SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Made2Manage Systems, 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)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
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[ ] Fee paid previously with preliminary materials. [ ] Check box if any part of
the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
<PAGE>
Made2Manage Systems, Inc.
9002 Purdue Road
Indianapolis, IN 46268
March 12, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
Made2Manage Systems, Inc. (the "Company") which will be held at the Indianapolis
Marriott North, 3645 River Crossing Parkway, Indianapolis, Indiana 46240 on
Tuesday, April 20, 1999, at 10:00 a.m. (Eastern Standard Time).
Details of the business to be conducted at the Annual Meeting are given in the
attached Notice of Annual Meeting of Shareholders and Proxy Statement. After
careful consideration, the Company's Board of Directors has unanimously approved
the proposals set forth in the Proxy Statement and recommends that you vote for
each such proposal.
In order for us to have an efficient meeting, please sign, date and return the
enclosed proxy promptly in the accompanying reply envelope. If you are able to
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ David B. Wortman
David B. Wortman
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
----------------------
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope. No postage need be affixed if mailed in the United
States.
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<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1999
The 1999 Annual Meeting of Shareholders of Made2Manage Systems, Inc. (the
"Company") will be held at the Indianapolis Marriott North, 3645 River Crossing
Parkway, Indianapolis, Indiana 46240 on Tuesday, April 20, 1999, at 10:00 a.m.
(Eastern Standard Time).
Only shareholders of record at the close of business on March 1, 1999, are
entitled to notice of and to vote at the meeting. At the meeting we will vote
on:
1. Directors to serve until the 2000 Annual Meeting of Shareholders;
2. Adoption of the 1999 Stock Option Plan; and
3. Such other business as may properly come before the meeting or any
adjournments thereof.
The Board of Directors recommends that you vote in favor of the two proposals
described in this Proxy Statement.
The Company's 1998 Annual Report for the fiscal year ended December 31, 1998,
has been mailed concurrently with the mailing of the Notice of the Annual
Meeting of Shareholders and this Proxy Statement to all shareholders entitled to
notice of, and to vote at, the Annual Meeting. The 1998 Annual Report is not
incorporated into this Proxy Statement and is not considered proxy soliciting
material.
By Order of the Board of Directors,
/s/ Stephen R. Head
Stephen R. Head
Secretary
<PAGE>
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<PAGE>
MADE2MANAGE SYSTEMS, INC.
1999 PROXY STATEMENT
Annual Meeting of Shareholders
April 20, 1999
Indianapolis Marriott North
3645 River Crossing Parkway
Indianapolis, IN 46240
<PAGE>
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<PAGE>
MADE2MANAGE SYSTEMS, INC.
1999 PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ANNUAL MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
What is the purpose of the Annual Meeting? . . . . . . . . . . . . . . . . . . . 1
Who is entitled to vote? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
What am i voting on? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
What are the board's recommendations?. . . . . . . . . . . . . . . . . . . . . . 1
What vote is required to approve each item?. . . . . . . . . . . . . . . . . . . 2
What constitutes a quorum? . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
How do i vote? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Can i change my vote?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
How many shares can vote?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
How will voting on any other business be conducted?. . . . . . . . . . . . . . . 3
Who can attend the meeting?. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
How much did this proxy solicitation cost? . . . . . . . . . . . . . . . . . . . 3
STOCK OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Who are the largest owners of the company's stock? . . . . . . . . . . . . . . . 4
How much stock do the company's directors and executive officers own?. . . . . . 5
PROPOSAL 1 - ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Meetings of the board of directors . . . . . . . . . . . . . . . . . . . . . . . 6
Compensation of directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Committees of the board of directors . . . . . . . . . . . . . . . . . . . . . . 6
Nominees for director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Vote required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PROPOSAL 2 - ADOPTION OF THE 1999 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . 10
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Summary of 1999 plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Certain federal income tax consequences of the plan. . . . . . . . . . . . . . . 12
Vote required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE . . . . . . . . . . . . . . . 14
EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Summary compensation table . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Option grants in last fiscal year. . . . . . . . . . . . . . . . . . . . . . . . 16
Aggregate option exercises in last fiscal year and fiscal year end option values 17
COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General Compensation Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Annual Cash Bonuses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Long-Term Incentive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 19
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CEO Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Tax Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . . . . . 20
COMPARATIVE PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INDEPENDENT ACCOUNTANTS AND AUDIT MATTERS . . . . . . . . . . . . . . . . . . . . . . 22
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING . . . . . . . . . . . . . . . . . . 22
OTHER BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1999 STOCK OPTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A - 1
</TABLE>
<PAGE>
1999 PROXY STATEMENT
ANNUAL MEETING INFORMATION
What is the purpose of the Annual Meeting?
At the Company's Annual Meeting, shareholders will act upon the matters outlined
in the accompanying notice of meeting, including the election of directors and
approval of the 1999 Stock Option Plan. In addition, the Company's management
will report on the performance of the Company during fiscal 1998 and respond to
questions from shareholders.
Who is entitled to vote?
Only shareholders of record at the close of business on the record date, March
1, 1999, are entitled to receive notice of the Annual Meeting and to vote the
shares of common stock of Made2Manage Systems, Inc. (the "Common Stock") that
they held on that date at the meeting, or any postponement or adjournment of the
meeting. Each outstanding share entitles its holder to cast one vote on each
matter to be voted upon.
What am I voting on?
You are asked to:
- - Elect nominees to serve on the Board of Directors for the next year (see
pages 6 - 9); and
- - Approve or disapprove the 1999 Stock Option Plan (see pages 9 - 12 and
Appendix A).
What are the Board's recommendations?
The Board recommends a vote:
- - FOR election of the nominated slate of directors; and
- - FOR approval of the 1999 Stock Option Plan.
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors.
At the record date, directors and executive officers of the Company directly or
indirectly own an aggregate of 216,719 shares of Common Stock (not including
shares of Common Stock issuable upon exercise of outstanding stock options).
This represents 4.7% of the shares of Common Stock outstanding and entitled to
vote at the Annual Meeting. These directors and executive officers have
indicated to the Company that each intends to vote all shares of Common Stock
that they own or control in favor of all of the proposals described herein. The
Company's directors and executive officers do not own or control a sufficient
number of shares to dictate approval of either proposal.
1
<PAGE>
What vote is required to approve each item?
Election of Directors. The affirmative vote of a majority of the shares present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the election of directors is required to elect a nominee to the Board of
Directors. A properly executed proxy marked "WITHHOLD AUTHORITY" with respect to
the election of one or more directors will not be voted with respect to the
director or directors indicated, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, a "WITHHOLD AUTHORITY" will
have the effect of a negative vote for a nominee.
1999 Stock Option Plan. The affirmative vote of a majority of the shares present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the item will be required for approval of the 1999 Stock Option Plan. A properly
executed proxy marked "ABSTAIN" with respect to this proposal will not be voted,
although it will be counted for purposes of determining whether there is a
quorum. Accordingly, an "ABSTAIN" will have the effect of a negative vote.
If your shares are held in "street name" through a broker or other nominee, your
broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of Common Stock outstanding on the record date will constitute a
quorum, permitting the meeting to conduct its business. Proxies received but
marked as abstentions and broker non-votes will be included in the calculation
of the number of shares considered to be present at the meeting.
How do I vote?
You should following the instructions included with your proxy card and your
vote will cast as you direct. If you are a registered shareholder and attend the
meeting, you may deliver your completed proxy card in person. "Street name"
shareholders who wish to vote at the meeting will need to obtain a proxy form
from the institution that holds their shares.
Can I change my vote?
Yes. You may change your vote at any time before the proxy is exercised by
filing with the Secretary of the Company either a notice of revocation or a duly
executed proxy bearing a later date. The powers of the proxy holders will be
suspended if you attend the meeting in person and so request, although
attendance at the meeting will not by itself revoke a previously granted proxy.
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<PAGE>
How many shares can vote?
The record date for determining those shareholders who are entitled to notice
of, and to vote at, the Annual Meeting is March 1, 1999. At the close of
business on the record date, the Company had 4,563,638 outstanding shares of
Common Stock, no par value. Each shareholder is entitled to one vote for each
share of Common Stock held by such shareholder as of March 1, 1999.
If a shareholder has specified a choice 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 of Shareholders and in this Proxy Statement. Abstentions and
broker non-votes (i.e., the submission of a proxy by a broker or nominee
specifically indicating the lack of discretionary authority to vote on the
matter) will be counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for purposes of determining whether or not a proposal has been approved.
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the 1999
Annual Meeting other than the proposals described in this Proxy Statement, if
any other business is presented at the Annual Meeting, your signed proxy card
gives authority to Ira Coron, the Chairman of the Board of Directors, David B.
Wortman, the Company's President and Chief Executive Officer, or Stephen R.
Head, the Company's Corporate Secretary, to vote on your behalf on such matters.
The proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies, may
attend the meeting. Registration and seating will begin at 9:30 a.m. Each
shareholder may be asked to present valid picture identification, such as
driver's license or passport. Cameras, recording devices and other electronic
devices will not be permitted at the meeting.
Please note that if you hold shares in "street name" (that is, through a broker
or other nominee), you will need to bring a copy of the brokerage statement
reflecting your stock ownership as of March 1, 1999, and check in at the
registration desk at the meeting.
How much did this proxy solicitation cost?
The cost of soliciting proxies will be paid by the Company and may include
reimbursement paid to brokerage firms and others for their expense in forwarding
solicitation materials as well as the expense of preparing, assembling,
photocopying and mailing this Proxy Statement. Solicitation will be made
primarily through the use of the mail, however, regular employees of the Company
may, without additional remuneration, solicit proxies personally by telephone or
facsimile. The total cost of the proxy solicitation is less than $10,000.
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STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
Based on information reported to the Company or filed with the Securities and
Exchange Commission as of March 1, 1999, the beneficial owners of more than 5%
of the Company's Common Stock are as follows: <TABLE> <CAPTION>
<S> <C> <C>
Number of Shares Percent of
of Common Stock Common Stock
Name Beneficially Owned Outstanding
- ----- ------------------ -------------
Entitities affiliated with Hambrecht & Quist Group (1) 976,793 21.4%
Pilgrim Baxter & Associates, Ltd. (2). . . . . . . . . 289,800 6.4
Fleet Financial Group (3). . . . . . . . . . . . . . . 254,450 5.6
Oberweiss Asset Management, Inc. (4) . . . . . . . . . 245,500 5.4
WM Advisors, Inc. (5). . . . . . . . . . . . . . . . . 230,200 5.0
<FN>
(1) Consists of 520,562 shares of Common Stock owned by H&Q London Ventures; 287,044
shares of Common Stock owned by Hambrecht & Quist California; and 169,187 shares of
Common Stock owned by Ivory & Sime Enterprise Capital PLC. All of the aforementioned
entities (the "H&Q Entities") are controlled, directly or indirectly, by Hambrecht &
Quist Group. The address for each of the H&Q Entities is One Bush Street, San Francisco,
California, 94104.
(2) The address for Pilgrim Baxter & Associates, Inc. is 825 Duportail Road, Wayne,
PA 19087.
(3) The address of Fleet Financial Group is One Federal Street, Boston,
Massachusetts, 02110.
(4) The address of Oberweiss Asset Management, Inc. is 951 Ice Cream Drive, Suite
200, North Aurora, IL 60542.
(5) The address for WM Advisors, Inc. is 1201 Third Avenue, Suite 1400, Seattle,
Washington 98101.
</FN>
</TABLE>
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<PAGE>
How much stock do the Company's directors and executive officers own? -The
following table shows the amount of Common Stock of the Company beneficially
owned (unless otherwise indicated) by the Company's directors, the executive
officers of the Company named in the Summary Compensation Table included
elsewhere in this Proxy Statement and the directors and executive officers of
the Company as a group as of March 1, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Percent of
of Common Stock Common Stock
Name (1)(2) Beneficially Owned Outstanding (1)
- ----------- ------------------ ---------------
Ira Coron (3) . . . . . . . . . . . . . . . . . . . 92,401 2.0
Michael P. Cullinane. . . . . . . . . . . . . . . . -- --
John M. Dillon. . . . . . . . . . . . . . . . . . . -- --
Richard G. Halperin . . . . . . . . . . . . . . . . 3,900 *
David B. Wortman (4). . . . . . . . . . . . . . . . 197,812 4.2
Oliver C. Fowler (5). . . . . . . . . . . . . . . . 86,040 1.9
Stephen R. Head (6) . . . . . . . . . . . . . . . . 49,582 1.1
Gary W. Rush (7). . . . . . . . . . . . . . . . . . 96,915 2.1
Joseph S. Swern (8) . . . . . . . . . . . . . . . . 60,207 1.3
All directors and executive officers as a group (9) 641,440 12.9
<FN>
* Less than 1% of outstanding Common Stock.
(1) Except as indicated in the footnotes to this table and pursuant to applicable
community property laws, the Company believes that the persons named in the table
have sole voting and investment power with respect to all shares of Common Stock.
(2) The business address of all directors and executive officers is in care of
Made2Manage Systems, Inc., 9002 Purdue Road, Indianapolis, Indiana 46268.
(3) Includes 62,332 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(4) Includes 112,812 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(5) Includes 42,290 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(6) Includes 49,582 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(7) Includes 69,415 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(8) Includes 37,707 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
(9) Includes 424,721 shares of Common Stock issuable upon the exercise of options
within 60 days of March 1, 1999.
</FN>
</TABLE>
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<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
General
The business of the Company is managed under the direction of a Board of
Directors currently consisting of five directors: Ira Coron, Michael P.
Cullinane, John M. Dillon, Richard G. Halperin and David B. Wortman. The Board
of Directors has responsibility for establishing broad corporate policies and
for the overall performance of the Company. The Board of Directors is not,
however, involved in the management or supervision of the day-to-day operations
of the Company. The Board of Directors is kept advised of the Company's business
at regularly scheduled meetings and through regular reports and discussions with
the Company's executive officers between meetings.
The Company's Restated Bylaws require that the Board of Directors have at least
three members.
Meetings of the Board of Directors
The Board of Directors meets on a regularly scheduled basis during the year to
review significant developments affecting the Company and to act on matters
requiring Board approval. It also holds special meetings when an important
matter requires Board action between regularly scheduled meetings. The Board of
Directors met six times during the Company's fiscal year ended December 31,
1998. During 1998, each director attended all of the meetings of the Board of
Directors and the committees of the Board of Directors of which each was a
member.
Compensation of Directors
Through the first quarter of 1998, the Company paid Mr. Coron $4,000 per quarter
plus expenses for his service as a director. Beginning with the second quarter
of fiscal 1998, the Company paid each non-employee director ("Independent
Director") $3,750 per quarter plus expenses for service as a director. In
addition, pursuant to the Made2Manage Systems, Inc. Stock Option Plan (the
"Stock Option Plan"), each Independent Director receives a stock option to
purchase 20,000 shares of Common Stock on the date of election to the Board of
Directors and a stock option to purchase 5,000 shares of Common Stock on each
anniversary thereof so long as he or she is a director. Such options are
exercisable at the fair market value of the stock on the date of grant and 25%
of such options are exercisable on the first anniversary of the date of the
grant and the remaining is exercisable at the rate of 1/48th of the amount
granted each month thereafter.
During 1998 Mr. Coron received stock options to purchase 5,000 shares at an
exercise price of $8.06 per share and Messrs. Cullinane, Dillon and Halperin
received stock options to purchase 20,000 shares at an exercise price of $13.31
per share.
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Compensation Committee.
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<PAGE>
- - The Audit Committee reviews with the Company's independent auditors the scope
and timing of their audit services and any other services they are asked to
perform, the auditor's report on the Company's consolidated financial statements
following completion of their audit and the Company's policies and procedures
with respect to internal accounting and financial controls. The Audit Committee
met three times during 1998.
- - The Compensation Committee reviews and approves
the compensation and benefits to be provided to the Company's executive
officers, reviews general policy matters related to employee compensation and
benefits and administers the Company's Stock Option Plan and the Employee Stock
Purchase Plan. The Compensation Committee met four times during 1998.
Nominees for Director
The following individuals, each of whom currently serves as a director of the
Company, have been nominated for re-election at the Company's Annual Meeting. If
appointed, these individuals would stand for re-election at the 2000 Annual
Meeting of Shareholders.
Ira Coron, age 70
Chairman of the Board of Directors since July 1993
Member of the Audit Committee and Compensation Committee
Mr. Coron has served as Chairman of California Amplifier, Inc. since March 1994
and served also as that Company's Chief Executive Officer until August 1997.
From 1989 to 1994, he was an independent management consultant to several
companies and venture capital firms. He retired from TRW, Inc. in 1989, after
serving in numerous senior management positions since 1967, including Vice
President and General Manager of TRW's Electronic Components Group. He is a
director of the Wireless Cable Association and a director of CMC Industries. He
is a graduate of the United States Military Academy with a B.S. degree in
engineering.
Michael P. Cullinane, age 49
Executive Vice President and Chief Financial Officer, PLATINUM technology
International, inc.
Member of the Board of Directors since July 1998
Member of the Audit Committee and Compensation Committee
Mr. Cullinane joined PLATINUM in 1988 as Chief Financial Officer and was elected
to PLATINUM's board of directors in 1991. He also serves on four other boards of
directors, including Platinum Entertainment, Inc. He is a graduate of the
University of Notre Dame.
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<PAGE>
John M. Dillon, age 49
President and Chief Executive Officer, Hyperion Solutions, Inc.
Member of the Board of Directors since July 1998
Member of the Compensation Committee
Hyperion Solutions was formed through the 1998 merger of Hyperion Software, Inc.
and Arbor Software, Inc. Mr. Dillon was named President and Chief Operating
Officer of Arbor in 1997 and became Chief Executive Officer of Arbor in 1998 and
President and Chief Executive Officer of Hyperion Solutions upon its formation.
Previously, he was Arbor's vice president of worldwide sales. Prior to Arbor,
Dillon was vice president of operations for Interleaf, a major document
management software company, and served in various sales management positions at
Oracle Corporation. He holds an M.B.A. degree from Golden Gate University and a
B.S. degree in engineering from the United States Naval Academy.
Richard G. Halperin, age 50
Chief Executive Officer, Coherent Networks International, Inc.
Member of the Board of Directors since July 1998
Member of the Audit Committee
Mr. Halperin joined Coherent Networks International, Inc. as Chief Executive
Officer in 1998. Previously, he was CEO of JBA International, a unit of JBA
Holdings, a global ERP software company based in the United Kingdom. Prior to
JBA, Halperin was senior vice president of XL/DATACOMP, a subsidiary of Storage
Technology, and vice president of sales and services for System Software
Associates. He graduated from Northwestern University with a B.S. degree in
business administration.
David B. Wortman, age 47
President and Chief Executive Officer, Made2Manage Systems, Inc.
Member of the Board of Directors since January 1994
Mr. Wortman joined the Company in September 1993 as Senior Vice President and
has served as President and Chief Executive Officer and a director since January
1994. Prior to joining the Company, Mr. Wortman held a succession of senior
executive positions and served as a director of Pritsker Corporation, a computer
software company he co-founded in 1973. Mr. Wortman is a past president of the
Institute of Industrial Engineers. He is a director and past president of the
Indiana Information Technology Association. Mr. Wortman holds B.S. and M.S.
degrees in industrial engineering from Purdue University.
8
<PAGE>
Vote Required
Each nominee receiving the affirmative vote of a majority of the shares present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the election of directors shall be elected to the Board of Directors.
Unless otherwise instructed, the persons named in the accompanying proxy card
will vote the proxies received by them for each of the Company's nominees named
above, each of whom is presently a director of the Company. If any nominee of
the Company is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who is designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director.
The Company's Board of Directors unanimously recommends a vote "FOR" the
nominees listed herein, and proxies executed and returned will be so voted
unless contrary instructions are indicated thereon.
9
<PAGE>
PROPOSAL 2 - ADOPTION OF THE 1999 STOCK OPTION PLAN
General
The Company's current Stock Option Plan was originally adopted in 1990 ("1990
Plan") and has a ten year life. The Board of Directors recommends that the
shareholders approve the 1999 Stock Option Plan ("Plan" or "1999 Plan") to
replace the 1990 Plan. If the 1999 Plan is approved by the shareholders, no
further options will be granted under the 1990 Plan. The 1999 Plan, like the
1990 Plan, provides for (i) discretionary grants to key employees and other key
persons whose efforts on behalf of the Company or a subsidiary are deemed worthy
of encouragement and (ii) formula grants to Independent Directors. If the
shareholders approve the 1999 Plan, it will be effective April 20, 1999.
The Board of Directors recommends that the shareholders approve the reservation
of 200,000 shares of Common Stock for issuance under the 1999 Plan. This number
of shares, when reduced by shares already reserved for the 1990 Plan, represents
a net increase of 128,318 shares of Common Stock reserved for options. The Board
believes that the reservation of this number of shares is necessary to give the
Company the flexibility it needs to promote the growth of the Company through
the issuance of stock options to key directors, employees, consultants,
independent contractors, vendors, suppliers, and other persons whose efforts are
deemed worthy of encouragement.
The 1999 Plan provides that, on January 1 of each year, the number of shares
available and reserved for issuance under the Plan will be increased by the
number equal to 7% of the Base Shares (as defined in the following sentence)
calculated as of the last day of the preceding fiscal year. The Base Shares will
equal the sum of (i) the number of shares of the Company's Common Stock
outstanding on the last day of the preceding fiscal year and (ii) the number of
shares of Common Stock reserved for issuance upon the exercise of options
outstanding on the last day of the preceding fiscal year. Under the terms of the
Plan, the number of shares available and reserved for issuance is also increased
automatically by the number of any outstanding shares subject to issuance under
options that have expired or been terminated. The Plan also contains
anti-dilution provisions authorizing appropriate adjustments to outstanding
options in certain circumstances. The Plan also provides for issuance of
reacquired shares.
Summary of 1999 Plan
The following summary of the 1999 Plan is qualified in its entirety by reference
to the full text of the 1999 Plan, which is set forth as Appendix A to this
Proxy Statement.
The 1999 Plan will be administered by the Board of Directors (or a committee of
the Board consisting solely of two or more Independent Directors (the
"Committee")). Under the Plan, the Board or Committee may, in its sole
discretion, grant stock options to key employees and other key persons,
consistent with the objectives and limitations of the Plan. The Plan also
provides that each Independent Director will automatically be granted an option
to purchase 5,000 shares of Common Stock upon election to the Board of
Directors, and each Independent Director annually will be granted an additional
option to purchase 5,000 shares of Common Stock. These Independent Director
grants shall be exercisable on the date of grant.
10
<PAGE>
The Board or Committee has authority, within the limits of the 1999 Plan, to (i)
determine the persons to whom options will be granted, (ii) designate an option
as an incentive stock option or a non-qualified stock option (described below),
(iii) establish the number of shares of Common Stock that may be purchased under
each option and the option exercise price, (iv) determine the time and
conditions subject to which options may be exercised in whole or in part, (v)
fix the term of each option, (vi) determine how withholding taxes related to the
exercise of an option are paid, (vii) establish any other terms, restrictions,
or conditions applicable to any option not inconsistent with the provisions of
the Plan, and (viii) take any other actions deemed necessary or advisable for
the administration of the Plan. The Board or Committee will have the power to
interpret the Plan and may adopt, amend, and rescind rules, not inconsistent
with the provisions of the Plan, as it deems advisable.
Options granted under the 1999 Plan may be incentive stock options ("ISOs"), as
defined by Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonqualified stock options that do not meet the requirements of Code
Section 422 ("NQSOs"). ISOs may be granted only to employees of the Company or a
subsidiary. The per share exercise price of an option cannot be less than 100%
of the fair market value of the Common Stock on the date of the grant, except
that the per share exercise price for ISOs granted to holders of 10% or more of
the total combined voting power of all outstanding classes of stock of the
Company ("10% Shareholders") cannot be less than 110% of such fair market value.
In addition, for each optionee, the maximum aggregate fair market value on the
date of grant of all shares subject to ISOs first exercisable in any one year
may not exceed $100,000.
The option price may be paid by personal check, by bank, or cashier's check or
in such other form of lawful consideration as the Board or the Committee may
determine, including Common Stock or a promissory note. No shares of Common
Stock may be issued to any optionee until the full option price has been paid.
Awards under the 1999 Plan are not transferable otherwise than by will or the
laws of descent and distribution.
Except for formula option grants to Independent Directors, options granted under
the 1999 Plan generally become exercisable with respect to 25% of the shares on
the first anniversary of the date of grant and with respect to 1/48 of the
shares in each of the next 36 consecutive months; provided, however, the Board
or Committee may use any other option vesting schedule consistent with the terms
of the Plan. In event of a merger of the Company with or into another
corporation in which the Company does not survive or a sale of substantially all
of the Company's assets, all outstanding options vest immediately and become
fully exercisable, unless the Board or Committee determines that immediate
vesting is not in the best interests of the Company.
11
<PAGE>
The Board may, in its discretion, amend the 1999 Plan; provided, however, no
amendment shall materially affect the rights of any optionee without the
optionee's prior consent. In addition, any amendment that changes the Plan's
formula for computing the number of shares of Common Stock available for grant
under the Plan, changes the method of determining the exercise price or the
maximum term of the options that may be granted under the Plan, or materially
lessens the requirements for participation in the Plan must be approved by the
Company's shareholders.
Within the limitations of the Plan, the Board or Committee may modify, extend,
or renew outstanding options or accept the cancellation of outstanding options
for the granting of new options in substitution therefor, provided that, except
for certain adjustments, (i) no modification of an option previously granted may
affect the rights of the optionee in a material adverse way without the affected
optionee's consent and (ii) the exercise price of outstanding options may not be
changed.
The Company plans to file a registration statement registering the shares of
Common Stock issued under the Plan. Accordingly, subject to certain
restrictions, those shares may be publicly traded upon issuance.
The last sale price of the Company's Common Stock on March 1, 1999, as reported
by the Nasdaq National Market was $8.75 per share.
Certain Federal Income Tax Consequences of the Plan
The following is a brief summary of the Federal income tax aspects of grants
made under the 1999 Plan based upon statutes, regulations, and interpretations
in effect on the date hereof. This summary is not intended to be exhaustive and
does not describe state or local tax consequences.
Incentive Stock Options
The optionee does not recognize taxable income upon the grant or exercise of an
ISO. Upon a disposition of shares received upon the exercise of an ISO after the
later of (i) two years from the date of grant or (ii) one year after the
issuance of the shares to the optionee, the optionee recognizes the difference,
if any, between the amount realized from the sale and the exercise price as
long-term capital gain (or loss, as the case may be). The Company will not
qualify for a deduction in connection with the grant or exercise of the options.
If Common Stock acquired upon the exercise of an ISO is disposed of before the
end of the holding period described above, the optionee must recognize ordinary
income in the taxable year of disposition in an amount equal to the excess, if
any, of (i) the lesser of (a) the fair market value of the shares on the date of
exercise or (b) the amount realized on the disposition of the shares over (ii)
the exercise price paid for such shares. The Company will qualify for a
deduction equal to any amount recognized by the optionee pursuant to the
preceding sentence, subject to the requirements of the Code.
12
<PAGE>
Non-Qualified Stock Options
Upon the grant of a NQSO, the optionee does not recognize income, and the
Company is not entitled to a deduction. Upon exercise of a NQSO, the optionee
generally must recognize ordinary income in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over the
exercise price, and the Company will qualify for a deduction in the same amount,
subject to the requirements of the Code.
Vote Required
The affirmative vote of a majority of the votes cast will be required to approve
approval of the 1999 Stock Option Plan.
The Company's Board of Directors unanimously recommends a vote "FOR" approval of
the 1999 Stock Option Plan.
13
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock (collectively the "Reporting Persons") to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock of the Company. Such Reporting Persons are
required by regulations of the Commission to furnish the Company with copies of
all such filings.
Based solely on a review of copies of reports filed by the Reporting Persons
pursuant to Section 16(a) of the Exchange Act, or written representations from
certain Reporting Persons that no Form 5 filing was required for such person,
the Company believes that all Reporting Persons complied with all Section 16(a)
requirements in the fiscal year ended December 31, 1998.
14
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total annual compensation paid to, or for the
account of, the Chief Executive Officer of the Company and the Company's four
other most highly compensated executive officers whose total annual salary and
bonus exceeded $100,000 during the year ended December 31, 1998 (collectively,
the "Named Executive Officers"). <TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C>
Long-term
Compensation
Option All
Annual Compensation Awards Other
Name and Principal Position Year Salary Bonus (# of Shares) Compensation (1)
- --------------------------- ---- -------- ------- ------------- -----------------
David B. Wortman . . . . . . . . . 1998 $175,000 $92,706 60,000 $ 2,608
President and Chief Executive. . 1997 150,000 61,253 30,000 2,789
Officer. . . . . . . . . . . . . 1996 140,000 48,151 75,000 2,531
Oliver C. Fowler . . . . . . . . . 1998 120,000 88,998 25,000 2,608
Vice President, Sales. . . . . . 1997 110,000 63,240 15,000 2,520
1996 100,000 44,287 25,000 2,262
Stephen R. Head. . . . . . . . . . 1998 125,000 45,833 30,000 2,546
Vice President, Finance and. . . 1997 110,000 37,548 -- 1,917
Administration, Chief Financial. 1996 9,167(2) -- 70,000 --
Officer, Secretary and Treasurer
Gary W. Rush . . . . . . . . . . . 1998 120,000 43,999 25,000 2,396
Vice President, Development. . . 1997 100,000 32,534 20,000 1,986
1996 90,000 27,244 62,000 2,136
Joseph S. Swern. . . . . . . . . . 1998 115,000 42,166 20,000 2,355
Vice President, Service and. . . 1997 102,000 34,817 20,000 2,013
Support. . . . . . . . . . . . . 1996 92,000 30,150 20,000 1,246
<FN>
(1) Consists of Company matching contributions to the 401(k) plan and life insurance premiums.
(2) Mr. Head joined the Company in December 1996.
</FN>
</TABLE>
15
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of stock
options during 1998 to (i) each of the Named Executive Officers, (ii) all
current executive officers as a group, (iii) all current directors who are not
executive officers as a group, and (iv) all employees, not including executive
officers, as a group.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Potential
% of Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Exercise Stock Price
Options Employees Price Expiration Option Term (3)
Granted (1) in Year ($/Share) (2) Date 5% 10%
----------- ------------- ----------------- ---------- ------- --------
David B. Wortman . . . . . 60,000 11.6% $8.06 2/2/08 $304,133 $770,734
Oliver C. Fowler . . . . . 25,000 4.9 8.06 2/2/08 126,722 321,139
Stephen R. Head. . . . . . 30,000 5.8 8.06 2/2/08 152,067 385,367
Gary W. Rush . . . . . . . 25,000 4.9 8.06 2/2/08 126,722 321,139
Joseph S. Swern. . . . . . 20,000 3.9 8.06 2/2/08 101,378 256,911
All current executive
officers as a group. . . 180,000 34.9 NA NA NA NA
All current directors who
are not executive
officers, as a group . . 65,000 12.6 NA NA NA NA
All employees, not
including executive
officers, as a group . . 260,450 50.5 NA NA NA NA
<FN>
(1) Options granted under the Option Plan become exercisable over a
four-year period, 25% on the first anniversary of the date of grant and 1/48
of the total each month thereafter, with vesting subject to the employee's
continued employment. The exercise of the options may be accelerated in the
event of certain occurrences including the sale of the Company.
(2) All options were granted at fair market value as determined by the average
of the closing bid and ask prices as reported by the NASDAQ National Market on
the day of grant. The exercise price may in some cases be paid by delivery of
other shares or by offset of the shares subject to the options. (3) The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated by
rules of the Securities and Exchange Commission. There can be no assurance
provided to any Named Executive Officer or any other holder of the Company's
securities that the actual stock price appreciation over the ten year option
term will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the Common Stock appreciates over the option term, no
value will be realized from the option grants made to the Named Executive
Officers.
</FN>
</TABLE>
16
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
The following table sets forth certain information concerning the Named
Executive Officers' options exercises in 1998 and exercisable and unexercisable
stock options held at December 31, 1998. <TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of
Shares Securities Underlying Value of
Acquired Unexercised Options In-The-Money Options
on Value at December 31, 1998 Option Term (2)
Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------- ----------- ------------- ------------ --------------
David B. Wortman 35,000 $ 233,800 88,228 96,772 $ 1,026,116 $ 785,584
Oliver C. Fowler 43,750 292,250 27,499 43,751 300,892 375,683
Stephen R. Head. -- -- 35,000 65,000 331,800 533,400
Gary W. Rush . . 4,000 32,760 73,957 53,043 875,921 463,639
Joseph S. Swern. 22,500 188,550 26,041 41,459 277,993 370,457
<FN>
(1) Based on the fair market value of the Company's Common Stock on the date of
exercise, less the exercise price payable for such shares. (2) Based of the
closing price as reported on The Nasdaq Stock Market for December 31, 1998, of
$14.875 per share less the per share exercise price.
</FN>
</TABLE>
17
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the "Committee")
has the exclusive authority to establish the base salary of the Chief Executive
Officer (the "CEO") and the executive officers of the Company and to administer
the Company's Stock Option Plan and Employee Stock Purchase Plan. In addition,
the Committee has the responsibility for approving the individual bonus programs
for the CEO and the other executive officers each fiscal year.
For the 1998 fiscal year, the process utilized by the Committee in determining
executive compensation levels took into account both qualitative and
quantitative factors. Among the factors considered by the Committee were
compensation data disclosing executive compensation programs in place at similar
companies and the recommendations of the Company's CEO.
General Compensation Policy
The Company's primary objective is to maximize shareholder value. This objective
requires the Company to develop, market and sell superior products and services
to customers in order to generate earnings. The Committee's fundamental policy
is to offer the Company's executive officers competitive compensation
opportunities based upon the Company's overall performance, their individual
contributions to the financial success of the Company and their personal
performance. It is the Committee's objective to have a substantial portion of
each officer's compensation contingent upon the Company's performance, as well
as individual performance. Accordingly, each executive officer's compensation
package consists of: (i) base salary, (ii) cash bonus awards and (iii) long-term
stock-based incentive awards.
Base Salary
The base salary for each executive officer is set on the basis of personal
performance and the salary level in effect for comparable positions at companies
that compete for executive talent.
Annual Cash Bonuses
The Company maintains annual cash incentive bonus programs to reward executive
officers and other key employees for attaining defined performance goals. For
the executive officers, bonuses are based completely or primarily on
Company-wide performance targets. In setting performance targets, the Committee
considered the Company's historical performance and expectations related to
operating results. Incentive compensation is subject to adjustment based on a
combination of financial factors, including attainment of personal objectives,
total revenues, earnings and cash flow.
Each year, the annual incentive plan is reevaluated with a new achievement
threshold and new targets established for objectives.
18
<PAGE>
Long-term Incentive Compensation
During fiscal 1998, the Committee, in its discretion, granted options to the
executive officers under the Stock Option Plan. Generally, a grant is made in
the year an officer commences employment. Additional grants are typically made
in subsequent years. Generally, the size of the initial grant and each
subsequent grant is set at a level that the Committee deems appropriate to
create a meaningful opportunity for stock ownership based upon the individual's
position with the Company, the individual's potential for future responsibility
and promotion and, for subsequent grants, the individual's performance in the
recent period and the number of unvested options held by the individual at the
time of the new grant. The relative weight given to each of these factors will
vary from individual to individual at the Committee's discretion.
Each grant allows the officer to acquire shares of the Company's Common Stock at
a fixed price per share (the market price on the grant date). The option vests
in periodic installments, generally over a four year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if the executive
officer remains in the Company's employ, and then only if the market price of
the Company's Common Stock appreciates over the option term.
Benefits
Benefits offered to the Company's executive officers serve as a safety net of
protection against the financial catastrophes that can result from illness,
disability or death and are the same as those offered to all the Company's
regular employees.
The Company has established a tax-qualified cash or deferred profit sharing plan
(the "401(k) Savings Plan") covering all of the Company's eligible full-time
employees. Under the plan, participants may elect to contribute, through salary
reductions, up to 15% of their annual compensation subject to a statutory
maximum. The Company provides a matching contribution under the 401(k) Savings
Plan of 25% of the first 6% of an employee's annual compensation contributed.
The 401(k) Savings Plan is designed to qualify under Section 401 of the Internal
Revenue Code so that contributions by employees or by the Company to the plan,
and income earned on plan contributions, are not taxable to employees until
withdrawn from the 401(k) Savings Plan, and so that contributions by the
Company, if any, will be deductible by the Company when made. The trustee under
the plan, at the direction of each plan participant, currently invests the
assets of the 401(k) Savings Plan in Company selected diversified and
money-market investments based on the election of each employee.
CEO Compensation
The annual base salary for Mr. Wortman, the Company's President and CEO, was
established by the Committee as of January 1998. The Committee's decision
regarding Mr. Wortman's salary was made primarily on the basis of Mr. Wortman's
personal performance of his duties and gave consideration to compensation survey
information of similar companies.
19
<PAGE>
The cash incentive component of the Mr. Wortman's fiscal year compensation was
entirely dependent upon the Company's financial performance and provided no
dollar guarantees. The bonus paid to Mr. Wortman for the fiscal year 1998 was
based on the Company's financial performance relative to established financial
targets. An option grant was made to Mr. Wortman during the 1998 fiscal year and
was intended to create an incentive for Mr. Wortman to take actions to increase
the value of the Company and to place a significant portion of his total
compensation at risk, because the options will have no value unless there is
appreciation in the value of the Company's Common Stock over the option term.
Tax Limitation
As a result of federal tax legislation enacted in 1993, a publicly-held company
such as the Company will not be allowed a federal income tax deduction for
compensation paid to certain executive officers to the extent that compensation
exceeds $1 million per officer in any year. Since it is not expected that the
compensation to be paid to the Company's executive officers for the 1999 fiscal
year will exceed the $1 million limit per officer, the Committee will defer any
decision on whether to limit the dollar amount of all other compensation payable
to the Company's executive officers to the $1 million cap.
Compensation Committee
Ira Coron
Michael P. Cullinane
John M. Dillon
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed in
January 1997. The current members of the Compensation Committee are Messrs.
Coron, Cullinane and Dillon. None of these individuals was at any time during
1998, or at any other time, an officer or employee of the Company. No executive
officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
20
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's Common
Stock during the period from the Company's initial public offering on December
19, 1997 through December 31, 1998, with the cumulative total return on the
NASDAQ Stock Market - U.S. Companies Index (the "NASDAQ U.S. Index") and NASDAQ
Computer and Data Processing Services Stocks (the "Computer Index"). The
comparison assumes $100.00 was invested in the Company's Common Stock and in
each of the indices and assumes any dividends were reinvested.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Index Description 12/19/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
- ----------------- --------- --------- -------- -------- -------- ---------
Made2Manage Systems, Inc. $ 100.00 $ 100.84 $ 130.00 $ 155.00 $ 115.83 $ 198.33
Nasdaq U.S. Index . . . . $ 100.00 $ 102.94 $ 120.45 $ 123.94 $ 112.20 $ 144.71
Computer Index. . . . . . $ 100.00 $ 103.56 $ 136.80 $ 151.82 $ 143.11 $ 185.32
</TABLE>
21
<PAGE>
INDEPENDENT ACCOUNTANTS AND AUDIT MATTERS
The firm of PricewaterhouseCoopers LLP has audited the accounts of the Company
since 1988. In addition, the firm has rendered other services during that time.
The Board of Directors has not yet selected an accounting firm for fiscal year
1999 but, consistent with prior practice, anticipates making such selection
before December 31, 1999.
A representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement, and will be
available to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
An eligible shareholder who desires to have an qualified proposal considered for
inclusion in the proxy statement prepared in connection with the Company's 2000
Annual Meeting of Shareholders must deliver a copy of the proposal to the
Secretary of the Company, at the Company's principal executive offices, no later
than December 31, 1999. To submit a proposal, a shareholder must have been a
record or beneficial owner of shares of Common Stock having a market value of at
least $1,000 for a period of at least one year prior to submitting the proposal,
and the shareholder must continue to hold the shares through the date on which
the meeting is held.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the Annual
Meeting for action, apart from the matters described in the accompanying Notice
of Annual Meeting of Shareholders. However, as to any such business, the persons
designated as proxies in the enclosed proxy will have discretionary authority to
act in their best judgment.
22
<PAGE>
APPENDIX A
MADE2MANAGE SYSTEMS, INC.
1999 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.01. Establishment and Term of Plan. Made2Manage Systems, Inc., an
Indiana corporation, has established the Made2Manage Systems, Inc. 1999 Stock
Option Plan, effective as of April 20, 1999, subject to approval of its
shareholders.
Section 1.02. Purpose of the Plan. The Plan is intended to promote the growth of
the Company by attracting and motivating key Employees, Directors, Consultants,
independent contractors, vendors, suppliers, and other persons providing
services to the Company whose efforts are deemed worthy of encouragement through
the incentive effects of stock options.
ARTICLE II
DEFINITIONS
When capitalized in this Plan, unless the context otherwise requires:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Board of Directors" or "Board" means the Board of Directors of the Company.
To the extent that the Board has delegated its authority hereunder to a
Committee pursuant to Section 3.01, any reference hereunder to the "Board of
Directors" or "Board" shall be deemed a reference to the Committee.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(d) "Committee" means the committee, if any, designated by the Board pursuant to
Section 3.01.
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Made2Manage Systems, Inc.
(g) "Consultant" means any person who is engaged by the Company or a Parent or
Subsidiary to render consulting services.
A-1
<PAGE>
(h) "Continuous Status" means the absence of any interruption or termination of
service as an Employee, Director, Consultant, or other person providing services
on a regular basis to the Company or a Parent or Subsidiary. Continuous Status
of an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either (i) the leave is for a period not exceeding 90 days or (ii)
reemployment upon the expiration of the leave is provided or guaranteed by
contract or statute.
(i) "Director" means any person serving on the Board.
(j) "Employee" means any person employed as a common law employee by the Company
or a Parent or Subsidiary.
(k) "Fair Market Value" means the fair market value of a Share on the applicable
date, as determined pursuant to this subsection. If the Common Stock is publicly
traded, Fair Market Value as of a date shall be the average of the closing bid
and asked prices of a Share on such date, as reported by the market or exchange
on which the Common Stock is traded, or if the closing bid and asked prices are
not reported, the closing sale price as so reported. If the Common Stock is not
traded publicly, the Fair Market Value of a Share shall be determined, in good
faith, by the Board, taking into account such factors affecting value as it, in
its discretion, deems relevant.
(l) "Incentive Option" means a stock option issued pursuant to the Plan that is
intended to satisfy the requirements of Code Section 422.
(m) "Non-Employee Director" means any Director who is not an Employee.
(n) "Non-Qualified Option" means a stock option issued pursuant to the Plan that
is not intended to satisfy the requirements of Code Section 422.
(o) "Option" means a stock option issued pursuant to the Plan. Options may be
either Incentive Options or Non-Qualified Options.
(p) "Option Agreement" means the written agreement containing the terms and
conditions of an Option.
(q) "Optioned Shares" means the Shares subject to an Option.
(r) "Optionee" means a person who receives an Option.
(s) "Parent" means a parent corporation of the Company, whether now or hereafter
existing, as defined in Section 424(e) of the Code.
A-2
<PAGE>
(t) "Plan" means the Made2Manage Systems, Inc. 1999 Stock Option Plan, as
amended from time to time.
(u) "Retire" or "Retirement" means, with respect to Employee Optionee, that the
employment relationship has terminated for a reason other than disability or
death either (i) after the Optionee has reached age 65 or (ii), with the consent
of the Board, before the Optionee has reached age 65.
(v) "Share" means a share of Common Stock.
(w) "Subsidiary" means a subsidiary corporation of the Company, whether now or
hereafter existing, as defined in Section 424(f) of the Code.
ARTICLE III
ADMINISTRATION
Section 3.01. General Provisions. The Plan shall be administered by the Board;
provided, however, the Board may delegate some or all of its responsibilities
and authority hereunder to a Committee consisting solely of two or more
Non-Employee Directors. The Board shall have full authority to administer the
Plan, including authority to construe any provision of the Plan and to adopt
such rules and regulations for administering the Plan as it may deem necessary
or appropriate. The Board may reserve to itself any of the authority granted to
the Committee, and it may perform and discharge all of the functions and
responsibilities of the Committee at any time that a duly constituted Committee
is not appointed and serving.
Section 3.02. Actions of the Board. All actions taken and all interpretations
and determinations made in good faith by the Board, including determinations of
Fair Market Value, shall be final and binding upon all Optionees, the Company,
and all other interested persons. No member of the Board shall be personally
liable for any action, determination, or interpretation made in good faith with
respect to the Plan, and all members of the Board shall, in addition to their
rights as Directors, be fully protected by the Company with respect to any such
action, determination, or interpretation.
Section 3.03. Powers of the Board of Directors. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion, (i) to determine,
upon review of the relevant information, the Fair Market Value of the Common
Stock; (ii) to determine the persons to whom Options shall be granted, the time
or times at which Options shall be granted, the number of Shares to be
represented by each Option, and the exercise price per Share; (iii) to interpret
the Plan; (iv) to prescribe, amend, and rescind rules and regulations relating
to the Plan; (v) to determine whether an Option shall be an Incentive Option or
a Non-Qualified Option, to determine the terms and provisions of an Option, and,
with the consent of the Optionee, to modify an Option, including reductions in
the exercise price thereof; (vi) to accelerate or defer, with the consent of the
Optionee, the exercise date of an Option; (vii) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted by the Board; and (viii) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
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ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Section 4.01. Eligibility. Options may be granted to any Employee, Consultant,
Non-Employee Director, independent contractor, vendor, supplier, or other person
providing services to the Company or a Parent or Subsidiary whose efforts are
deemed worthy of encouragement by the Board; provided, however, an Incentive
Option may be granted only to an Employee.
Section 4.02. Participation by Director. Board members who either are eligible
for Options or have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of Options pursuant to the Plan, except
that no Director shall act on granting an Option to himself or herself;
provided, however, a Director may be counted in determining the existence of a
quorum at a Board meeting and may be counted as part of an action by unanimous
written consent granting an Option to him or her.
Section 4.03. Automatic Grants to Non-Employee Directors.
(a) Initial Grants. If an individual first becomes a Non-Employee Director after
April 19, 1999, he or she shall automatically be granted an Option to purchase
5,000 Shares. Such grant shall be effective as of the date on which the
individual becomes a Non-Employee Director.
(b) Annual Grants. Each Non-Employee Director shall automatically be granted an
Option to purchase 5,000 Shares on each anniversary of the most recent grant of
options to such individual in his or her capacity as a Non-Employee Director
provided that he or she is a Non-Employee Director on such anniversary date.
(c) Date Options Become Exercisable. Unless otherwise established by the Board,
each Option granted under this Section 4.03 shall be fully exercisable as to all
Shares subject to the Option on the effective date of the grant.
(d) Termination of Option. Options granted pursuant to this Section 4.03 shall
terminate on the earliest of (i) ten years after the effective date of the
grant, (ii) as provided in Article VII, or (iii) such earlier date as required
by any other provision of this Plan.
(e) Option Price. The Option price for each Share granted to a Non-Employee
Director pursuant to this Section 4.03 shall be its Fair Market Value on the
effective date of the grant.
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ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.01. Exercise Price. The exercise price of any Option with respect to a
Share shall be not less than 100% of the Fair Market Value of a Share on the
date of the Option grant. If an Incentive Option is granted to an Optionee who
then owns stock possessing more than 10% of the total combined voting power or
value of all classes of stock of the Company or a Parent or Subsidiary, the
exercise price of such Incentive Option with respect to a Share shall be at
least 110% of the Fair Market Value of a Share on the date of the Option grant.
Section 5.02. Consideration. The exercise price shall be paid in full, at the
time of exercise, by personal or bank cashier's check or in such other form of
lawful consideration as the Board may approve from time to time, including,
without limitation, the transfer of outstanding Shares, the withholding of
Optioned Shares as provided in Section 7.03, or the Optionee's promissory note
in form satisfactory to the Company and bearing interest at a rate of not less
than 6% per annum.
Section 5.03. Form of Option Agreement. Each Option shall be evidenced by an
Option Agreement specifying the number of Shares that may be purchased upon
exercise of the Option and containing such terms and provisions as the Board may
determine, subject to the provisions of the Plan.
ARTICLE VI
SHARES OF COMMON STOCK SUBJECT TO PLAN
Section 6.01. Number. The aggregate number of Shares subject to Options that may
be granted under the Plan shall be 200,000, adjusted as provided herein. On
January 1, 2000, and on each following January 1 while the Plan is in effect,
the number of shares reserved for issuance pursuant to the preceding sentence
shall be increased by a number equal to 7% of the Base Shares (as defined
below), calculated as of the last day of the preceding fiscal year. The number
of Base Shares as of a date shall be equal to the sum of (i) the number of
shares of Common Stock outstanding on such date and (ii) the number of shares of
Common Stock reserved for issuance upon the exercise of options outstanding as
of such date. To the extent that any Option granted under the Plan shall expire,
terminate unexercised, or for any reason become unexercisable, the Shares
subject to the Option shall thereafter be available for future grants under the
Plan. The Shares available for issuance pursuant to the Plan may be authorized,
unissued, or reacquired Shares.
Section 6.02. Capital Changes. Except as hereinafter provided, no adjustment
shall be made in the number of Shares issued to an Optionee, or in any other
rights of the Optionee upon exercise of an Option, by reason of any dividend,
distribution, or other right granted to shareholders for which the record date
precedes the date of exercise of the Option. If any change is made to the shares
of Common Stock (whether by reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, change in corporate structure, or otherwise), appropriate adjustments
shall be made in (i) the number of Shares subject to Options and the exercise
price with respect to such Shares and (ii) the aggregate number of Shares that
may be made subject to Options. If any of the foregoing adjustments results in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to the fractional
share.
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ARTICLE VII
EXERCISE OF STOCK OPTIONS
Section 7.01. Time of Exercise. Subject to the provisions of the Plan, including
without limitation Section 4.03, Section 7.04, and Article VIII, the Board, in
its discretion, shall determine when an Option, or a portion of an Option, shall
become exercisable, and when an Option, or a portion of an Option, shall expire;
provided, however, (i) an Option shall expire, to the extent not exercised, no
later than the tenth anniversary of the grant date, and (ii) an Incentive Option
granted to a person who owns shares possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or a
Parent or Subsidiary shall expire no later than the fifth anniversary of the
grant date.
Section 7.02. Notice of Exercise. An Optionee electing to exercise an Option
shall give written notice to the Company, as specified by the Option Agreement,
of his or her election to purchase a specified number of Shares. Such notice
shall be accompanied by the documents required by the Company and a tender of
the exercise price. If the notice of exercise is given by the executor or
administrator of a deceased Optionee, or by the person or persons to whom the
Option has been transferred by the Optionee's will or the applicable laws of
descent and distribution, the Company shall not be required to deliver Shares
pursuant to the exercise unless and until the Company is satisfied that the
person or persons giving such notice is or are entitled to exercise the Option.
Section 7.03. Exchange of Outstanding Stock or Optioned Shares. As part or full
payment for the exercise of an Option, the Board may, in its sole discretion,
permit an Optionee to (i) surrender to the Company Shares acquired by the
Optionee at least six months before such surrender or (ii) authorize the Company
to withhold Optioned Shares. Such surrendered Shares shall be valued at their
Fair Market Value on the date of exercise of the Option.
Section 7.04. Termination of Continuous Status. If an Optionee's Continuous
Status ends for any reason (other than an Employee or Non-Employee Director
Optionee's death or disability or an Employee Optionee's Retirement as provided
below), any Option then held by the Optionee or the Optionee's estate, to the
extent then exercisable, shall remain exercisable after the termination of
Continuous Status for a period of 30 days, beginning on the date of such
termination (or such longer period as the Board may allow, either in the form of
an Option Agreement or by Board action). If the Option is not exercised during
this period, it shall be deemed to have been forfeited and be of no further
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force or effect. Notwithstanding the foregoing, if the Optionee's relationship
with the Company is terminated (i) for "cause" (as hereinafter defined) or (ii)
due to his or her expropriation of Company property (including trade secrets or
other proprietary rights), the Board may terminate the Option immediately by
notice to the Optionee. As used herein, "cause" shall mean that the Optionee has
(i) willfully and intentionally engaged in material misconduct or gross neglect
of duties or has been grossly negligent in failing to act, which act or failure
has materially and adversely affected the business or affairs of the Company,
(ii) has committed an act of fraud or an act not approved by the Board involving
a material conflict of interest or self-dealing adverse to the Company, (iii)
has been convicted of a felony or any offense involving moral turpitude, or (iv)
has unreasonably failed to comply with any reasonable direction from the Board
with respect to a major policy decision affecting the Company.
Section 7.05. Retirement. If an Employee Optionee Retires, the Optionee may
exercise the unexercised portion of any Option, regardless of whether otherwise
exercisable on the date of the Optionee's Retirement, at any time or times
before the earlier of (i) the end of the original Option term or (ii) 12 months
after Retirement. Except as so exercised, the Option shall expire at the end of
such period.
Section 7.06. Disability. If an Employee or Non-Employee Director Optionee
becomes disabled (within the meaning of Section 22(e)(3) of the Code), the
Optionee may exercise the unexercised portion of any Option, regardless of
whether otherwise exercisable on the date of the Optionee's disability, at any
time or times before the earlier of (i) the end of the original Option term or
(ii) 12 months after the Optionee becomes disabled. Except as so exercised, the
Option shall expire at the end of such period.
Section 7.07. Death. If an Employee or Non-Employee Director Optionee dies, the
Optionee's executor or administrator or the person(s) to whom the Option is
transferred by will or the applicable laws of descent and distribution may
exercise the unexercised portion of any Option, regardless of whether otherwise
exercisable on the date of the Optionee's death, at any time or times before the
earlier of (i) the end of the original Option term or (ii) 12 months after the
Optionee's death (or such longer period as the Board may allow), and except as
so exercised, the Option shall expire at the end of such period.
Section 7.08. Disposition of Terminated Options. Any Shares subject to Options
that have been terminated as provided above shall not thereafter be eligible for
purchase by the Optionee, but they shall again be available for grant by the
Board to other Optionees.
Section 7.09. Registration of Optioned Shares. The Options shall not be
exercisable unless purchase of the Optioned Shares is pursuant to an effective
registration statement filed pursuant to the Act, or unless, in the opinion of
counsel to the Company, the proposed purchase of the Optioned Shares would be
exempt from the registration requirements of the Act.
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ARTICLE VIII
SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS
The Company shall not grant Incentive Options to an Optionee to the extent that
the aggregate Fair Market Value of the Shares covered by such Incentive Options
that are exercisable for the first time by the Optionee during any calendar
year, when combined with the aggregate Fair Market Value of all stock covered by
incentive stock options (as defined in Code Section 422) granted to the Optionee
by the Company or a Parent or Subsidiary that are exercisable for the first time
during the same calendar year, exceeds $100,000. Incentive Options shall be
granted only to persons who, on the date of grant, are Employees. If the grant
of Options pursuant to this Plan causes the $100,000 limitation of this Article
to be exceeded for a year, the Options in excess of such amount shall be deemed
to be Non-Qualified Options. Whether a particular Option is to be deemed a
Non-Qualified Option pursuant to the preceding sentence shall be determined by
taking Options into account in the order in which they were granted.
ARTICLE IX
MISCELLANEOUS
Section 9.01. No Contract of Employment. Unless otherwise expressed in a writing
signed by an authorized officer of the Company, all Employees are considered to
be "at-will employees." Nothing in this Plan shall confer upon any Optionee the
right to continue in the employ of the Company or a Parent or Subsidiary, nor
shall it limit or restrict the right of the Company or a Parent or Subsidiary to
discharge the Optionee at any time, with or without cause.
Section 9.02. No Rights as a Shareholder. An Optionee shall have no rights as
a shareholder with respect to any Shares subject to an Option.
Section 9.03. Nontransferability of Options; Death of Optionee. No Option
acquired by an Optionee shall be assignable or transferable by the Optionee,
other than by will or the laws of descent and distribution, and such Options are
exercisable, during the Optionee's lifetime, only by the Optionee. Subject to
Section 7.07, in the event of Optionee's death, the Option may be exercised by
the personal representative of the Optionee's estate, or if no personal
representative has been appointed, by the successor(s) in interest determined
under the Optionee's will or under the applicable laws of descent and
distribution.
ARTICLE X
LIQUIDATION OR MERGER OF THE COMPANY
Section 10.01. Liquidation. The Option shall terminate immediately before any
dissolution or liquidation of the Company, unless otherwise provided by the
Board. The Board, in its discretion, may declare that any Option shall terminate
as of a date fixed by the Board, and give each Optionee the right to exercise
his or her Option, as to all or any part of the Shares covered by the Option,
including Shares as to which the Option would not otherwise be exercisable.
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Section 10.02. Sale of Assets, Merger, or Consolidation. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger or consolidation of the Company with or into another corporation in a
transaction in which the Company does not survive, all Options shall vest
immediately and may be fully exercised without regard to the normal vesting
schedules of the Options; provided, however, that if the Board, determines,
after giving due consideration to the effects of any such sale, merger, or
consolidation on the Employees, that such immediate vesting is not in the best
interests of the Company, the Option shall be assumed or an equivalent Option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation. If the Option becomes fully exercisable immediately,
the Board shall notify the Optionee that the Option will be fully exercisable
for a period of not fewer than 10 nor more than 60 days from the date of notice
and, if the Option is not exercised, the Option will terminate upon the
expiration of the period and be of no further force or effect.
ARTICLE XI
PLAN AMENDMENT AND TERMINATION
The Board may from time to time amend, suspend, or terminate the Plan, and may
make any changes that it deems appropriate; provided, however, no such action
shall adversely affect the rights of an Optionee with respect to outstanding
Options; and provided further, no such action shall, without the approval of the
Company's shareholders, (i) increase the maximum number of Shares that may be
made subject to Options (unless necessary to effect the adjustments required by
Article VI), (ii) change the limitations on the exercise price or the maximum
term of Options, or (iii) materially lessen the requirements for participation
in the Plan. No such amendment or termination shall materially adversely affect
the rights of any Optionee under any Option previously granted without such
Optionee's prior consent.
ARTICLE XII
TAX WITHHOLDING OBLIGATIONS
Section 12.01. General. The Company or a Parent or Subsidiary may take such
steps as it deems necessary or appropriate to withhold any taxes that the
Company or a Parent or Subsidiary is required by law or regulation to withhold
in connection with any Option, including but not limited to (i) requiring the
Optionee to pay such tax at the time of exercise, (ii) withholding Shares in
accordance with Section 12.02, or (iii), in the Company's sole discretion,
canceling the issuance of any portion of the Shares to be issued pursuant to the
Option in an amount sufficient to reimburse itself for the amount that it is
required to withhold.
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Section 12.02. Satisfying Taxes by Withholding Optioned Shares. Option
Agreements may, at the discretion of the Board, provide that all taxes required
to be withheld or collected from an Optionee upon exercise of an Option may be
satisfied by withholding a sufficient number of exercised Optioned Shares which,
valued at Fair Market Value on the date of exercise, would be equal to the
statutory minimum required tax withholding obligation of the Optionee for the
exercise of such Option; provided, however, if the Company is a public reporting
corporation, no person who is an "officer" of the Company, as such term is
defined in Rule 3b-2 under the Securities Exchange Act of 1934, may elect to
have tax withholding obligations satisfied by the withholding of Optioned
Shares, unless such election would, in the opinion of Company's counsel, satisfy
the requirements of applicable securities laws, including Rule 16b-3 of the
Securities Exchange Act of 1934. Such election shall be deemed made upon receipt
of notice thereof by an officer of the Company, by mail, personal delivery, or
by facsimile message, and shall (unless notice to the contrary is provided to
the Company) be operative for all Option exercises during the 12-month period
following election.
ARTICLE XIII
EFFECTIVE DATE AND TERM OF PLAN
The Plan is effective as of April 20, 1999, subject to approval by the Company's
shareholders on such date. No Options shall be granted more than 10 years after
the effective date of the Plan; provided, however, Options outstanding more than
10 years after the effective date of the Plan shall continue to be governed by
the provisions of the Plan until exercised or terminated in accordance with the
Plan or the respective Option Agreements.
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