MATRIXONE INC, DEF 14A, 2000-09-22

MATRIXONE INC
DEF 14A, 2000-09-22
PREPACKAGED SOFTWARE

Previous: MATRIXONE INC, 10-K, EX-27.1, 2000-09-22

Next: E PAWN COM INC, 10-K, 2000-09-22

<PAGE>

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:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))

MATRIXONE, 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.:

3) Filing Party:

4) Date Filed:

--------------------------------------------------------------------------------

<PAGE>

MATRIXONE, INC.
Two Executive Drive
Chelmsford, Massachusetts 01824

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

----------------

To The Stockholders:

The Annual Meeting of Stockholders of MatrixOne, Inc. (the "Company"), a
Delaware corporation, will be held on Monday, November 6, 2000 at 10:00 A.M.
at Testa, Hurwitz & Thibeault, LLP, Conference Center, 20th Floor, High Street
Tower, 125 High Street, Boston, Massachusetts 02110, for the following
purposes:

1. To elect one member to the Board of Directors for a three-year term as a
Class I director.

2. To approve and adopt an amendment to the 1999 Stock Plan to increase the
aggregate number of shares which may be issued thereunder from 1,500,000
to 3,000,000, and to ratify the 1999 Stock Plan.

3. To ratify the selection of the firm Arthur Andersen LLP as auditors for
the fiscal year ending June 30, 2001.

4. To transact such other business as may properly come before the meeting
and any adjournments thereof.

Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on Friday, September 8, 2000, the
record date fixed by the Board of Directors for such purpose.

By Order of the Board of Directors,

Gordon H. Hayes, Jr.
Secretary

September 22, 2000

Stockholders are requested to sign the enclosed proxy card and return it
in the enclosed stamped envelope by return mail.

<PAGE>

MATRIXONE, INC.
Two Executive Drive
Chelmsford, Massachusetts 01824

----------------

PROXY STATEMENT

September 22, 2000

Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of MatrixOne, Inc. (the "Company") for use at the Annual
Meeting of Stockholders of the Company to be held on Monday, November 6, 2000,
at 10:00 A.M., at Testa, Hurwitz & Thibeault, LLP, Conference Center, 20th
Floor, High Street Tower, 125 High Street, Boston, Massachusetts 02110.

Only stockholders of record as of the close of business on September 8,
2000 will be entitled to vote at the meeting and any adjournments thereof. As
of that date, 42,599,296 shares of Common Stock of the Company were issued and
outstanding. Each share outstanding as of the record date will be entitled to
one vote, and stockholders may vote in person or by proxy. Execution of a
proxy will not in any way affect a stockholder's right to attend the meeting
and vote in person. Any stockholder delivering a proxy has the right to revoke
it by written notice to the Secretary at any time before it is exercised.

An Annual Report to Stockholders, containing financial statements for the
fiscal year ended July 1, 2000, is being mailed together with this proxy
statement to all stockholders entitled to vote. It is anticipated that this
proxy statement and the accompanying proxy will be first mailed to
stockholders on or about September 29, 2000.

The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee for election as director, abstentions and broker
"non-votes" are counted as present or represented for purposes of determining
the presence or absence of a quorum for the meeting. A "non-vote" occurs when
a nominee holding shares for a beneficial owner votes on one proposal, but
does not vote on another proposal because, in respect of such other proposal,
the nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. The election of directors by the
stockholders shall be determined by a plurality of the votes cast by
stockholders entitled to vote, and votes withheld will not be counted toward
the achievement of a plurality. On all other matters being submitted to
stockholders, an affirmative vote of a majority of the shares present or
represented and voting on each such matter is required for approval. An
automated system administered by the Company's transfer agent tabulates the
votes. The vote on each matter submitted to stockholders is tabulated
separately. Abstentions are included in the number of shares present or
represented and voting on each matter. Broker "non-votes" are not considered
voted for the particular matter and have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.

Each of the persons named as proxies in the proxy is a director or officer
of the Company. All properly executed proxies returned in time to be cast at
the meeting will be voted. With respect to the election of a Board of
Directors, any stockholder submitting a proxy has a right to withhold
authority to vote for any individual nominee or group of nominees to the Board
of Directors by writing the name of such individual or group in the space
provided on the proxy. The proxies will be voted as stated below and under
"Election of Directors." The stockholders also will act upon a proposal to
amend and ratify the 1999 Stock Plan and a proposal to ratify the

1
<PAGE>

selection of auditors. Where a choice has been specified on the proxy with
respect to these matters, the shares represented by the proxy will be voted in
accordance with the specification and will be voted FOR if no specification is
indicated.

The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as proxies in the proxies.

2
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of September 8, 2000, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to be the beneficial owner of more than
five percent of its Common Stock, (ii) each director, or nominee for director,
of the Company, (iii) each of the executive officers named in the Summary
Compensation Table under the caption "Compensation and Other Information
Concerning Directors and Officers" below, and (iv) all directors, nominees for
director and executive officers of the Company as a group. Except as otherwise
indicated in the footnotes to the table, to the Company's knowledge, the
beneficial owners listed have sole voting and investment power (subject to
community property laws where applicable) as to all of the shares beneficially
owned by them. The address of each of our executive officers and directors is
c/o MatrixOne, Inc., Two Executive Drive, Chelmsford, MA 01824. As of
September 8, 2000, there were 42,599,296 shares of Common Stock outstanding.

<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
-------------------------------
Name and Address of Beneficial Common Options Percent of
Owner Stock (1) Total Class
------------------------------ ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
William Blair Capital Partners... 9,835,485 -- 9,835,485 23.1%
227 West Monroe
Suite 3400
Chicago, IL 60606

Gilde IT Fund.................... 3,594,063 -- 3,594,063 8.4
Gilde Investment Management
Newtonlaan 91
P.O. Box 85067
Utrecht 3508AB
Netherlands

Executive Officers and Directors
Mark F. O'Connell(2)............. 600,000 1,031,718 1,631,718 3.7
Brian M. Gallagher............... 59,061 75,595 134,656 *
Johannes T.J. Ruigrok............ 5,000 270,000 275,000 *
Michael Segal(3)................. 212,686 433,876 646,562 1.5
Sam Zawaideh..................... 168,468 15,469 183,937 *
Ellen Carnahan(4)................ 9,835,485 -- 9,835,485 23.1
Daniel J. Holland(5)............. 99,066 -- 99,066 *
James F. Morgan(6)............... 1,180,068 -- 1,180,068 2.8
Charles R. Stuckey, Jr........... -- 87,375 87,375 *
All executive officers, nominees
for director and directors as a
group (14 persons)(7)........... 12,489,208 2,497,294 14,986,502 33.2%
</TABLE>
--------
* Represents beneficial ownership of less than one percent of common stock.
(1) Includes all options that are currently exercisable or will become
exercisable within 60 days from September 8, 2000 by the person.
(2) Includes options to purchase 60,000 shares of Common Stock held of record
by Mark F. O'Connell, Trustee of The Mark F. O'Connell Grantor Retained
Annuity Trust--1999, options to purchase 105,000 shares of Common Stock
held of record by Gordon H. Hayes, Jr., Trustee of The Mark F. O'Connell
Irrevocable

3
<PAGE>

Trust -- 1999 for the benefit of Mr. O'Connell's children, options to
purchase 60,000 shares of Common Stock held of record by Debra A.
O'Connell, Mr. O'Connell's wife, Trustee of The Debra A. O'Connell Grantor
Retained Annuity Trust--1999, and options to purchase 105,000 shares of
Common Stock held of record by Gordon H. Hayes, Jr., Trustee of The Debra
A. O'Connell Irrevocable Trust--1999 for the benefit of Mr. O'Connell's
children. Mr. O'Connell disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest therein.
(3) Includes 24,000 shares of Common Stock and options to purchase 12,600
shares of Common Stock held of record by Lee E. Fogarty, Trustee of The
Michael Segal and Kathleen A. Brown Irrevocable Trust--1999 for the
benefit of Mr. Segal's children, and 9,750 shares of Common Stock and
options to purchase 5,400 shares of Common Stock held of record by
Kathleen A. Brown, Mr. Segal's wife, Trustee of The Segal/Brown Family
Irrevocable Trust--1999. Mr. Segal disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest therein.
(4) Ms. Carnahan is a Managing Director of William Blair Capital Partners,
L.L.C. In such capacity, Ms. Carnahan may be deemed to have beneficial
ownership of the 9,835,485 shares of Common Stock owned by William Blair
Capital Partners V, L.P. Ms. Carnahan disclaims beneficial ownership of
the shares, except to the extent of her pecuniary interest therein.
(5) Includes 30,000 shares of Common Stock held of record by Morgan, Holland
Fund, L.P. Mr. Holland is the Managing General Partner of Morgan, Holland
Fund. In such capacity, Mr. Holland may be deemed to have beneficial
ownership of the 30,000 shares of Common Stock owned by Morgan, Holland
Fund, L.P. Also includes 400 shares of Common Stock owned by Patricia
Holland, Mr. Holland's wife. Mr. Holland disclaims beneficial ownership of
the shares, except to the extent of his pecuniary interest therein.
(6) Includes 375,000 shares of Common Stock held of record by Wilmington Trust
Company, Trustee of The JFM Trust.
(7) See notes 2-6. Also includes 15,000 shares of Common Stock held of record
by Paul B. Gilmartin, Trustee of The Paul B. Gilmartin Grantor Retained
Annuity Trust--2000 and 15,000 shares of Common Stock held of record by
Maria M. Gilmartin, Mr. Gilmartin's wife, Trustee of The Maria M.
Gilmartin Grantor Retained Annuity Trust--2000. Mr. Gilmartin disclaims
beneficial ownership of the shares in The Maria M. Gilmartin Grantor
Retained Annuity Trust--2000, except to the extent of his pecuniary
interest therein.

4
<PAGE>

ELECTION OF DIRECTORS

In accordance with the Company's Amended and Restated Certificate of
Incorporation, the Company's Board of Directors is divided into three classes.
Each class serves a three-year term, with the terms of office of the
respective classes expiring in successive years. The Class I Director's term
will expire at the Annual Meeting of Stockholders being held November 6, 2000.
Each Class II Director is serving a term that will expire at the Annual
Meeting of Stockholders to be held in 2001. Each Class III Director is serving
a term that will expire at the Annual Meeting of Stockholders to be held in
2002. All directors will hold office until their successors have been duly
elected and qualified or until their earlier resignation or removal. Prior to
the Annual Meeting, James F. Morgan was the Class I Director; Ellen Carnahan
and Daniel J. Holland were the Class II Directors; and Mark F. O'Connell and
Charles R. Stuckey, Jr. were the Class III Directors.

The Board of Directors has nominated and recommends that James F. Morgan,
who is currently serving as the Class I Director, be elected the Class I
Director, to hold office until the Annual Meeting of Stockholders to be held
in 2003 and until his successor has been duly elected and qualified or until
his earlier resignation or removal. Mr. Morgan has indicated his willingness
to serve, if elected; however if he should be unable or unwilling to serve,
the proxies will be voted for the election of a substitute nominee designated
by the Board of Directors or for fixing the number of directors at a lesser
number. Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for Mr. Morgan will be
voted FOR the election of Mr. Morgan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEE
LISTED ON THE FOLLOWING PAGE.

Information regarding the nominee for director and further information with
respect to the Board of Directors is set forth on the following page.

5
<PAGE>

OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the Class I nominee to be elected as a
director at the Annual Meeting of Stockholders, current directors who will
continue to serve as directors beyond the Annual Meeting and the executive
officers of the Company, their ages, and the positions currently held by each
such person with the Company.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark F. 45 President, Chief Executive Officer and Director
O'Connell
Maurice L. 49 Vice President of Finance and Administration, Chief
Castonguay Financial Officer and Treasurer
Stephen P. 48 Vice President of Xchange Business Development
Dunn
Brian M. 51 Vice President of Sales, Americas
Gallagher
Paul B. 52 Vice President of Product Management
Gilmartin
David W. 41 Vice President of Engineering
McNelis
Johannes T.J. 41 Senior Vice President of Worldwide Sales and Marketing
Ruigrok
Michael Segal 47 Senior Vice President of Customer Success
Jane E. Seitz 49 Vice President of Human Resources
Sam Zawaideh 36 Vice President of Xchange Business
Ellen 45 Director
Carnahan(1)(2)
Daniel J. 64 Director
Holland(1)(2)
James F. 63 Director
Morgan
Charles R. 58 Director
Stuckey, Jr.
(1)(2)
</TABLE>
--------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.

Nominee for Election at the Annual Meeting

James F. Morgan has served as a Director of the Company since June 1984 and
as Corporate Advisor from July 1997 to March 31, 2000. Mr. Morgan was the
Chairman and Chief Executive Officer of Adra Systems from October 1996 to July
1997. Prior to joining the Company, Mr. Morgan served as a general partner of
Morgan, Holland Fund, a venture capital fund organized in 1981, and as a
general partner of Morgan, Holland Fund II, a venture capital fund organized
in 1988.

Directors Whose Term Extends Beyond the Annual Meeting

Ellen Carnahan has served as a Director of the Company since October 1997.
Ms. Carnahan has served as a managing director at William Blair Capital
Partners, L.L.C. and its predecessor funds, which are venture capital firms,
since January 1988. William Blair Capital Partners, L.L.C. is an affiliate of
William Blair & Company, an investment bank. From January 1983 through
December 1987, she was vice president of marketing and planning at SPSS, Inc.,
an applications software company. Ms. Carnahan also serves as a director of
NewsEdge Corporation, a provider of news and current awareness solutions.

Daniel J. Holland has served as a Director of the Company since September
1996. Mr. Holland is a senior advisor and partner of OneLiberty Ventures, a
venture capital firm he cofounded in 1995. Previously, he was cofounder and
president of Morgan, Holland Ventures, a venture capital firm he cofounded in
1982. He also serves as the managing general partner of Morgan, Holland Fund.
Mr. Holland serves as a director of Vista Medical Technologies, Inc., a
developer and manufacturer of three-dimensional visualization systems.

6
<PAGE>

Mark F. O'Connell has served as President since September 1996 and as Chief
Executive Officer and Director since July 1997. From March 1995 to September
1996, Mr. O'Connell was Vice President of Marketing. Prior to joining the
Company, Mr. O'Connell held a number of management positions in finance and
marketing at Digital Equipment Corp., a supplier of networked computer
systems, software and services. These positions included director of software
product marketing from January 1994 to March 1995, director of corporate
product marketing communications from February 1993 to January 1994, director
of workstations and server marketing from May 1991 to February 1993, and group
manager of marketing and sales programs for the UNIX software and systems
business from January 1990 to May 1991.

Charles R. Stuckey, Jr. has served as a Director of the Company since
October 1998. Mr. Stuckey has been chairman of the board and chief executive
officer of RSA Security, Inc., formerly Security Dynamics Technologies, Inc.,
an e-security company, since January 1987. Mr. Stuckey serves as a director of
The Massachusetts Telecommunications Council.

Executive Officers

Maurice L. Castonguay has served as Chief Financial Officer, Vice President
of Finance and Administration and Treasurer since January 1999. Prior to
joining the Company, from August 1997 to December 1998, Mr. Castonguay was
vice president of finance and chief financial officer of Stratus Computer,
Inc., a supplier of fault tolerant computer platforms, applications and
services focused at the telecommunications and financial services markets. Mr.
Castonguay left Stratus after it was acquired by Ascend Communications. From
March 1996 to August 1997, Mr. Castonguay was vice president of finance, chief
financial officer and treasurer of Gradient Technologies, Inc., a provider of
security and infrastructure software. From September 1990 to March 1996, Mr.
Castonguay was chief financial officer at Xylogics, Inc., a data networking
and remote access company that was acquired by Bay Networks. Prior to that,
Mr. Castonguay held tax, corporate development and division controller
positions at Prime Computer from May 1987 to September 1990. Mr. Castonguay
has served as a director of Media 100, Inc., a supplier of streaming media
tools to stream video and audio over the Internet, since February 1997.

Stephen P. Dunn has served as Vice President of Xchange Business
Development since August 2000. Mr. Dunn served as Vice President of Global
Alliances from December 1997 to August 2000. Prior to joining the Company, Mr.
Dunn was the vice president of North American sales at Workgroup Technology
Inc., a developer of product data management and workflow systems, from
September 1995 to June 1997. From November 1993 to August 1995, he was the
director, eastern region for Rasna Corporation, a computer aided design and
design engineering firm. From January 1992 to November 1993, Mr. Dunn was the
vice president of worldwide sales for Mechanical Dynamics, Inc., a developer
of mechanical system simulation software.

Brian M. Gallagher has served as Vice President of Sales, Americas since
June 1999. Prior to joining the Company, Mr. Gallagher was vice president of
various business units at Baan Company, a provider of enterprise business
software, from February 1999 to June 1999. Prior to that, Mr. Gallagher was
vice president of worldwide sales at Baan Supply Chain from August 1997 to
February 1999, where he was responsible for building a worldwide sales
organization including Europe, Latin America and Asia. From June 1989 to July
1997, he was the director of major accounts at System Software Associates, an
enterprise resource planning software provider.

Paul B. Gilmartin has served as Vice President of Product Management since
October 1999. Mr. Gilmartin served as Vice President of Marketing from October
1997 to October 1999. Mr. Gilmartin served as Director of Product Marketing
with Adra Systems from June 1995 to September 1997. From October 1987 to May
1995,

7
<PAGE>

Mr. Gilmartin held several positions, including the corporate director of
channels marketing for the Corporate Software Group at Digital Equipment Corp.
Prior to that, from February 1984 to October 1987, Mr. Gilmartin was director
of North American sales at Votan Corporation, a producer of speech technology
and products.

David W. McNelis has served as Vice President of Engineering since January
1996. From October 1992 to January 1996, Mr. McNelis served as the Director of
Engineering for Adra Systems. Prior to joining the Company, Mr. McNelis spent
nine years with Sikorsky Aircraft as the senior architect of the Igor
information management system.

Johannes T. J. Ruigrok has served as Senior Vice President of Worldwide
Sales and Marketing since September 2000. Mr. Ruigrok served as Vice President
of Sales, Europe, Middle East and Africa from July 1998 to August 2000. From
March 1996 to June 1998, Mr. Ruigrok was a managing director of Oracle GmbH
Austria, an enterprise software and database management company. From January
1995 to March 1996, Mr. Ruigrok was the director of alliances, and from 1993
to January 1995 the business unit manager industry and distribution, for
Oracle BV The Netherlands.

Michael Segal has served as Senior Vice President of Customer Success since
August 2000. Mr. Segal served as Vice President of Customer Success from
August 1998 to August 2000. From December 1995 to August 1998, Mr. Segal was
Vice President and General Manager--Matrix. From 1988 to December 1995,
Mr. Segal was Vice President of Customer Services for Adra Systems with
responsibility for all customer service operations and technical support.
Prior to joining the Company, Mr. Segal spent 11 years with Applicon Inc., a
CAD/CAM vendor, where he held management positions in manufacturing, quality
assurance and customer service.

Jane E. Seitz has served as Vice President of Human Resources since July
1999. Prior to joining the Company, Ms. Seitz was an interim executive from
May 1996 to July 1999 serving at several start-up companies, including: Indigo
America, Inc., a manufacturer of digital color printing products; Wellspace,
Inc., a network of healthcare practitioners; and FluidSense Corp., a provider
of services and products enabling hospitals to outsource the logistics of
infusion therapy. From May 1991 to April 1996, Ms. Seitz was the vice
president of human resources, corporate services and legal administration at
the Bank of Ireland First Holdings, Inc.

Sam Zawaideh has served as Vice President of Xchange Business since April
2000. Mr. Zawaideh served as Vice President of Global Services from September
1996 to April 2000. Mr. Zawaideh served as Director of Professional Services
with Adra Systems from July 1995 to September 1996. From 1991 through 1995,
Mr. Zawaideh served as a regional manager for Sherpa Systems Incorporated.

Executive officers are elected to serve at the discretion of the Board of
Directors. All of the current Directors were elected as Directors of the
Company pursuant to an Amended and Restated Stockholders Agreement dated June
17, 1999, between the Company and certain of its stockholders, the voting
provisions of which terminated on the closing of the Company's initial public
offering of common stock. There are no family relationships among any of the
Directors and executive officers of the Company.

Board Committees and Meetings

The Board of Directors of the Company held 10 meetings during the fiscal
year ended July 1, 2000. The Compensation Committee of which Messrs. Holland
and Stuckey and Ms. Carnahan are members, determines the compensation of the
Company's senior management and administers and makes recommendations and
awards concerning the Company's stock option plans. The Compensation Committee
held 6 meetings in fiscal

8
<PAGE>

2000. The Audit Committee, of which Messrs. Holland and Stuckey and Ms.
Carnahan are members, oversees financial results and internal controls of the
Company, including matters relating to the appointment and activities of the
Company's independent auditors. The Audit Committee held 2 meetings during
fiscal 2000. During fiscal 2000, no incumbent director attended fewer than 75%
of the aggregate of (i) the total number of meetings of the Board of Directors
(held during the period for which he or she has been a director) and (ii) the
total number of meetings held by all Committees of the Board of Directors on
which he or she served (during the period that he or she served on such
Committee).

The Board of Directors does not have a standing nominating committee or
committee performing similar functions.

9
<PAGE>

COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS

Executive Compensation

The following table shows compensation information with respect to services
rendered to the Company in all capacities during the fiscal years ended July
1, 2000, July 3, 1999 and June 27, 1998, for (i) the individual who served as
the Chief Executive Officer for the fiscal year ended July 1, 2000, and (ii)
each of the four other most highly compensated executive officers whose
aggregate salary and bonus exceeded $100,000 in the fiscal year ended July 1,
2000 (collectively with the Chief Executive Officer, the "Named Officers"):

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
(1) Awards (2)
------------------- ------------
Securities
Name and Principal Fiscal Bonus and Underlying All Other
Position Year Salary Commission Options Compensation
------------------ ------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark F. O'Connell........ 2000 $230,000 $173,000 157,500 $ 432 (3)
President, Chief
Executive Officer 1999 215,000 99,446 -- 1,236 (3)
and Director 1998 201,667 135,000 1,350,000 5,992 (3)
Brian M. Gallagher (4)... 2000 175,000 459,169 -- --
Vice President of Sales,
Americas 1999 673 -- 472,500 --
Johannes T. J. Ruigrok... 2000 122,901 259,590 36,000 17,040 (5)
Senior Vice President of
Worldwide 1999 130,539 70,858 414,000 13,886 (6)
Sales and Marketing 1998 10,192 -- -- --
Michael Segal............ 2000 170,000 75,004 45,000 7,612 (3)
Senior Vice President of
Customer 1999 170,000 63,470 36,000 8,667 (3)
Success 1998 160,000 37,000 225,000 10,764 (7)
Sam Zawaideh............. 2000 120,000 155,570 135,000 8,204 (8)
Vice President of 1999 110,000 148,141 90,000 10,229 (9)
Xchange Business 1998 100,000 82,680 90,000 5,383(10)
</TABLE>
--------
(1) Excludes perquisites and other personal benefits, if any, the aggregate
amount of which for each officer was less than the lesser of $50,000 or
10% of the total of annual salary and commission and bonus reported.
(2) The Company did not grant any restricted stock awards or stock
appreciation rights or make any long term incentive plan payouts during
fiscal 2000, 1999 or 1998.
(3) Represents medical reimbursements.
(4) Brian M. Gallagher joined the Company on June 30, 1999.
(5) Consists of $14,999 for an automobile allowance and $2,041 for medical
reimbursements.
(6) Represents an automobile allowance.
(7) Consists of $4,000 for an automobile allowance and $6,764 for medical
reimbursements.
(8) Consists of $4,500 for an automobile allowance and $3,704 for medical
reimbursements.
(9) Consists of $4,500 for an automobile allowance and $5,729 for medical
reimbursements.
(10) Consists of $4,500 for an automobile allowance and $883 for medical
reimbursements.

10
<PAGE>

Option/SAR Grants in Last Fiscal Year

The following table sets forth information concerning the stock option
grants made to each of the Named Officers in fiscal 2000. The exercise price
per share of each option was equal to the fair market value of the common
stock on the grant date as determined by the Board of Directors of the Company
and the options become exercisable at the rate of 6.25% of the total option
grant at the end of each 3-month period from the date the option begins to
vest. The Company did not grant any stock appreciation rights in fiscal 2000.
The potential realizable value represents amounts that may be realized upon
exercise of the options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation on the Company's
common stock over the term of the options. These numbers are calculated based
on the requirements of the Securities and Exchange Commission and do not
reflect the Company's estimate of future stock price growth. Actual gains, if
any, on stock option exercises will depend on the future performance of the
common stock and the date on which the options are exercised. There can be no
assurance that the rates of appreciation assumed in the table can be achieved
or that the amounts reflected will be received by the Named Officers.

Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
Individual Grants
----------------------------------------
Potential
Percent Realizable Value
of Total at Assumed Annual
Options Rates of Stock
Number of Granted Price
Securities to Exercise Appreciation for
Underlying Employees Price Option Term
Options in Fiscal Per Expiration -----------------
Name Granted Year Share Date 5% 10%
---- ---------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark F. O'Connell....... 157,500 5.62% $1.11 07/30/09 $109,947 $278,626
Brian M. Gallagher...... -- -- -- -- -- --
Johannes T.J. Ruigrok... 36,000 1.28 1.11 07/22/09 25,131 63,686
Michael Segal........... 45,000 1.61 1.11 07/22/09 31,413 79,607
Sam Zawaideh............ 72,000 2.57 1.11 07/22/09 50,261 127,372
63,000 2.25 8.00 12/09/09 316,962 803,246
</TABLE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information regarding stock option exercises
in the last fiscal year and exercisable and unexercisable stock options held
as of July 1, 2000 by each of the Named Officers. Amounts described in the
following table under the heading "Value Realized" were calculated based on
the difference between the fair market value of the Company's common stock on
the date of exercise and the exercise price of the options in accordance with
regulations promulgated under the Securities Exchange Act of 1934, as amended,
and do not necessarily reflect amounts received by the Named Officers. Amounts
described in the following table under the heading "Value of Unexercised In-
the-Money Options at Year End" are based upon the fair market value of the
common stock as of July 1, 2000, which was $40.63 per share as quoted on the
Nasdaq National Market less the applicable exercise price, multiplied by the
number of shares underlying the options.

11
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Option Values at July 1,
2000

<TABLE>
<CAPTION>
Number of Shares of
Common Stock Underlying Value of Unexercised
Shares Unexercised Options In-the-Money
Acquired at Year End Options at Year End
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark F. O'Connell....... 600,000 $9,352,500 841,406 696,094 $33,796,281 $27,890,319
Brian M. Gallagher...... 59,061 728,222 59,064 354,375 2,360,197 14,160,825
Johannes T.J. Ruigrok... -- -- 213,750 236,250 8,586,090 9,475,290
Michael Segal........... 108,936 794,967 388,876 132,188 15,630,534 5,288,139
Sam Zawaideh............ 101,949 68,306 90,283 167,768 3,559,901 6,286,648
</TABLE>

Employment Agreements and Change in Control Arrangements

On January 11, 1999, the Company entered into an employment arrangement
with Maurice L. Castonguay, the Chief Financial Officer, Vice President of
Finance and Administration and Treasurer. The agreement provides that, in the
event of a change of control of the Company, all of Mr. Castonguay's unvested
options will be accelerated and become fully vested. The arrangement also
provides Mr. Castonguay with a one-year severance package equal to his base
salary plus bonus and all customary executive benefits in the event of a
change of control of, or if he terminates his employment for good reason
within 18 months of a change of control of, the Company.

On June 3, 1999, the Company entered into an employment arrangement with
Brian M. Gallagher, the Vice President of Sales, Americas. The arrangement
provides that Mr. Gallagher would receive six months of his targeted total
compensation upon the termination of his employment for any reason.

On July 15, 1998, MxOne B.V., a subsidiary of the Company organized in the
Netherlands, entered into an Employment Agreement with Johannes T.J. Ruigrok.
Under the agreement, Mr. Ruigrok was appointed as Vice President of European
Sales of the Company as well as an officer of certain foreign subsidiaries of
the Company. The agreement provides Mr. Ruigrok with an initial base salary of
(Euro)122,521 (which is equivalent to approximately $124,285 per year),
commissions based on revenues targets and an allowance for a mobile phone and
an automobile.

On April 14, 1998, the Company entered into an employment agreement with
James F. Morgan, the former Chairman of the Board of Directors and former
Chief Executive Officer and currently a Director. Under the agreement, Mr.
Morgan agreed to serve as the full-time corporate advisor until June 30, 1998.
From July 1, 1998 through January 2, 2000, Mr. Morgan agreed to serve as a
part-time corporate advisor. In December 1999, Mr. Morgan's employment
agreement was extended through March 31, 2000. For such services, Mr. Morgan
was paid a monthly salary of $13,750 until June 30, 1998 and $6,000 per month
from July 1, 1998 through March 31, 2000. Mr. Morgan also received a bonus
equal to $110,500 from the May 7, 1998 sale of assets of Adra Systems to
SofTech, Inc. Pursuant to the employment agreement, the Board of Directors
reviewed Mr. Morgan's options at the end of the March 31, 2000 period and
permitted the conversion of all unexercised incentive stock options held by
Mr. Morgan to non-qualified stock options to make such options exercisable
until September 30, 2006. Mr. Morgan's option agreement also provides for the
full acceleration of vesting of all unvested options on the initial public
offering of common stock of the Company, the closing of which occurred on
March 6, 2000.

The offer letter, dated December 5, 1997, of Stephen P. Dunn, the Vice
President of Xchange Business Development, provides for the full acceleration
of vesting of his initial option grant of 202,500 shares in the event of a
change in control of the Company.

12
<PAGE>

The standard option agreements under the Company's 1987 and 1996 stock
option plans provide that if the Board of Directors approves a change of
control transaction, as long as such transaction occurs while the employee is
still employed by the Company, then all unvested options of the employee shall
be accelerated. After acceleration, the employee may then exercise their
options in full. Pursuant to the option agreements, however, if the change of
control transaction is intended to be accounted for as a pooling of interests
no acceleration of vesting will occur if any portion of the acceleration of
the options would preclude such financial accounting treatment. The 1999 Stock
Plan provides for the acceleration of unvested awards by a period of 24 months
upon the consummation of an acquisition. In addition to or in lieu of the
foregoing, with respect to outstanding options only, the Board of Directors
may, upon written notice to the affected optionees, provide that any
outstanding options shall become immediately exercisable in full. The standard
option agreements under the 1987 and 1996 stock option plans and the 1999
Stock Plan further provides that if any exercise of accelerated options or the
acceleration of the vesting of any options would result in an excess parachute
payment under Section 280G(b) of the Internal Revenue Code, then the exercise
or vesting of that portion of the options, or any acceleration thereof,
resulting in the excess payment shall not be allowed or shall not occur,
subject in the 1999 Stock Plan to certain circumstances.

13
<PAGE>

Stock Performance Graph

The following graph compares the percentage change in the cumulative total
stockholder return on the Company's common stock during the period from the
Company's initial public offering on February 29, 2000 through July 1, 2000
with the cumulative total return for the Nasdaq Stock Market Index and the
Nasdaq Computer & Data Processing Index. The comparison assumes $100 was
invested on March 1, 2000, the date the Company's common stock began publicly
trading, in the Company's common stock and in each of the foregoing indices
and assumes reinvestment of dividends, if any.
[CHART APPEARS HERE]

<TABLE>
<CAPTION>
03/01/00 04/01/00 04/29/00 05/27/00 07/01/00
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MatrixOne $100.00 $159.75 $132.00 $77.50 $162.50
Nasdaq $100.00 $ 95.58 $ 80.70 $67.00 $ 82.90
Nasdaq C&D $100.00 $ 99.51 $ 83.03 $68.87 $ 86.35
</TABLE>

--------
(1) Prior to March 1, 2000, the Company's common stock was not publicly
traded. Comparative data is provided only for the period since that date.
This graph is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily
indicative of future price performance. Information used on the graph was
obtained from www.marketdata.nasdaq.com, a source believed to be reliable,
but the Company is not responsible for any errors or omissions in such
information.

14
<PAGE>

Compensation Committee Report on Executive Compensation

The Compensation Committee is comprised of three outside directors and
determines the compensation of the Company's senior management and administers
and makes recommendations and awards under the Company's stock option plans.

The Company's executive compensation policies are designed to promote the
following objectives:

. to enhance profitability of the Company and increase stockholder value;

. to provide levels of compensation that assist the Company in attracting,
motivating and retaining qualified executives;

. to recognize individual initiative and achievement; and

. to align the interests of the Company's management with those of
stockholders.

The Company's executive compensation program for fiscal 2000 consisted of the
following elements: (1) base salary; (2) incentive compensation in the form of
annual cash bonuses; and (3) long-term incentive compensation in the form of
incentive and non-qualified stock options. All of these elements are
administered by the Compensation Committee. Executive officers are also
eligible to participate in certain benefit programs that are generally
available to all employees of the Company, including life insurance and other
employee benefits and a 401(k) retirement savings plan. In all cases, the
Compensation Committee's decisions involving executive officer compensation
are ultimately based on the committee's judgment regarding the best interests
of the Company and its stockholders.

Base Salary

Base salary compensation levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally determined by
evaluating (i) the experience of and the responsibilities to be held by the
individual, (ii) the Company's past financial performance and future
expectations and (iii) individual performance. The Compensation Committee does
not assign relative weights or rankings to these factors, but instead makes a
determination based upon consideration of all of these factors, as well as the
progress made with respect to the Company's long-term goals and strategies.
The Compensation Committee also considers generally available information
regarding salaries paid to executive officers with comparable qualifications,
experience and responsibilities at companies in the same or similar business.
Base salary levels for each of the Company's executive officers, other than
the Chief Executive Officer, are also based upon evaluations and
recommendations made by the Chief Executive Officer. With respect to executive
officers who first joined the Company in fiscal 2000, special consideration
was given to each officer's compensation package at his/her prior place of
employment.

Annual Incentive Compensation

Each executive officer, including the Chief Executive Officer, is entitled
to receive annual incentive compensation, in the form of cash bonuses based on
the achievement by the Company of predetermined revenue and earnings
objectives, as well as the performance of the individual executive officer.
Cash bonuses are intended to constitute a significant portion of an executive
officer's incentive and total compensation package. Cash bonuses for each of
the Company's executive officers, other than the Company's Chief Executive
Officer, are also based upon recommendations of the Chief Executive Officer.

15
<PAGE>

Long-Term Incentive Compensation

Long-term incentive compensation, in the form of stock options, provide a
stock-based incentive to improve the Company's financial performance by
allowing the executive officers to share in any appreciation in the value of
the Company's common stock. Accordingly, the Compensation Committee believes
that stock option participation aligns the interests of executive officers
with those of the Company's stockholders by encouraging executive officers to
maximize the value of the Company. Stock options also assist in the
recruitment, motivation and retention of key professional and managerial
personnel. Stock options are granted to executive officers from time to time
based primarily upon the individual's actual and/or potential contributions to
the Company, competitive market practices, and the Company's financial
performance. When establishing stock option grant levels for executive
officers, the Compensation Committee considers existing levels of stock
ownership, previous grants of stock options, vesting schedules of previously
granted options and the current market value of the Company's common stock.
Stock options granted under the Company's various stock option plans have an
exercise price equal to the fair market value of the stock on the date of
grant.

Compensation of the Chief Executive Officer

Mr. O'Connell is the President and Chief Executive Officer and a Director
of the Company. His fiscal 2000 performance was evaluated on the basis of the
factors described above applicable to executive officers generally. The annual
bonus and stock option grant components of his compensation, as well as his
salary, reflect the Company's strong financial performance, the continued
introduction and commercialization of new products and progress toward
achieving business goals, as well as the achievement by Mr. O'Connell of other
non-financial goals.

Deductibility of Executive Compensation Expenses

In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Compensation Committee has considered the limitations on deductions imposed by
Section 162(m) of the Code, and it is the Compensation Committee's present
intention that, for so long as it is consistent with its overall compensation
objective, substantially all tax deductions attributable to executive
compensation will not be subject to the deduction limitations of Section
162(m) of the Code.

Respectfully submitted by the Compensation Committee:

Ellen Carnahan
Daniel F. Holland
Charles R. Stuckey, Jr.

Compensation of Directors

Non-employee directors are reimbursed for their reasonable travel expenses
in attending meetings of the Board of Directors. Beginning January 1, 2000,
non-employee directors received cash compensation of $4,000 per quarter for
services provided as directors. Directors are also eligible to participate in
the 1996 Stock Plan and the 1999 Stock Plan. Directors who are officers or
employees of the Company do not receive any additional compensation for their
services as directors.

16
<PAGE>

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between the Board of Directors or the
Compensation Committee and the board of directors or the compensation
committee of any other company, nor has any interlocking relationship existed
in the past.

Audit Committee Report

The Audit Committee, of which Messrs. Holland and Stuckey and Ms. Carnahan
are members, 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 held 2 meetings during fiscal 2000.

The Audit Committee has reviewed and discussed the audited financial
statements of the Company for fiscal 2000 with management and has discussed
with Arthur Andersen LLP, among other things, the methods used to account for
significant unusual transactions, the effect of significant accounting
policies in emerging areas, the process used by management in formulating
sensitive accounting estimates and other matters required under SAS 61, or the
Codification of Statements on Auditing Standards, AU Section 380, as modified
or supplemented. In addition, the Audit Committee has received written
disclosures and a letter from Arthur Andersen LLP regarding their independence
as auditors required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as modified or supplemented, and has discussed with Arthur
Andersen LLP the status of their independence. Based upon this review of the
above-mentioned issues, the Audit Committee has recommended to the Board of
Directors that the audited annual financial statements of the Company for
fiscal 2000 be included in the Company's Annual Report on Form 10-K for fiscal
2000.

The Board of Directors has adopted a written charter for the Audit
Committee set forth hereto as Appendix A. While Messrs. Holland and Stuckey
are independent directors under Rule 4200(a)(15) of the National Association
of Security Dealers, Inc. ("NASD") rules, Ms. Carnahan, a Managing Director of
William Blair Capital Partners, L.L.C. which is a holder of more than 20% of
the outstanding common stock of the Company, is not currently independent
under the NASD rules. The Board of Directors has appointed Ms. Carnahan to the
Audit Committee despite this status because of the key role she has played at
the Company since first being appointed to the Board of Directors in October
1997. Ms. Carnahan has served on the Audit Committee for two years and prior
to that was a key financial advisor to the Company with extensive knowledge of
the historical and present financial operation of the Company. Due to this
long standing relationship and her integral knowledge of the Company and its
financial matters, the Board of Directors believes this is an exceptional
circumstance under the NASD rules and that it is in the best interest of the
Company and its stockholders for Ms. Carnahan to continue in her capacity as
an audit committee member.

Respectfully submitted by the Audit Committee:

Ellen Carnahan
Daniel F. Holland
Charles R. Stuckey, Jr.

17
<PAGE>

Certain Relationships and Related Transactions

On June 17, 1999, MatrixOne sold an aggregate of 750,000 shares of Class H
Convertible Preferred Stock in a private financing at a price of $8.00 per
share. William Blair Capital Partners V, L.P., a beneficial owner of more than
5% of MatrixOne's capital stock, purchased 548,595 shares of Class H
Convertible Preferred Stock at a price of $8.00 per share, which equals an
aggregate purchase price of $4,388,760. In the same financing, Gilde IT Fund,
a beneficial owner of more than 5% of MatrixOne capital stock, purchased
201,405 shares of Class H Convertible Preferred Stock at a price of $8.00,
which equaled an aggregate purchase price of $1,611,240. On October 1, 1997,
the Company sold an aggregate of 1,899,138 shares of our Class G Convertible
Preferred Stock to seven investors at a price of $5.80 per share. William
Blair Capital Partners V, L.P. purchased 1,261,139 shares of Class G
Convertible Preferred Stock at a price of $5.80 per share, which equals an
aggregate purchase price of $7,314,606. In the same financing, Gilde IT Fund
purchased 463,000 shares of Class G Convertible Preferred Stock at a price of
$5.80 per share, which equals an aggregate purchase price of $2,685,400.

On December 13, 1999 the Company signed a license agreement with RSA
Security, Inc. Charles R. Stuckey, Jr., a member of our Board of Directors, is
Chairman of the Board of RSA and President of RSA Investments, a recently
formed subsidiary of RSA.

The Company entered into a severance agreement and release with our former
Chief Financial Officer, William L. Fiedler, on August 24, 1998. Under the
agreement, the Company agreed to the following:

. pay his base salary for up to 12 months;

. pay him a bonus for the sale of assets related to the former Adra
Systems, Inc.; and

. convert his options into non-qualified stock options exercisable until
September 29, 2006.

Under the agreement, Mr. Fiedler agreed to release the Company from any
potential claims and agreed not to compete with us or solicit our employees
for a period of one year.

18
<PAGE>

The following table sets forth information regarding certain term
promissory notes entered into between the Company and several of the Company's
directors and executive officers which were used to exercise options to
purchase shares of the Company's common stock. Each of the officers and
directors has pledged the purchased shares of common stock to secure his
promissory note.

Summary Term Promissory Notes as of July 1, 2000

<TABLE>
<CAPTION>
Pledged
Shares Principal
Date of of Outstanding
Name and Promissory Common Interest Date at
Principal Position Note Principal Stock Rate Due Date Repaid 9/8/2000*
------------------ ---------- --------- ------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark F. O'Connell...... 09/10/1999 $ 66,500 150,000 8% 09/10/2001 03/31/2000 --
President, Chief 02/21/2000 198,000 450,000 8 02/21/2002 03/31/2000 --
Executive Officer and
Director

Stephen P. Dunn........ 08/29/1999 33,665 75,936 8 08/29/2001 -- $ 33,665
Vice President of 02/23/2000 20,587 33,750 8 02/23/2002 -- 20,587
Xchange Business
Development

Michael Segal.......... 09/08/1999 19,715 48,936 8 09/08/2001 -- 19,715
Senior Vice President 02/17/2000 20,000 60,000 8 02/17/2002 -- 20,000
of Customer Success

Sam Zawaideh........... 09/08/1999 45,197 101,949 8 09/08/2001 08/09/2000 --
Vice President of
Xchange Business

Paul B. Gilmartin...... 09/07/1999 13,300 30,000 8 09/07/2001 08/22/2000 --
Vice President of
Product Management

James F. Morgan........ 09/27/1999 66,500 150,000 8 09/27/2001 07/24/2000 --
Director 02/28/2000 332,500 750,000 8 02/28/2002 -- 332,500
02/29/2000 99,750 225,000 8 02/29/2002 07/24/2000 --
</TABLE>
--------
*Excludes accrued interest from inception to date.

We believe that all transactions set forth above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
We have adopted a policy whereby all future transactions between us and any of
our officers, directors and affiliates will be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties and will be
approved by a majority of the disinterested members of our Board of Directors.

19
<PAGE>

PROPOSAL TO APPROVE
AMENDMENT TO 1999 STOCK PLAN AND RATIFY 1999 STOCK PLAN

The 1999 Stock Plan was adopted by the Company's Board of Directors on
January 20, 2000 and approved by the stockholders on January 20, 2000. On
September 13, 2000 the Company's Board of Directors approved an Amendment to
the 1999 Stock Plan (the "Amendment") pursuant to which the number of shares
reserved for issuance thereunder would be increased by an additional 1,500,000
shares to 3,000,000 shares, which Amendment is attached to this proxy
statement as Appendix B. Stockholder approval of the Amendment is required by
the terms of the 1999 Stock Plan.

As of September 8, 2000, options to purchase an aggregate of approximately
10,814,747 shares of common stock were outstanding under the Company's Amended
and Restated 1987 Stock Option Plan, Amended and Restated 1996 Stock Plan and
1999 Stock Plan, and approximately 1,088,374 shares were available for future
grant under such plans. The Board of Directors has determined not to grant
additional options under the Amended and Restated 1987 Stock Option Plan.
Approximately 243,250 shares remain available for grant under the 1999 Stock
Plan. If the proposal to approve the Amendment is approved, approximately
1,743,250 shares will be available for future grant under the 1999 Stock Plan.

The Board of Directors believes that in order to attract and retain
qualified employees, it is necessary to continue to grant options to such
employees. The Board of Directors believes that the remaining shares in the
1999 Stock Plan are insufficient for this purpose, especially due to the
planned addition of new employees to continue the growth of the Company.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT AND RATIFICATION OF THE 1999 STOCK PLAN

The essential features of the 1999 Stock Plan are outlined below.

The Company intends the 1999 Stock Plan to provide incentives to the
directors, officers and other employees of the Company and to other
individuals who render service to the Company by providing them with
opportunities to participate in the ownership of the Company through the
following:

. the grant of options which qualify as incentive stock options under
Section 422(b) of the Code;

. the grant of options which do not qualify as incentive stock options;

. awards of stock; and

. opportunities to make direct purchases of stock.

Both incentive stock options and non-qualified options are referred to
hereafter individually as an "Option" and collectively as "Options." Options,
awards of stock and authorizations to make purchases of stock are referred to
hereafter collectively as "Stock Rights."

The Compensation Committee of the Board of Directors administers the 1999
Stock Plan. Subject to the provisions of the 1999 Stock Plan, the Compensation
Committee has the authority to select the persons to whom Stock Rights are
granted and determine the terms of each Stock Right.

Stock Rights may be granted under the 1999 Stock Plan at any time prior to
January 20, 2010.

20
<PAGE>

The 1999 Stock Plan currently authorizes the issuance of up to 1,500,000
shares of common stock, but no employee may be granted Stock Rights to
acquire, in the aggregate, more than 300,000 shares of stock. Any shares
subject to a Stock Right which expires, terminates or is surrendered or
forfeited may again be available for grant under the 1999 Stock Plan.

Options granted under the 1999 Stock Plan generally vest quarterly over
four years. The Compensation Committee may, however, specify a different
vesting schedule for any particular grant. Each Option may be exercised from
time to time, in whole or in part, up to the total number of shares with
respect to which it is then exercisable. The 1999 Stock Plan provides that
upon a change of control, the vesting of all unvested Stock Rights will
accelerate by 24 months. The Compensation Committee has the right to
accelerate the date of exercise of any installment of any Stock Right or to
free some or all of the restrictions on any Stock Right despite the fact that
the foregoing actions may cause the application of Sections 280G and 4999 of
the Code if a change of control of the Company occurs or disqualify all or
part of the Option as an incentive stock option.

Stock Rights are not assignable or transferable by the grantee except by
will, by the laws of descent or distribution or, in the case of a non-
qualified option, pursuant to a valid domestic relations order or to certain
identified persons or entities for estate planning reasons, both only with the
consent of our Chief Executive Officer or Chief Financial Officer.

The Board of Directors may terminate the 1999 Stock Plan at any time but
such termination will not affect any Stock Rights then outstanding under the
1999 Stock Plan. Unless terminated by action of the Board of Directors, the
1999 Stock Plan will continue in effect until January 20, 2010, but Stock
Rights granted prior to that time will continue in effect until they expire in
accordance with their terms. The Board of Directors may also amend the 1999
Stock Plan as it deems advisable, subject to any applicable statutory or
regulatory requirement to obtain shareholder approval when and if so
requested.

Certain Federal Income Tax Considerations with Respect to the 1999 Stock Plan

With respect to incentive stock options, if the holder of an option does
not dispose of the shares acquired upon exercise of the option within one year
from the transfer of such shares to such employee, or within two years from
the date the option to acquire such shares is granted, for federal income tax
purposes:

. the optionee will not recognize any income at the time of the exercise of
the option;

. the excess of the fair market value of the shares as of the date of
exercise over the option price will constitute an item of income for
purposes of the alternative minimum tax; and

. the difference between the option price and the amount realized upon the
sale of the shares by the optionee will be treated as a long-term capital
gain or loss.

The Company will not be allowed a deduction for federal income tax purposes
in connection with the granting of an incentive stock option or the issuance
of shares thereunder.

If the holder of an incentive stock option disposes of the shares acquired
upon exercise of the option within one year from the transfer of such shares
to such employee, or within two years from the date the option to acquire such
shares was granted (each a "disqualifying disposition"), then for federal
income tax purposes, in most cases, the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the incentive stock
option over the exercise price or (ii) the actual gain on disposition will be
treated as compensation

21
<PAGE>

to the optionee and will be taxed as ordinary income in the year of such
disposition. The difference between the amount realized by the optionee as the
result of a disqualifying disposition over the sum of (i) the exercise price
and (ii) the amount of ordinary income recognized as a result of such
disposition will be treated as capital gain.

In any year that an optionee recognizes compensation income on a
disqualifying disposition of stock acquired by exercising an incentive stock
option, the Company generally should be entitled to a corresponding deduction
for federal income tax purposes.

With respect to the grant of options which are not incentive stock options,
the person receiving an option will recognize no income on receipt thereof.
Upon the exercise of the option, the optionee will 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. The Company will
receive an equivalent deduction at that time. The optionee generally will
recognize capital gain or loss in an amount equal to the difference between
the amount realized upon the sale of the shares acquired upon exercise of the
non-qualified option and his or her basis in the shares (generally, the
exercise price plus the amount taxed to the optionee as ordinary income) when
the optionee sells the shares.

Persons receiving common stock under the 1999 Stock Plan pursuant to an
award of common stock or a grant of an opportunity to purchase common stock
will generally recognize ordinary income equal to the fair market value of the
shares received in the case of an award, or in the case of a purchase, the
fair market value of the shares, reduced by any purchase price paid. The
Company generally should be entitled to a corresponding tax deduction. When
such common stock is sold, the seller generally will recognize capital gain or
loss. Special rules apply if the stock acquired is subject to vesting.

Approval and adoption of the Amendment to the 1999 Stock Plan and
ratification of the 1999 Stock Plan requires the affirmative vote of the
holders of a majority of the shares of common stock voting on the proposal at
the Annual Meeting. The full text of the proposed Amendment to the 1999 Stock
Plan is included as Appendix B to this proxy statement.

The board of directors unanimously recommends a vote "FOR" approval and
adoption of the Amendment to the 1999 Stock Plan pursuant to which the number
of shares reserved for issuance thereunder will be increased from 1,500,000 to
3,000,000 shares, and the ratification of the 1999 Stock Plan.

22
<PAGE>

Option Information

The Company's Amended and Restated Certificate of Incorporation currently
authorizes the issuance of up to 100,000,000 shares of Common Stock. As of
September 8, 2000, authorized shares of the Company were issued and
outstanding or subject to outstanding options or reserved for future grants as
follows:

<TABLE>
<S> <C> <C>
Issued and Outstanding Shares of Common Stock....... 42,599,296

<CAPTION>
Shares Shares
Subject Reserved
To For
Outstanding Future
Options Grants
----------- ---------
<S> <C> <C>
Stock-based Compensation Plans:
Amended and Restated 1987 Stock Option Plan*...... 839,049 --
Amended and Restated 1996 Stock Plan.............. 8,718,948 845,124
1999 Stock Option Plan............................ 1,256,750 243,250
2000 Employee Stock Purchase Plan................. -- 1,350,000
---------- ---------
Totals.......................................... 10,814,747 2,438,374
========== =========
</TABLE>
--------
* The Board of Directors of the Company has voted not to issue any more
options under this Plan and will not grant any more options under it in the
future.

The outstanding options under all of the above stock-based compensation
plans, as of September 8, 2000 were held as follows:

<TABLE>
<CAPTION>
Shares
Subject
To
Options
---------
<S> <C>
All executive officers as a group.............................. 5,009,912
All current directors (who are not executive officers) as a
group......................................................... 112,500
All employees (who are not executive officers) as a group...... 5,692,335
</TABLE>

RATIFICATION OF SELECTION OF AUDITORS

The Board of Directors has selected the firm of Arthur Andersen LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending June 30, 2001. Arthur Andersen LLP has served as the Company's
auditors and outside accountants since August 1983. It is expected that a
member of the firm will be present at the Annual Meeting of Stockholders with
the opportunity to make a statement if so desired and will be available to
respond to appropriate questions. The directors recommend a vote FOR
ratification of this selection. The ratification of this selection is not
required under the laws of the State of Delaware where the Company is
incorporated, but the results of this vote will be considered by the Board of
Directors in selecting auditors for future fiscal years.

23
<PAGE>

STOCKHOLDER PROPOSALS

Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next annual meeting
of stockholders of the Company must be received at the Company's principal
executive offices not later than May 31, 2001. The deadline for providing
timely notice to the Company of matters that stockholders otherwise desire to
introduce at the next annual meeting of stockholders of the Company is August
14, 2001. In order to curtail controversy as to the date on which a proposal
was received by the Company, it is suggested that all notices of proposals by
stockholders should be sent Certified Mail--Return Receipt Requested to the
attention of: Maurice L. Castonguay, MatrixOne, Inc., Two Executive Drive,
Chelmsford, MA 01824.

EXPENSES AND SOLICITATION

The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Company
and/or a proxy solicitor may also be made of some stockholders in person or by
mail, telephone or telegraph following the original solicitation.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities and 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, "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 persons
are required by regulations of the Commission to furnish the Company with
copies of all such filings. Based on its review of the copies of such filings
received by it with respect to the fiscal year ended July 1, 2000 and written
representations from certain Reporting Persons, the Company believes that all
Reporting Persons complied with all Section 16(a) filing requirements in the
fiscal year ended July 1, 2000 with the following exceptions: Daniel J.
Holland. Mr. Holland has subsequently filed a Form 5 to report the purchase of
400 shares of Common Stock by his wife.

24
<PAGE>

APPENDIX A

MATRIXONE, INC.

AUDIT COMMITTEE CHARTER

A. Purpose

The primary function of the Audit Committee of MatrixOne, Inc. (the
"Corporation") is to assist the Board of Directors in fulfilling its
responsibilities by reviewing: (i) the financial reports and other financial
information provided by the Corporation to governmental agencies, the
Corporation's shareholders or to the general public, (ii) the Corporation's
systems of internal controls regarding finance, accounting, legal compliance
and ethics that management and the Board of Directors have established, and
(iii) the Corporation's auditing, accounting and financial reporting processes
in general. Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the Corporation's
policies, procedures and practices at all levels. The Committee will primarily
fulfill these responsibilities by carrying out the activities enumerated in
Section D of this Charter.

B. Composition

The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall be independent
directors, and free from any relationship that, in the opinion of the Board of
Directors, would interfere with the exercise of his or her independent
judgment as a member of the Committee. Members of the Committee shall be
considered independent if they have no relationship to the Corporation that
may interfere with the exercise of their independence from management and the
Corporation. Examples of such relationships include:

. a director being employed by the Corporation or any of its affiliates for
the current year or any of the past three years;

. a director accepting any compensation from the Corporation or any of its
affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for service on the Board of Directors, benefits under a
tax-qualified retirement plan or non-discretionary compensation;

. a director being a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the
Corporation or any of its affiliates as an executive officer; Immediate
family includes a person's spouse, parents, children, siblings, mother-
in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law and anyone who resides in such person's home;

. a director being a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Corporation made, or from which the Corporation received, payments (other
than those arising solely from investments in the Corporation's
securities) that exceed 5% of the Corporation's consolidated gross
revenue for that year, or $200,000, whichever is more, in any of the past
three years;

. a director being employed as an executive of another entity where any of
the Corporation's executives serves on that entity's compensation
committee.

All members of the Committee shall either (i) have a working familiarity
with basic finance and accounting practices, including the ability to read and
understand fundamental financial statements, such as a balance sheet, cash
flow statement and income statement (ii) or those members will be able to have
such working familiarity within a reasonable period of time after appointment
to the Committee. At least one member of the Committee

A-1
<PAGE>

shall have accounting or related financial management experience, requisite
professional certification in accounting, or other comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Corporation or an
outside consultant.

The members of the Committee shall be elected by the Board of Directors at
the annual meeting of the Board of Directors and shall serve until their
successors shall be duly elected and qualified. Unless a Chair is elected by
the full Board of Directors, the members of the Committee may designate a
Chair by majority vote of the full Committee membership.

C. Meetings

The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
sessions to discuss any matters that the Committee or each of these groups
believe should be discussed privately. In addition, the Committee or at least
its Chair should meet with the independent accountants and management
quarterly to review the Corporations financials consistent with D(4) below.

D. Responsibilities and Duties

To fulfill its responsibilities and duties the Committee shall:

Documents/Reports Review

1. Review and update this Charter periodically as conditions dictate, but
review at least annually.

2. Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental agencies, the
Corporation's shareholders or the general public, including any certification,
report, opinion or review rendered by the independent accountants, including
reviewing the nature and extent of any significant changes in accounting
principles.

3. Review the regular internal reports to management prepared by the
internal auditing department and management's response.

4. Review with financial management and the independent accountants interim
financial statements prior to their filing or prior to the release of
earnings. The Chair of the Committee may represent the entire Committee for
purposes of this review.

Independent Accountants

5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the fees
and other compensation to be paid to the independent accountants. On an annual
basis, the Committee shall receive from the independent accounts a formal
written statement identifying all relationships between the independent
accountants and the Corporation consistent with Independence Standard Boards
Standard 1. The Committee shall review and discuss with the independent
accountants all relationships the accountants have with the Corporation to
determine the accountants'

A-2
<PAGE>

independence and objectivity, and recommend to the Board of Directors any
proposed discharge if the Committee determines the accountants are not
appropriately independent.

6. Review the performance of the independent accountants and recommend to
the Board of Directors any proposed discharge of the independent accountants
when circumstances warrant.

7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and accuracy
of the organization's financial statements.

Financial Reporting Processes

8. In consultation with the independent accountants and the internal
auditors, review the integrity of the Corporation's internal and external
financial reporting processes. Review adequacy of the Corporation's systems of
internal control.

9. Meet with independent accountants and internal auditors to review the
scope of the audit and audit plan for the current year.

10. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting and consider and approve, if appropriate, material changes
to the Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management or the internal auditing
department.

11. Review organizational structure, qualifications and activities of the
internal audit staff.

Process Improvement

12. Establish regular and separate systems of reporting to the Committee by
each of management, the independent accountants and the internal auditors
regarding any significant judgments made in management's preparation of the
financial statements and the view of each as to appropriateness of such
judgments. Review any significant disagreement among management and the
independent accountants or the internal auditing department in connection with
the preparation of the financial statements.

13. Following completion of the annual audit, review separately with each
of management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or access to required
information.

14. Review with the independent accountants, the internal auditing
department and management the extent to which changes or improvements in
financial or accounting practices, as approved by the Committee, have been
implemented. (This review should be conducted at an appropriate time
subsequent to implementation of changes or improvements, as decided by the
Committee.)

Ethical and Legal Compliance

15. Review with the corporation's counsel: (a) legal compliance matters
including corporate securities trading policies and (b) any legal matter that
could have a significant impact on the corporation's financial statements.

16. Perform any other activities consistent with this Charter, the
Corporation's Bylaws and governing law, as the Committee or the Board of
Directors deems necessary or appropriate.

A-3
<PAGE>

17. Review the system for monitoring the Corporation's compliance with laws
and regulations and the results of management's investigation of, and action
taken in connection with, fraudulent acts and accounting irregularities.

Reporting

18. Report to the Board of Directors following each meeting of the
Committee.

19. Maintain minutes of each meeting of the Committee.

A-4
<PAGE>

APPENDIX B

AMENDMENT NO. 1

MATRIXONE, INC. 1999 STOCK PLAN

MatrixOne, Inc.'s 1999 Stock Plan (the "Plan") is hereby amended as
follows:

1. Section 3(a) of the Plan is amended and restated in its entirety as
follows:

"Number of Shares. Subject to adjustment under Section 3(c), the
aggregate number of shares of Common Stock of the Company (the "Common
Stock") that may be issued pursuant to the Plan is 3,000,000 shares. If any
Award expires, or is terminated, surrendered or forfeited, in whole or in
part, the unissued Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan. If shares of Common Stock
issued pursuant to the Plan are repurchased by, or are surrendered or
forfeited to, the Company at no more than cost, such shares of Common Stock
shall again be available for the grant of Awards under the Plan; provided,
however, that the cumulative number of such shares that may be so reissued
under the Plan will not exceed 3,000,000 shares. Shares issued under the
Plan may consist in whole or in part of authorized but unissued shares or
treasury shares."

2. Except as modified hereby, the Plan shall remain in full force and
effect.

B-1
<PAGE>

MONE-PS-00S

<PAGE>

DETACH HERE

PROXY

MATRIXONE, INC.

Two Executive Drive
Chelmsford, Massachusetts 01824

THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS

The undersigned holder of Common Stock of MatrixOne, Inc., a Delaware
corporation (the "Company"), hereby appoints Mark F. O'Connell and Maurice L.
Castonguay, and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated on the reverse side of this proxy card,
all of the shares of stock of the Company that the undersigned is entitled to
vote at the Company's 2000 Annual Meeting of Stockholders, to be held on Monday,
November 6, 2000, at 10:00 a.m., local time, at the offices of Testa, Hurwitz &
Thibeault, LLP, Conference Center, 20th Floor, High Street Tower, 125 High
Street, Boston, MA 02110 and at any adjournments or postponements thereof.

PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED

------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------- -------------

<PAGE>

DETACH HERE

[X] Please mark
votes as in
this example.

--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
--------------------------------------------------------------------------------

1. Election of director.

Nominee: (01) James F. Morgan

FOR WITHHELD
THE [_] [_] FROM THE
NOMINEE NOMINEE

FOR AGAINST ABSTAIN
2. To approve and adopt an amendment to the [_] [_] [_]
1999 Stock Plan to increase the aggregate
number of shares that may be issued
thereunder from 1,500,000 to 3,000,000, and
to ratify the 1999 Stock Plan.

FOR AGAINST ABSTAIN
3. To ratify the Appointment of Arthur [_] [_] [_]
Andersen LLP as Independent Auditors.

In their discretion, upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.

MARK HERE MARK HERE IF
FOR ADDRESS [_] YOU PLAN TO [_]
CHANGE AND ATTEND THE
NOTE AT LEFT MEETING

NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, give
full name and title as such.

Please sign, date and return promptly in
the accompanying envelope.

Signature: ______________________________ Date: ___________