary of i2 a signed notice of revocation or a
later-dated, signed proxy; or
- by attending the meeting and voting in person.
<PAGE> 7
Attendance at the meeting does not in itself constitute the revocation of a
proxy. In addition, if your shares are held in the name of your broker, bank or
other nominee, you must obtain a proxy, executed in your favor, from the holder
of record to be able to vote at the meeting.
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. The vote of a plurality of
the shares of our common stock present in person or represented by proxy at this
meeting and entitled to vote on the election of directors is necessary for the
election of a director. Abstentions and broker non-votes have no effect on the
determination of plurality, except to the extent that they affect the total
votes received by any particular candidate.
As of January 31, 2000, our directors and executive officers beneficially
owned an aggregate of approximately 66.1 million shares of our common stock, not
including shares of common stock issuable upon exercise of outstanding stock
options, constituting approximately 42.4% 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 our common stock held or owned by such
persons, or over which such persons have voting control, in favor of all of the
proposals described in this proxy statement. Nonetheless, the approval of the
proposals is not assured. See "Principal Stockholders."
PROPOSAL 1
ELECTION OF DIRECTOR
We currently have the following four directors serving on our Board:
Sanjiv S. Sidhu
Harvey B. Cash
Thomas J. Meredith
Sandeep R. Tungare
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 III director, Sanjiv S. Sidhu, expires at this
meeting, the term of office of the Class I director, Thomas J. Meredith, expires
at the 2001 annual meeting of stockholders, and the term of office of the Class
II directors, Harvey B. Cash and Sandeep R. Tungare, expires at the 2002 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.
On March 12, 2000, we entered into a definitive agreement to acquire Aspect
Development, Inc. in exchange for up to 44.9 million shares of our common stock.
The acquisition is subject to regulatory and stockholder approvals and other
customary contingencies and is expected to close in the summer of 2000. As a
condition to closing, we have agreed to expand our Board of Directors to five
members and appoint Romesh T. Wadhwani, the Chairman of the Board and Chief
Executive Officer of Aspect, as our Vice Chairman of the Board and a Class III
director to hold office as a director until the 2003 annual meeting of
stockholders, or until his successor is elected and qualified. No action is
required of you and you are not being asked to take any action on the
appointment of Mr. Wadhwani.
VOTE REQUIRED
One Class III director is to be elected at this meeting to hold office
until the 2003 annual meeting of stockholders, or until his or her successor is
elected and qualified. The nominee receiving the greatest number of votes of
outstanding shares present in person or represented by proxy at this meeting and
entitled to vote on this proposal will be elected to our Board of Directors even
if he or she receives less than a majority of such shares. Abstentions will not
be counted towards the tabulation of votes cast for the election of any
director.
2
<PAGE> 8
Unless otherwise instructed, the persons named in the accompanying proxy
card will vote the proxies received by them for our nominee, Sanjiv S. Sidhu. If
Mr. Sidhu is unable or declines to serve as a director at the time of this
meeting, the proxies will be voted for the nominee who is designated by the
present Board of Directors to fill the vacancy. It is not expected that Mr.
Sidhu will be unable or will decline to serve as a director.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" SANJIV S. SIDHU
AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS
ARE INDICATED ON THE PROXY.
CLASS III NOMINEE
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITIONS
- ---- -------------- --- ---------
<S> <C> <C> <C>
Sanjiv S. Sidhu......................... 1989 42 Chairman of the Board and
Chief Executive Officer
</TABLE>
DIRECTOR COMPENSATION AND INDEMNIFICATION ARRANGEMENTS
Directors are not paid any fees or additional compensation for services as
members of our Board of Directors or any committee of our Board of Directors,
but are reimbursed for all out-of-pocket expenses incurred in attending meetings
of our Board of Directors and committees on which they serve. In addition,
directors who are not our employees or employees of any of our subsidiaries
periodically receive automatic grants of 4,000 non-qualified stock options under
our 1995 Stock Option/Stock Issuance Plan. Each option will have an exercise
price per share equal to 100% of the fair market value per share of our common
stock on the option grant date and a maximum term of ten years measured from the
option grant date. Each option will be immediately exercisable for all the
option shares, but any purchased shares will be subject to repurchase by us, at
the exercise price paid per share, upon the director's cessation of Board
service. Each option grant will vest, and our repurchase rights will lapse, in
four equal annual installments over the director's period of Board service, with
the first installment to vest one year from the option grant date.
We maintain directors' and officers' liability insurance and our Bylaws
provide for mandatory indemnification of directors to the fullest extent
permitted by Delaware law. We have entered into indemnification agreements with
all of our directors. In addition, our Restated Certificate of Incorporation
limits the liability of our directors to us and our stockholders for breaches of
the directors' fiduciary duties to the fullest extent permitted by Delaware law.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors met seven times during 1999, and acted a number of
times by written consent. Each incumbent director attended at least 75% of the
aggregate of (1) the total number of meetings of our Board of Directors and (2)
the total number of meetings held by all committees of our Board of Directors on
which such director served.
We have a standing Compensation Committee currently composed of Messrs.
Cash and Meredith. The Compensation Committee met one time in 1999. The
Compensation Committee administers our stock plans. The Compensation Committee
has the responsibility for establishing the compensation payable to our Chief
Executive Officer and is responsible for establishing compensation payable to
our other executive officers based on recommendations made by the Chief
Executive Officer. The Compensation Committee also is responsible for the
overall administration of our employee benefit plans, including our employee
stock purchase plans.
We also have a standing Audit Committee, which during 1999 was composed of
Messrs. Cash and Meredith. The Audit Committee met two times in 1999. Mr.
Tungare was appointed as an additional member of our Audit Committee on January
14, 2000. The Audit Committee assists in the selection of our independent
auditors and is responsible for designating those services to be performed by
and maintaining effective communication with the auditors.
3
<PAGE> 9
We do not have a standing Nominating Committee or any other committee
performing similar functions, and these matters are considered at meetings of
the full Board of Directors.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN
Our stockholders are being asked to approve an amendment to our 1995 Stock
Option/Stock Issuance Plan, or 1995 Plan, that will increase the number of
shares available for issuance under the 1995 Plan from 86,000,000 shares to
126,000,000 shares. The 40,000,000-share increase was approved by the Board on
January 14, 2000, subject to stockholder approval at the 2000 Annual Meeting.
The Board believes it is in our best interest to increase the share reserve so
that we can continue to attract and retain the services of those persons
essential to our 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 who wishes to obtain a copy of the
actual plan document may do so upon written request to the Corporate Secretary
at our principal executive offices in Dallas, Texas.
Equity Incentive Programs
The 1995 Plan contains three separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) a Stock Issuance Program and (iii) an
Automatic Option Grant Program. The principal features of these programs are
described below. The Compensation Committee and the Board of Directors each have
separate but concurrent authority to administer the Discretionary Option Grant
and Stock Issuance Programs. The Board has approved the establishment of a pool
of options which Mr. Sidhu may grant under the Discretionary Option Grant
Program to each individual not subject to Section 16 of the Securities Exchange
Act of 1934. The number of options in the pool may be revised by the Board of
Directors. The term "Plan Administrator," as used in this summary, will mean
either the Compensation Committee, the Board of Directors, or Mr. Sidhu to the
extent each such entity or individual is acting within the scope of its or his
administrative authority 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 126,000,000 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 2,000,000
shares per calendar year. Stockholder approval of this proposal will constitute
re-approval of such share limitation. As of February 29, 2000, there were
40,242,942 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 our 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 us, at the option
4
<PAGE> 10
exercise or direct issue price paid per share, pursuant to our repurchase rights
under the 1995 Plan, will be available for reissuance.
Eligibility
Our officers and other employees of our parent or subsidiaries (whether now
existing or subsequently established), non-employee members of the Board and the
board of directors of our parent or subsidiaries and our consultants and
independent advisors of our parent and subsidiaries are eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs. Only non-employee
members of the Board are eligible to participate in the Automatic Option Grant
Program.
As of January 31, 2000, six executive officers, approximately 2,900 other
employees and three non-employee Board members were eligible to participate in
the 1995 Plan.
Valuation
The fair market value per share of our common stock on any relevant date
under the 1995 Plan will be the closing sales price per share on that date on
the Nasdaq National Market. As of January 31, 2000, the closing sales price per
share was $96.31.
Discretionary Option Grant Program
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share of not less than 85% of the fair market value per share
of common stock on the option grant date. No granted option will have a term in
excess of ten years.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights, which provide the holders with the
right to surrender their options for an appreciation distribution from us
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, which may be granted to our
officers as part of their option grants. Any option with such a limited
stock appreciation right in effect may be surrendered to us upon the
successful completion of a hostile take-over of us. In return for the
surrendered option, the officer will be entitled to a cash distribution
from us 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 our common stock
and to issue replacement options with an exercise price based on the market
price of our common stock at the time of the new grant.
5
<PAGE> 11
Stock Issuance Program
Shares may be sold under the Stock Issuance Program at a price per share of
not less than 85% of the fair market value per share of common stock, payable in
cash or through a promissory note payable to us. Shares also may be issued
solely as a bonus for past services.
The issued shares may be either 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 4,000 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 4,000 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 40,000,000-share increase subject to this proposal will constitute
pre-approval of each option granted on or after the date of the 2000 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 us, at the exercise price
paid per share, upon the optionee's cessation of Board service. Each option
grant will vest (and our repurchase rights will lapse) in four (4) equal annual
installments over the optionee's period of Board service, with the first such
installment to vest one (1) year from the option grant date.
The shares subject to each automatic option grant will vest immediately
upon the optionee's death or permanent disability or an acquisition of us by
merger or asset sale or a hostile take-over of our 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 us 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 we are 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 our repurchase
rights with respect to those shares are to be assigned to the successor
corporation. Any outstanding options under the Discretionary Option Grant
Program assumed or replaced in connection with such acquisition will be subject
to immediate acceleration, and any unvested shares under the Stock Issuance
Program 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 our 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
6
<PAGE> 12
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 our company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, takeover attempt or other efforts
to gain control of our 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 us withhold a
portion of the shares otherwise issuable to such individuals in satisfaction of
the withholding 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 our executive officers
named in the Summary Compensation Table and the various indicated individuals
and groups, the number of shares of common stock subject to options granted
between January 1, 1999 and January 31, 2000 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
Gregory A. Brady,.......................................... 200,000 $19.88
President
William M. Beecher,........................................ 300,000 27.74
Executive Vice President and Chief Financial Officer
Hiten D. Varia,............................................ 490,000 18.64
Executive Vice President and Chief Delivery Officer
Reagan L. Lancaster,....................................... 480,000 35.80
Executive Vice President, Worldwide Sales
All current executive officers as a group (five persons)... 1,470,000 26.27
Harvey B. Cash,............................................ 24,000 16.99
Director
Thomas J. Meredith,........................................ 24,000 16.99
Director
Sandeep R. Tungare,........................................ -- --
Director
All non-employee directors as a group (three persons)...... 48,000 16.99
All employees, including current officers who are not
executive officers as a group (approx. 2,900 persons).... 20,938,710 37.57
</TABLE>
7
<PAGE> 13
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the 1995 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code, or
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 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 we 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 we be allowed a deduction with respect to
the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by us 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 our 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.
We will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for our taxable
year 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. We 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 Issuance
The tax principles applicable to direct stock issuances under the 1995 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
We anticipate that any compensation deemed paid by us in connection with
the disqualifying disposition of incentive stock option shares or the exercise
of non-statutory options granted with exercise prices equal to
8
<PAGE> 14
the fair market value of the shares on the grant date will qualify as
performance-based compensation for purposes of Section 162(m) of the Code 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
of our executive officers. Accordingly, all compensation deemed paid under the
1995 Plan with respect to such dispositions or exercises will remain deductible
by us without limitation under Section 162(m) of the Code.
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will result in a
compensation expense to our earnings equal to the difference between the
exercise or issue price and the fair market value of the shares on the grant or
issue date. Such expense will be accruable by us 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 our earnings. Whether or not
granted at a discount, the number of outstanding options may be a factor in
determining our 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 our
reported earnings were those options valued as compensation expense for book
accounting purposes.
NEW PLAN BENEFITS
AS OF JANUARY 31, 2000 NO OPTIONS HAD BEEN GRANTED AND NO STOCK HAD BEEN
ISSUED UNDER THE 1995 PLAN ON THE BASIS OF THE 40,000,000-SHARE INCREASE FOR
WHICH STOCKHOLDER APPROVAL IS SOUGHT UNDER THIS PROPOSAL 2.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of our outstanding voting shares present
or represented by proxy and entitled to vote at this meeting is required for
approval of the amendment to the 1995 Plan. Should such stockholder approval not
be obtained, then the share reserve will not be increased. 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 OUR BEST INTERESTS TO CONTINUE TO HAVE A COMPREHENSIVE
EQUITY INCENTIVE PROGRAM FOR US WHICH WILL PROVIDE A MEANINGFUL OPPORTUNITY FOR
OFFICERS, EMPLOYEES, NON-EMPLOYEE BOARD MEMBERS AND CONSULTANTS TO ACQUIRE A
SUBSTANTIAL PROPRIETARY INTEREST IN THE ENTERPRISE AND THEREBY ENCOURAGE SUCH
INDIVIDUALS TO REMAIN IN OUR SERVICE AND MORE CLOSELY ALIGN THEIR INTERESTS WITH
THOSE OF OUR STOCKHOLDERS.
9
<PAGE> 15
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of January 31, 2000 by (1) each person who is
known by us to own beneficially more than five percent of our common stock, (2)
each of our directors, (3) each of our executive officers named in the Summary
Compensation Table, and (4) 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)........................................ 62,101,200(3) 39.8%
Sidhu-Singh Family Investments, Ltd.(2)................... 12,980,000 8.3
Sandeep R. Tungare........................................ 2,741,220(4) 1.8
Gregory A. Brady.......................................... 2,003,030(5) 1.3
William M. Beecher........................................ 144,644(6) *
Hiten D. Varia............................................ 425,912(7) *
Reagan L. Lancaster....................................... 245,402(8) *
Harvey B. Cash............................................ 92,000(9) *
Thomas J. Meredith........................................ 113,000(10) *
All executive officers and directors as a group (eight
persons)................................................ 67,866,408(11) 43.0%
</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).
Percentage of beneficial ownership is based on 156,077,380 shares of our
common stock outstanding as of January 31, 2000. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of our common stock subject to options held by that person
that are currently exercisable or will become exercisable within 60 days
following January 31, 2000 are deemed outstanding. However, these shares
are not deemed outstanding for the purpose of computing the percentage
ownership of any other person. Unless otherwise indicated in the footnotes
to this table, the persons and entities named in the table have sole voting
and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(2) The address for this person is One i2 Place, 11701 Luna Road, Dallas, Texas
75234.
(3) Includes 12,980,000 shares held by Sidhu-Singh Family Investments, Ltd., of
which Mr. Sidhu is a general partner, and 30,000 shares held by the
Sidhu-Singh Family Foundation, of which Mr. Sidhu is a trustee.
(4) Includes 1,250,000 shares owned by Mr. Tungare's spouse and 91,220 shares
owned by the Tungare Manohar Family Foundation. Mr. Tungare serves on the
board of directors of the Tungare Manohar Family Foundation and, in this
capacity, shares the power to vote and dispose of the shares held by the
Foundation.
(5) Includes 875,000 shares subject to exercisable options.
(6) Includes 80,840 shares subject to exercisable options.
(7) Includes 376,500 shares subject to exercisable options.
(8) Includes 236,888 shares subject to exercisable options.
(9) Includes 92,000 shares subject to exercisable options.
(10) Includes 20,000 shares held in a trust for the benefit of Mr. Meredith's
family and 93,000 shares subject to exercisable options.
(11) Includes 1,754,228 shares subject to exercisable options.
10
<PAGE> 16
EXECUTIVE COMPENSATION AND OTHER MATTERS
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning our directors and
executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ---- --- ----------------
<S> <C> <C>
Sanjiv S. Sidhu....................... 42 Chairman of the Board and Chief
Executive Officer
Gregory A. Brady...................... 39 President
Dr. Pallab Chatterjee................. 49 Chief Operating Officer
William M. Beecher.................... 43 Executive Vice President and Chief
Financial Officer
Hiten D. Varia........................ 43 Executive Vice President and Chief
Delivery Officer
Reagan L. Lancaster................... 35 Executive Vice President, Worldwide
Sales
Harvey B. Cash........................ 61 Director
Thomas J. Meredith.................... 49 Director
Sandeep R. Tungare.................... 43 Director
</TABLE>
Mr. Sidhu founded i2 Technologies in 1988 and has served as our Chairman of
the Board since our incorporation in 1989. Mr. Sidhu has served as our Chief
Executive Officer since December 1994, and previously served in various other
executive capacities with us. Before founding our company, Mr. Sidhu held
various positions with Texas Instruments, an 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. Brady joined us in December 1994 as President, Field Operations, became
President, Worldwide Operations in September 1996, and effective May 1, 1999,
became President. From 1988 until joining us, Mr. Brady held a variety of
positions with Oracle, 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.
Dr. Chatterjee joined us in February 2000 as Chief Operating Officer. From
January 1997 until joining us, Dr. Chatterjee served in several key executive
officer positions with Texas Instruments, most recently as Senior Vice President
and Chief Information Officer. Mr. Chatterjee holds a B.S. in electrical
engineering from the Indian Institute of Technology in Kharagpur, India, a M.S.
in electrical engineering from the University of Illinois and a Ph.D. in
electrical technology from the University of Illinois.
Mr. Beecher joined us in May 1997 as Vice President, International
Operations and became Executive Vice President, Operations in September 1998. In
1999, Mr. Beecher became our Chief Financial Officer. From April 1996 until
joining us, Mr. Beecher was the Chief Financial Officer of Think Systems
Corporation, which we acquired in May 1997. Prior to that time, he practiced law
at the law offices of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen in
Roseland, New Jersey. Mr. Beecher is a graduate of Cornell Law School and
received his undergraduate degree from the State University of New York at
Albany.
Mr. Varia joined us in July 1995 as Vice President, Worldwide Consulting,
became Executive Vice President, Worldwide Development in July 1998, and in
1999, became our Executive Vice President and Chief Delivery Officer. From 1985
until joining us, 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. Lancaster joined us in April 1995 as Vice President, Western Region for
Sales, and become Vice President, United States Sales and effective October 1999
became Executive Vice President, Worldwide Sales. From 1994 until joining us,
Mr. Lancaster served as a National Director of Sales for Trilogy Development
Corp. Mr. Lancaster attended the University of North Texas.
11
<PAGE> 17
Mr. Cash has served as a director 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 publicly held companies: Panja
Corporation (formerly AMJAX 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 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 a M.B.A. from Western Michigan University.
Mr. Meredith has served as a director since July 1996. Mr. Meredith has
served as a Managing Director of Dell Ventures, a wholly owned subsidiary of
Dell Computer Corporation, since March 2000, and served as Senior Vice President
and Chief Financial Officer for Dell from November 1992 to March 2000. 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 the following publicly held companies: International Integration
Incorporated (i-Cube), an information technology business consultancy; and
Freemarkets, Inc., a business to business e-commerce company. 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.
Mr. Tungare has served as a director since May 1997. He served as our
President, Demand Management, from May 1997, following our acquisition of Think
Systems Corporation, through July 1999. In November 1999, Mr. Tungare founded
Vistaar, a business-to-business e-commerce company, of which he serves as
Chairman and Chief Executive Officer. Mr. Tungare founded Think in 1986 and
served as its President and Chief Executive Officer until it was acquired by us
in May 1997. Mr. Tungare holds a B.S. in science from Bombay University and an
M.B.A. from Rutgers University.
EMPLOYMENT CONTRACTS; CHANGE-IN-CONTROL AND INDEMNIFICATION ARRANGEMENTS
The executive officers serve at the discretion of our Board of Directors.
We presently do not have an employment contract in effect with any of our
executive officers. Although no specific cash compensatory arrangements have
been made for our executive officers, certain provisions of the 1995 Plan may
have the effect of discouraging, delaying or preventing a change in control of
us or unsolicited acquisition proposals. We have entered into indemnification
agreements with all of our executive officers. We maintain directors' and
officers' liability insurance and our Bylaws provided for mandatory
indemnification of officers to the fullest extent permitted by Delaware law.
12
<PAGE> 18
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation earned by our Chief Executive Officer and our other five most
highly compensated executive officers. These individuals are collectively
referred to as the Named Officers. Mr. Tungare is included in the table since he
would have been among the four most highly compensated of our executive officers
during the fiscal year ended December 31, 1999 had he not resigned his position
earlier in the year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------- OPTIONS ALL OTHER
YEAR SALARY BONUS OTHER(1) (#OF SHARES) COMPENSATION(2)
---- -------- ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu................ 1999 $150,000 $ 75,000 $ 34,126(4) -- $1,542
Chairman of the Board and 1998 150,000 75,000 -- -- 1,542
Chief Executive Officer 1997 150,000 75,000 -- -- 1,597
Sandeep R. Tungare(3).......... 1999 93,750 75,000 -- -- --
President, Demand 1998 150,000 75,000 -- -- --
Management 1997 200,000 25,000 -- -- --
Gregory A. Brady............... 1999 150,000 466,975 262,635(5) 200,000 --
President 1998 150,000 350,000 201,104(5) 1,110,000 --
1997 150,000 349,380 -- 1,200,000 --
William M. Beecher(6).......... 1999 140,000 110,000 -- 300,000 --
Executive Vice President 1998 140,000 120,000 -- 370,000 --
and Chief Financial Officer 1997 70,000 75,812 -- 56,680 --
Reagan L. Lancaster............ 1999 150,000 576,775 -- 320,000 --
Executive Vice President, 1998 140,000 1,180,926 -- 160,000 --
Worldwide Sales 1997 125,000 298,230 -- 340,000 --
Hiten D. Varia................. 1999 125,000 191,376 -- 490,000 --
Executive Vice President 1998 125,000 89,236 -- 210,000 --
and Chief Delivery Officer 1997 125,000 -- -- 484,000 --
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits for executive officers
other than Messrs. Sidhu and Brady because the aggregate amounts thereof do
not exceed 10% of such officers' total salary and bonus in the respective
year.
(2) Represents premiums paid by us with respect to short term life insurance
policy on the life of Mr. Sidhu, the proceeds of which are payable to Mr.
Sidhu's personally designated beneficiaries.
(3) Mr. Tungare became our officer on May 15, 1997 in connection with our
acquisition of Think Systems Corporation. Prior to that date, Mr. Tungare
was employed and compensated by Think. Compensation for 1997 represents
collective compensation from us and Think. Mr. Tungare resigned his position
with us effective July 31, 1999 but continues to serve on our Board of
Directors.
(4) Represents expenses relating to tax and estate planning.
(5) We agreed to pay the interest incurred in connection with a personal loan to
Mr. Brady from a commercial bank. The loan, which was paid in full on
December 6, 1999, bore interest at one-month LIBOR plus 2%. The total
interest paid by us on behalf of Mr. Brady was $230,727 in 1999 and $174,133
in 1998.
(6) Mr. Beecher became our employee on May 15, 1997 in connection with our
acquisition of Think. Prior to that date, Mr. Beecher was employed and
compensated by Think. Compensation for 1997 represents only compensation
from i2.
13
<PAGE> 19
OPTION GRANTS IN 1999
The following table sets forth certain information concerning stock options
granted to each of the Named Officers during 1999. No stock appreciation rights,
or SARs, were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
--------------------------------------------------- ASSUMED ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM(7)
UNDERLYING GRANTED TO EXERCISE -----------------------------
OPTIONS EMPLOYEES PRICE EXPIRATION
GRANTED(1) IN 1999 PER SHARE(2) DATE 5% 10%
---------- ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu.......... -- -- $ -- -- $ -- $ --
Sandeep R. Tungare....... -- -- -- -- -- --
Gregory A. Brady......... 200,000 1.14% 19.88(3) 9/30/09 2,436,985 6,175,798
William M. Beecher....... 200,000 1.14% 19.88(3) 9/30/09 2,436,985 6,175,798
100,000 0.57% 43.47(4) 11/30/09 2,733,726 6,927,799
Reagan L. Lancaster...... 200,000 1.14% 13.75(5) 1/20/09 1,666,577 4,223,433
70,000 0.40% 16.69(6) 6/8/09 734,628 1,861,690
50,000 0.28% 19.88(3) 9/30/09 624,964 1,583,782
Hiten D. Varia........... 190,000 1.08% 16.69(6) 6/8/09 62,884 159,361
300,000 1.71% 19.88(3) 9/30/09 3,749,784 9,502,689
</TABLE>
- ---------------
(1) Options vest over a four-year period, and in certain cases may be exercised
prior to vesting subject to our right 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 us.
(2) The exercise price may be paid in cash or through a promissory note payable
to us.
(3) Options were granted on October 1, 1999.
(4) Options were granted on December 1, 1999.
(5) Options were granted on January 21, 1999.
(6) Options were granted on June 9, 1999.
(7) Future value assumes appreciation of 5% and 10% per year over the ten-year
option period in the value of our common stock as mandated by the rules and
regulations of the Securities and Exchange Commission and does not represent
our estimate or projection of the future value of our 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 1999 AND DECEMBER 31, 1999 OPTION VALUES
The following table sets forth certain information concerning options
exercised during 1999 and option holdings at December 31, 1999 with respect to
each of the Named Officers. No SARs were exercised during 1999 and none were
outstanding at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT DECEMBER 31, 1999(2) DECEMBER 31, 1999(2)(3)
ON VALUE ------------------------------- ------------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Sanjiv S. Sidhu....... -- $ -- -- -- $ -- $ --
Sandeep R. Tungare.... -- -- -- -- -- --
Gregory A. Brady...... -- -- 875,000 1,625,000 79,025,000 144,000,000
William M. Beecher.... -- -- 80,840 485,840 7,290,544 37,733,981
Reagan L. Lancaster... 152,700 2,657,841 184,388 610,000 16,885,298 52,039,062
Hiten D. Varia........ 58,000 1,763,890 346,500 899,500 31,813,913 75,570,459
</TABLE>
14
<PAGE> 20
- ---------------
(1) Determined by subtracting the exercise price from the market value of our
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.
Of the options set forth under "Unexercisable," Mr. Varia holds 10,000
options that are exercisable but unvested.
(3) Value is determined by subtracting the exercise price from the fair market
value of our common stock at December 31, 1999 ($97.50 per share), based
upon the closing sales price of our common stock on the Nasdaq National
Market on such date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cash and Meredith served on the Compensation Committee during all
of 1999. Neither of these persons is an officer or employee, or former officer
or employee, of us or any of our subsidiaries. No interlocking relationship
exists between the members of our Board of Directors or the Compensation
Committee and the board of directors or the compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
REPORT ON EXECUTIVE COMPENSATION
During 1999, compensation decisions concerning our 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 our executive officers during 1999.
General
Our primary objective is to maximize the value of our shares over time.
Accomplishing this objective requires developing and marketing superior products
and services that provide cost-effective solutions for our customers. The
overall goal of the Compensation Committee is to develop compensation practices
that will allow us to attract and retain the people needed to define, create,
manufacture and market leading-edge products and services.
We compensate our executive officers with a combination of salary and
incentives designed to focus their efforts on maximizing both our near-term and
long-term financial performance. In addition, our compensation structure also
rewards individual performance that furthers our goals. Elements of 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 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 our executive's peers. To assist in
15
<PAGE> 21
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
We maintain 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 our particular operation
groups.
In setting performance targets, we considered our historical performance
and underlying business model, and external as well as internal expectations
related to 1999 operating profits. Incentive compensation was subject to further
adjustment based on a combination of financial factors, including our
contracting activity, total revenues, operating income and earnings per share.
The financial factors were derived from 1999 budget data, historical performance
and median expectations of those industry analysts who publish our earnings
forecasts and otherwise actively follow us.
Equity Incentives
We utilize our 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 our 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, 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 also may be taken into consideration.
Option grants also may 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 our Board of Directors and approved by our
stockholders in 1995, and is administered by the Compensation Committee. In
determining the size of each grant to executive officers, our Board of Directors
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.
Our Board of Directors adopted and our stockholders approved an Employee
Stock Purchase Plan, or the Purchase Plan, in 1996. The Purchase Plan is
designed to allow our eligible employees to purchase shares of our common stock
through periodic payroll deductions under the Purchase Plan and a reserve of
5,000,000 shares of our common stock has been established for this purpose.
Payroll deductions may not exceed 15% of a participant's base salary for each
purchase period. The purchase price per share will be 85% of the lesser of the
fair market value of our 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. We have not established
a policy with regard to Section 162(m) of the Code, since we have not and do not
currently anticipate paying cash compensation in excess of $1,000,000 per annum
to any employee. None of the compensation paid by us in 1999 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.
16
<PAGE> 22
Benefits
Benefits offered to our executive officers serve as a safety net of
protection against the financial catastrophes that can result from illness,
disability or death. Benefits offered to our executive officers are
substantially the same as those offered to all of our regular employees.
In 1994, we established a tax-qualified deferred compensation plan, or the
401(k) Savings Plan, covering all of our 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. We do not currently
provide additional matching contributions under the 401(k) Savings Plan, but may
do so in the future. The 401(k) Savings Plan is designed to qualify under
Section 401 of the Code so that contributions by employees or by us 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 us, if any,
will be deductible by us 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 our Chief Executive Officer, Mr. Sidhu,
the Compensation Committee has taken into consideration his significant
ownership interest in us 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 our performance and to his personal performance. In 1999, Mr.
Sidhu earned a based salary of $150,000 and a cash bonus of $75,000. No options
were granted to Mr. Sidhu during 1999. The bonus for 1999 approximated 50% of
his base salary and was based on our performance and Mr. Sidhu's significant
contribution to that performance in terms of both leadership and strategic
vision.
<TABLE>
<S> <C>
Compensation Committee: Harvey B. Cash
Thomas J. Meredith
</TABLE>
17
<PAGE> 23
STOCK PERFORMANCE GRAPH
The graph below depicts our stock price as an index assuming $100 invested
on April 25, 1996, the date of our 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 us by the Nasdaq Stock Market. The comparisons
in the graph are required by regulations of the Securities and Exchange
Commission and are not intended to forecast or to be indicative of the possible
future performance of our common stock.
[GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET NASDAQ COMPUTER &
I2 TECHNOLOGIES US DATA PROCESSING
--------------- ------------------- -----------------
<S> <C> <C> <C>
4/25/1996 100.00 100.00 100.00
6/30/96 214.00 100.00 100.00
12/31/96 191.00 109.00 106.00
6/30/97 155.00 122.00 126.00
12/31/97 264.00 134.00 130.00
6/30/98 351.00 161.00 191.00
12/31/98 304.00 188.00 233.00
6/30/99 430.00 230.00 291.00
12/31/99 1950.00 340.00 491.00
</TABLE>
The preceding Report on Executive Compensation and the Stock Performance
Graph shall not be deemed incorporated by reference into any of our previous
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
which might incorporate filings made by us under those Acts, nor will such
report or graph be incorporated by reference into any future filings made by us
under those Acts, except to the extent that we specifically incorporate this
information by reference.
CERTAIN TRANSACTIONS WITH MANAGEMENT
We had an understanding with Mr. Brady whereby we agreed to pay the
interest incurred in connection with a personal loan to Mr. Brady from a
commercial bank. The loan, which was paid in full as of December 6, 1999, bore
interest at one-month LIBOR plus 2%. The total interest paid by us on behalf of
Mr. Brady was $230,727 in 1999 and $174,133 in 1998.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who beneficially own more than 10% of our
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange 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 us with copies of all
Section 16(a) forms they file.
18
<PAGE> 24
Based solely on review of the copies of the forms furnished to us or
written representations from certain reporting persons that no Forms 5 were
required, we believe that, during 1999, all of our executive officers, directors
and greater than 10% beneficial owners complied with all applicable Section
16(a) filing requirements, except that Messrs. Cash and Meredith did not timely
file their respective Forms 5 (which have been subsequently filed).
INDEPENDENT AUDITORS
Arthur Andersen LLP served as our independent public auditors for fiscal
year 1999, and was selected by our Board of Directors to serve in this capacity
for the 2000 fiscal year. Notwithstanding this selection, our Board of
Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if our Board of
Directors believes that this change would be in our and our stockholders' best
interests. Representatives of Arthur Andersen LLP are expected to be present at
this meeting to respond to appropriate questions and will have the opportunity
to make a statement if they desire to do so. The engagement of Arthur Andersen
LLP as our auditors has been approved by our Audit Committee.
Ernst & Young LLP served as our independent public auditors for fiscal year
1998. The decision to change independent public auditors was precipitated by the
potential conflict of interest presented by an agreement with Ernst & Young LLP
associated with our plan to pursue a strategic consulting agreement with Ernst &
Young LLP to jointly market and deliver our electronic Business Process
Optimization solutions worldwide. As a result, Ernst & Young LLP resigned their
role as our independent audit firm effective April 16, 1999.
Ernst & Young LLP's report on our financial statements during fiscal year
1998 contained no adverse opinion or disclaimer of opinion, and was not
qualified or modified as to the uncertainty, audit scope, or accounting
principles.
During 1998 and the subsequent interim period through April 16, 1999, 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 us during 1998 and the subsequent interim period
through April 16, 1999.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
stockholder proposals to be presented at our 2001 annual meeting of stockholders
and in our proxy statement and form of proxy relating to that meeting, must be
received by us at our offices in Dallas, Texas, addressed to our Secretary, not
later than 120 days prior to April 26, 2001. With respect to any stockholder
proposal submitted outside of Rule 14a-8, persons named in the accompanying
proxy card shall have discretionary authority to vote against any proposal
presented at our 2001 annual meeting of stockholders unless notice is received
by us in the manner specified in the previous sentence. These proposals must
comply with applicable Delaware law, certain rules and regulations promulgated
by the Securities and Exchange Commission and the procedures set forth in our
Bylaws.
ANNUAL REPORT ON FORM 10-K
WE WILL MAIL TO ANY STOCKHOLDER WITHOUT CHARGE, UPON WRITTEN REQUEST, A
COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS. REQUESTS
SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS, AT OUR EXECUTIVE OFFICES
LOCATED AT ONE I2 PLACE, 11701 LUNA ROAD, DALLAS, TEXAS 75234.
19
<PAGE> 25
OTHER MATTERS
Our Board of Directors is not aware of any matter to be presented for
action at this 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 of our interest. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed proxy card, unless marked to the contrary.
By Order of the Board of Directors,
/s/ ROBERT C. DONOHOO
ROBERT C. DONOHOO
Secretary
April 17, 2000
20
<PAGE> 26
APPENDIX A
i2 TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED THROUGH JANUARY 14, 2000)
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.
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.
A-1
<PAGE> 27
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 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 126,000,000(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
- ---------------
(1) All share numbers have been adjusted to reflect the 2 for 1 stock split
effected on February 17, 2000.
A-2
<PAGE> 28
increase of 3,206,304 shares authorized by the Board and approved by the
stockholders prior to the Plan Effective Date, (iii) an increase of 8,000,000
shares authorized by the Board and approved by the stockholders at the 1997
Annual Meeting, (iv) an increase of 14,000,000 shares approved by the Board on
July 1, 1997, approved by the stockholders at the 1998 Annual Meeting, (v) an
additional increase of 24,000,000 shares approved by the Board as of April 11,
1999, approved by the stockholders at the 1999 Annual Meeting, plus (vi) an
additional increase of 40,000,000 shares approved by the Board on January 14,
2000, subject to stockholder approval at the 2000 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
2,000,000 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 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.
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.
A-3
<PAGE> 29
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.
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.
A-4
<PAGE> 30
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 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.
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
A-5
<PAGE> 31
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 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.
A-6
<PAGE> 32
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
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
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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.
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,
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.
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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.
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 4,000 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 4,000 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 4,000-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.
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
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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 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.
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
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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 connection with the option exercise or
share vesting triggering the Taxes) with an aggregate Fair Market Value
equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs became
effective on the Plan Effective Date. The Automatic Option Grant Program became
effective on the Automatic Option Grant Program Effective Date, and the initial
options under the Automatic Option Grant Program were made to the Eligible
Directors at that time. The Plan was approved by the Corporation's stockholders
in September 1995.
On May 11, 1996, the Board adopted an amendment (the "1996 Amendment")
which (i) imposed a maximum limit, for purposes of Section 162(m) of the Code,
on the number of shares for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances per
calendar year under the Plan and (ii) increased the number of shares of Common
Stock issuable under the Plan by an additional 8,000,000 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 14,000,000
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
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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 (the "1999 Amendment")
(i) to increase the number of shares of Common Stock issuable under the Plan by
24,000,000 shares, 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. The 1999 Amendment was approved by the stockholders at
the 1999 annual meeting.
The Plan was amended and restated on January 14, 2000 to increase the
number of shares of Common Stock issuable under the Plan by 40,000,000 shares,
subject to stockholder approval at the 2000 Annual Meeting. If such stockholder
approval is not obtained at the 2000 Annual Meeting, then any options previously
granted on the basis of the 40,000,000-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.
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
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terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
(i) upon the exercise of any option or stock appreciation right or (ii) under
the Stock Issuance Program shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options and stock appreciation rights granted under it and
the shares of Common Stock issued pursuant to it. No shares of Common Stock or
other assets shall be issued or delivered under the Plan unless and until there
shall have been compliance with all applicable requirements of Federal and state
securities laws and any applicable listing requirements of any stock exchange
(or the Nasdaq National Market, if applicable) on which Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the date on
which the Underwriting Agreement is executed and the initial public offering
price of the Common Stock is established.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those immediately prior to such transaction; or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
H. CORPORATION shall mean i2 Technologies, Inc., a Delaware corporation.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
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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.
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.
A-16
<PAGE> 42
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for the purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
X. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance Plan,
as set forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether the Board,
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.
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.
A-17
<PAGE> 43
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).
A-18
<PAGE> 44
PROXY
i2 TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2000
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sanjiv S. Sidhu and William M. Beecher,
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"), the undersigned could vote, and with all power the
undersigned would possess, if personally present at the annual meeting of
stockholders of i2 to be held at the Omni Hotel at Park West, 1590 Lyndon B.
Johnson Freeway, Dallas, Texas on Wednesday, May 31, 2000 at 10:30 a.m. (Central
Time), and 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 AND 2. ANY HOLDER WHO WISHES TO WITHHOLD THE
DISCRETIONARY AUTHORITY REFERRED TO IN ITEM 3 ON THE REVERSE SIDE SHOULD MARK A
LINE THROUGH THE ENTIRE ITEM.
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o FOLD AND DETACH HERE o
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
Please mark [X]
your vote as
indicated in
this example
1. The election of a Class III director. 2. Approval of the amendment to the 1995
Stock Option/Stock Issuance Plan.
FOR the nominee WITHHOLD AUTHORITY NOMINEE: Sanjiv S. Sidhu
listed to the right to vote for the nominee For Against Abstain
(except as marked listed to the right [ ] [ ] [ ]
to the contrary)
[ ] [ ]
3. In their discretion, to act upon any matters incidental [ ] By checking the box to the left, I consent to future access of
to the foregoing and such other business as may the Annual Report, Proxy Statements, prospectuses and other
properly come before the annual meeting or any communications electronically via the Internet. I understand
adjournment thereof. that i2 may no longer distribute printed materials to me from
any future stockholder meeting until such consent is revoked.
I understand that I may revoke any consent at any time by
contacting i2's transfer agent, ChaseMellon Shareholder
Services, Ridgefield Park, NJ and that costs normally
associated with electronic access, such as usage and telephone
charges may be my responsibility.
Receipt of the proxy statement dated April 17, 2000, is
hereby acknowledged.
Dated: , 2000
----------------------
-----------------------------------
-----------------------------------
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. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title to
such.)
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY, USING THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL o
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
- --------------------------------------------------------------------------------
VOTE BY INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
Follow the instructions at our Internet Address: http://www.eproxy.com/ITWO
- --------------------------------------------------------------------------------
OR
- --------------------------------------------------------------------------------
VOTE BY PHONE
HAVE YOUR PROXY CARD IN HAND
Call toll-free 1-800-840-1208 on a touch tone telephone
24 hours a day, 7 days a week
There is NO CHARGE to you for this call.
You will be asked to enter your 11-digit Control Number,
which is located in the box in the lower right hand corner of this form.
Follow the recorded instructions.
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OR
- --------------------------------------------------------------------------------
VOTE BY PROXY CARD
Mark, sign and date your proxy card and
return promptly in the enclosed envelope.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU WISH TO ACCESS FUTURE ANNUAL REPORTS AND PROXY STATEMENTS ELECTRONICALLY
VIA THE INTERNET AND NO LONGER RECEIVE THE PRINTED MATERIALS
PLEASE PROVIDE YOUR CONSENT WITH YOUR PROXY VOTE.
- --------------------------------------------------------------------------------
NOTE: IF YOU VOTED BY INTERNET OR TELEPHONE,
THERE IS NO NEED TO MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING.
