SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Manugistics Group, Inc.
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MANUGISTICS GROUP, INC.
9715 Key West Avenue
Rockville, Maryland 20850
June 30, 2003
Dear Shareholders:
It is my pleasure to invite you to the 2003 Annual Meeting of
Shareholders of Manugistics Group, Inc. to be held on Tuesday, July 29, 2003 at
9:00 a.m., Eastern Daylight Time, at the Marriott Washingtonian Center, 9751
Washingtonian Boulevard, Gaithersburg, Maryland.
Whether or not you plan to attend, and regardless of the number of
shares you own, it is important that your shares be represented at the Annual
Meeting. You are accordingly urged to complete, sign, date and return your proxy
promptly in the enclosed envelope. Your return of a proxy in advance will not
affect your right to vote in person at the Annual Meeting.
I hope that you will attend the Annual Meeting. The officers and
directors of the Company look forward to seeing you at that time.
Very truly yours,
/s/ Gregory J. Owens
-------------------------------------------------
Gregory J. Owens
Chairman of the Board and Chief Executive Officer
1
MANUGISTICS GROUP, INC.
9715 Key West Avenue
Rockville, Maryland 20850
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, July 29, 2003
To our Shareholders:
The Annual Meeting of Shareholders (the "Meeting") of Manugistics
Group, Inc. (the "Company") will be held on Tuesday, July 29, 2003 at 9:00 a.m.
E.D.T. at the Marriott Washingtonian Center, 9751 Washingtonian Boulevard,
Gaithersburg, Maryland for the following purposes:
1. to elect three Class II Directors, each for a term of three
years and until their respective successors have been elected
and qualified;
2. to approve an amendment to the Amended and Restated 1998 Stock
Option Plan of Manugistics Group, Inc. allowing for the
issuance of restricted stock;
3. to ratify the appointment of Deloitte & Touche LLP as
independent auditor of the Company for its fiscal year ending
February 29, 2004; and
4. to transact such other business as may properly come before
the Meeting.
Shareholders of record at 5:00 p.m. E.D.T. on June 18, 2003 are
entitled to receive notice of and to vote at the Meeting.
You are invited to attend the Meeting. Please carefully read the
attached Proxy Statement for information regarding the matters to be considered
and acted upon at the Meeting. We hope that you will attend the Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED RETURN POSTAGE-PAID ENVELOPE. No postage need be affixed to the return
envelope if mailed in the United States. If you attend the Meeting, you may
withdraw your proxy and vote in person by ballot.
By Order of the Board of Directors
/s/ Timothy T. Smith
--------------------------------------------------
Timothy T. Smith
Senior Vice President, General Counsel and Secretary
Rockville, Maryland
June 30, 2003
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MANUGISTICS GROUP, INC.
9715 Key West Avenue
Rockville, Maryland 20850
PROXY STATEMENT
This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders and Proxy Card are being furnished in connection with the
solicitation by the Board of Directors of Manugistics Group, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Shareholders
scheduled to be held on Tuesday, July 29, 2003, at 9:00 a.m. E.D.T., at the
Marriott Washingtonian Center, 9751 Washingtonian Boulevard, Gaithersburg,
Maryland, and any adjournment or postponement thereof (the "Meeting"). This
Proxy Statement and the enclosed Proxy Card are being furnished on or about June
30, 2003, to all holders of record of the Company's Common Stock (the "Common
Stock") as of 5:00 p.m. E.D.T. on June 18, 2003. A copy of the Company's 2003
Annual Report on Form 10-K, including consolidated financial statements for the
fiscal year ended February 28, 2003, accompanies this Proxy Statement.
At the Meeting, shareholders will elect three Class II directors, each
to serve for a term of three years (Proposal 1). Shareholders will also act upon
proposals to amend the Company's Amended and Restated 1998 Stock Option Plan to
allow for the issuance of restricted stock (Proposal 2) and to ratify the
appointment of Deloitte & Touche LLP as the Company's independent auditor
(Proposal 3).
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed 5:00 p.m. E.D.T. on June 18, 2003 as
the record date (the "Record Date") for determination of shareholders entitled
to notice of and to vote at the Meeting. As of the Record Date, there were
70,114,376 shares of Common Stock issued and outstanding and there were no other
voting securities of the Company outstanding. The presence at the Meeting, in
person or by proxy, of a majority of the outstanding shares of Common Stock, or
35,057,189 shares, shall constitute a quorum for the Meeting. Each outstanding
share of Common Stock entitles the record holder thereof to one vote.
Abstentions and broker non-votes (where a broker or nominee is not permitted to
exercise discretionary authority to vote on a matter) are not counted as votes
cast on any matter to which they relate, but are counted in determining the
presence of a quorum.
Election of Directors. Assuming the presence of a quorum, a plurality
of the votes cast at the Meeting is required to elect each of the nominees for
director. Abstentions and broker non-votes have no effect on the outcome of the
election.
Amendment of the Amended and Restated 1998 Stock Option Plan of
Manugistics Group, Inc. To be approved, the proposal to amend the Company's
Amended and Restated 1998 Stock Option Plan must receive the affirmative vote of
a majority of the shares of Common Stock present in person or represented by
proxy at the Meeting and entitled to vote thereon. Uninstructed shares are not
entitled to vote on this matter. Broker non-votes have no effect on the outcome
of the vote on this proposal. Abstentions have the effect of negative votes.
Ratification of the Appointment of Independent Auditor. The affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy and entitled to vote at the Meeting will be required to ratify the
appointment of Deloitte & Touche LLP as the Company's independent auditor for
the fiscal year ending February 29, 2004. Broker non-votes have no effect on the
outcome of the vote on this proposal. Abstentions have the effect of negative
votes.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Eligible shareholders of record may vote at the Meeting in person or by
means of the enclosed Proxy Card. You may specify your voting choices by marking
the appropriate boxes on the Proxy Card. The proxy solicited hereby, if properly
signed and returned to the Company and not revoked prior to or at the Meeting,
will be voted in accordance with the instructions specified thereon. If you
properly sign and return your Proxy Card, but do not specify your choices, your
shares will be voted by the proxy holders as recommended by the Board of
Directors.
The Board of Directors encourages you to complete and return the Proxy
Card even if you expect to attend the Meeting. You may revoke your proxy at any
time before it is voted at the Meeting by giving written notice of revocation to
the Secretary of the Company, by submission of a proxy bearing a later date or
by attending the Meeting in person and casting a ballot.
The proxy holders, Raghavan Rajaji and Timothy T. Smith, will vote all
shares of Common Stock represented by Proxy Cards that are properly signed and
returned by shareholders. The Proxy Card also authorizes the proxy holders to
vote the shares
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represented with respect to any matters not known at the time this Proxy
Statement is mailed that may properly be presented for consideration at the
Meeting. YOU MUST RETURN A SIGNED PROXY CARD IF YOU WANT THE PROXY HOLDERS TO
VOTE YOUR SHARES OF COMMON STOCK.
The cost of soliciting proxies will be borne by the Company. The
Company has retained The Altman Group, Inc. to assist in the distribution of
proxy materials, and in the solicitation of votes for a fee of approximately
$6,500, plus reimbursement of out-of-pocket expenses. Following the mailing of
proxy solicitation materials, proxies may be solicited by directors, officers
and employees of the Company and its subsidiaries personally, by telephone or
otherwise. Such persons will not receive any fees or other compensation for such
solicitation. In addition, the Company will reimburse brokers, custodians,
nominees and other persons holding shares of Common Stock for others for their
reasonable expenses in sending proxy materials to the beneficial owners of such
shares and in obtaining their proxies.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Second Amended and Restated By-Laws of the Company (the "By-Laws")
provide that the Company's business shall be managed by a Board of Directors of
not less than six and not more than nine directors, with the number of directors
to be fixed by the Board of Directors from time to time. The number of directors
is presently fixed at nine. The By-Laws also provide that the Company's Board of
Directors is divided into three classes: Class I, Class II and Class III, each
class being as nearly equal in number as possible. The directors in each class
serve terms of three years and until their respective successors have been
elected and qualified. The term of office of one class of directors expires each
year in rotation so that one class is elected at each annual meeting of
shareholders for a three-year term.
On January 31, 2003, Steven A. Denning, a member of Class II resigned
from the Board of Directors and on October 24, 2002, Hau L. Lee, a member of
Class III, resigned from the Board of Directors.
On October 24, 2002, William H. Janeway, a partner of Warburg Pincus &
Co. and a Vice-Chairman and member of Warburg Pincus LLC, a private equity
investment firm, was nominated and appointed as a Class III director pursuant to
the request for representation on the Board from Warburg Pincus Private Equity
VIII, L.P. ("WP VIII") as a result of WP VIII's significant ownership interest
in the Company in 2002. In connection with Mr. Janeway's appointment to the
Board, the Company entered into a standstill agreement with WP VIII. Under the
agreement, the Company consented to the acquisition by WP VIII and certain of
its affiliates of up to 19.9% of the Common Stock and agreed that, for as long
as WP VIII and its affiliates beneficially own at least ten percent (10%) of the
outstanding shares of Common Stock, the Company would nominate and use its best
efforts to have elected to the Board one person designated by WP VIII and
reasonably acceptable to the Company. If WP VIII beneficially owns less than ten
percent (10%) of the outstanding shares of Common Stock as a result of the sale,
transfer or disposition of shares of Common Stock by WP VIII, then upon the
request of the Company, WP VIII's designated member of the Board would be
required to resign from the Board.
There are presently two directors in Class I, three directors in Class
II and two directors in Class III. The term of the three Class II directors,
Gregory J. Owens, Joseph H. Jacovini and Thomas A. Skelton, will expire at the
Meeting. The other four directors will remain in office for the remainder of
their respective terms, as indicated below. There are presently two vacancies on
the board. Based on the recommendation of the Corporate Governance Committee,
the Board of Directors will consider suitable candidates to fill the vacancies.
At the Meeting, three Class II directors are to be elected. Each of the
three director nominees, Messrs. Owens, Jacovini and Skelton, is presently a
director of the Company. Each nominee has consented to being named as a nominee
for director of the Company and has agreed to serve if elected. In the event
that any nominee should become unavailable or unable to serve as a director
prior to the Meeting, the persons named as proxies on the Proxy Card will vote
for the person(s) the Board of Directors recommends.
Candidates for election to the Board of Directors at annual meetings of
shareholders are nominated by the Corporate Governance Committee of the Board.
Shareholders are also entitled to nominate director candidates for the Board of
Directors in accordance with the procedures set forth in the By-Laws.
Shareholders may nominate candidates for election to the Board of Directors if
notice of such nomination is given to the Secretary of the Company 60 days in
advance of an annual meeting, if the meeting is to be held on a day within 30
days prior to the anniversary of the preceding year's annual meeting, or 90 days
in advance of the annual meeting if the annual meeting is held on or after the
anniversary of the preceding year's annual meeting. With respect to annual
meetings held 30 days or more prior to the anniversary of the preceding year's
annual meeting and special meetings, notice of the nomination must be received
no later than the close of business on the tenth day after the public
announcement of the date of such meeting. The shareholder's notice must set
forth as to each nominee (i) the nominee's name, age, and business and residence
address, (ii) the nominee's principal occupation, (iii) the class and number of
shares of the Company's equity securities beneficially owned by the nominee, and
(iv) such other information regarding such nominee that is required to be
disclosed under the SEC's proxy rules relating to elections of directors
(including the nominee's written consent to serve if elected). In addition, the
notice must give the
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name and address of the shareholder giving the notice as they appear on the
Company's books and the class and number of shares of the Company's equity
securities beneficially owned by the shareholder.
Set forth below is certain information regarding each nominee for Class
II director, and each Class I and Class III director, each of whose term of
office will continue after the Meeting.
NOMINEES FOR CLASS II DIRECTORS
Gregory J. Owens, 43, has served as Chairman of the Board of the
Company since March 2001 and has served as a director of the Company since June
1999. He has served as Chief Executive Officer of the Company since April 1999,
and served as President of the Company from April 1999 through November 2000.
From 1997 to April 1999, Mr. Owens served as the Global Managing Partner for the
Accenture Supply Chain Practice. Mr. Owens serves on the board of directors of
Serena Software, Inc., an Enterprise Change Management software provider and S1
Corporation, a provider of global enterprise software solutions for financial
organizations.
Joseph H. Jacovini, 62, has served as a director of the Company since
1986. He is a partner in Dilworth Paxson LLP, based in Philadelphia,
Pennsylvania, where he has practiced law since 1965. He has served as Chairman
of that firm since January 1998, having served as Co-Chairman from 1992 through
December 1997. Mr. Jacovini also served as Chairman of that firm's Corporate
Department from 1993 until 1997. Mr. Jacovini has been a Trustee of Drexel
University since 1990 and currently serves as Chairman of the Board of Trustees.
Thomas A. Skelton, 55, has served as a director of the Company since
1992. Since November 1999, Mr. Skelton has been the principal of Skelton &
Associates, LLC, through which he serves as an investor in and advisor to
computer software and services companies. He served as President and Chief
Operating Officer of Cambar Software, Inc. in Charleston, South Carolina from
August 1997 to November 1999.
A plurality of the votes cast is required to elect each of the above
nominees for election as a Class II Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINATED CLASS II DIRECTORS.
CLASS I DIRECTORS -- TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 2005
J. Michael Cline, 43, has served as a director of the Company since
1996 and currently serves as the Company's Lead Independent Director. Since
December 1999, Mr. Cline has served as Managing Partner of Accretive Technology
Partners LLC, a private investment firm, which he founded, with a primary focus
on enterprise software and business process outsourcing businesses. From 1989
until December 1999, Mr. Cline was a managing member of General Atlantic
Partners, LLC (or its predecessor in interest), a private equity investment firm
focused on information technology, media and communications investments on a
global basis. Mr. Cline serves on the board of directors of FirePond, Inc., an
enterprise software company and Exult, Inc., a web enabled human resources
company.
Lynn C. Fritz, 61, has served as a director of the Company since 1995.
Mr. Fritz has been Director General of the Fritz Institute, a disaster relief
management firm, since January 2001. From August 2000 to the present Mr. Fritz
has served as Chairman of the Board and Chief Executive Officer of LynnCo Supply
Chain Solutions (formerly Tradami Logistics, Inc.), a provider of solutions that
optimize and analyze logistics networks. From 1988 through May 2001, Mr. Fritz
served as Chairman and Chief Executive Officer of Fritz Companies, Inc., a
global freight forwarding and customhouse brokerage company acquired by UPS in
May 2001.
CLASS III DIRECTORS -- TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 2004
William H. Janeway, 60, has served as a director of the Company since
October 2002. From 1988 through December 1999, Mr. Janeway served as a Managing
Director of Warburg Pincus LLC; from January 2000 through December 2000, he
served as its Senior Managing Director. Mr. Janeway is currently a member and
since January 2001 has served as Vice Chairman of Warburg Pincus LLC and a
general partner of Warburg Pincus & Co. Mr. Janeway serves on the board of
directors of Indus International, Inc., a provider of integrated enterprise
asset management, and BEA Systems, Inc., an application infrastructure software
provider.
William G. Nelson, 69, has served as a director of the Company since
1986. Since 1990, Mr. Nelson has served as Chairman of HarrisData Service of
Wisconsin, Inc., a provider of business application software to mid-size
organizations. Mr. Nelson was Chief Executive Officer of Harris Data Service
from 1990 to June 2002. Since June 1999, Mr. Nelson has served as Chairman of
the Board of Repository Technologies, Inc., a provider of customer relationship
management systems for the software industry. From July 1996 until October 2000,
Mr. Nelson served as the Chairman, and, from September 1996 until April 1999, he
served as Chief Executive Officer and President, of Geac Computer Corporation
Limited, a Canadian provider of enterprise software and systems. Mr. Nelson
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serves on the board of directors of Geac Computer Corporation Limited, Catalyst
International, Inc., a provider of supply chain software, and HealthGate Data
Corp., a provider of healthcare information.
COMPENSATION OF DIRECTORS
The Company pays its non-employee directors an annual retainer of
$15,000. Additionally, the Chairman of the Audit Committee receives an annual
retainer of $10,000, and the Chairmen of the Company's other committees each
receive an annual retainer of $5,000. Non-employee directors also receive $1,000
for each Board and committee meeting attended. The Company's Lead Independent
Director also receives an annual retainer of $10,000. Directors who are
employees of the Company do not receive any compensation for their service on
the Board. Directors are reimbursed for their reasonable out-of-pocket expenses
incurred in connection with attendance at meetings of the Board of Directors and
its committees.
In addition, under the Company's Amended and Restated 1998 Stock Option
Plan (the "1998 SOP"), each non-employee director receives annually, commencing
with the first annual meeting of shareholders following the date of appointment
or election to the Board, an option to purchase 10,000 shares of Common Stock at
an exercise price equal to the market price of the Common Stock on the date of
grant. Any non-employee director who is appointed or elected to the Board after
March 1, 2003 receives an option to purchase 35,000 shares on the date of
appointment or election, prorated based on the number of fiscal quarters ending
from the date of the appointment or election until the next annual meeting.
These options vest quarterly over a five-year period. The 1998 SOP further
provides that discretionary grants of options may also be made to non-employee
directors. Mr. Janeway, who joined the Board in October 2002, received a grant
of an option for 24,000 shares upon his appointment to the Board.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During fiscal 2003, the Board of Directors held nine meetings,
including four regularly scheduled meetings and five additional meetings. The
Board of Directors has established standing Audit, Compensation and Corporate
Governance committees, each of which is composed solely of non-employee
directors. The membership of each of these standing committees is determined
from time to time by the full Board.
The Audit Committee, which presently consists of William G. Nelson ,
Chairman, Thomas A. Skelton and Lynn C. Fritz, each of whom meets the criteria
for "independence" under NASD Rule 4200, held fourteen meetings during fiscal
2003. The committee operates under a written charter adopted by the Board of
Directors and assists the Board of Directors in fulfilling its oversight
responsibilities with respect to the accounting and financial reporting
processes of the Company and audits of the financial statements of the Company.
As part of its responsibilities, the committee appoints, determines funding for,
evaluates and has the authority to replace the Company's independent auditor. In
addition, the committee, in consultation with the independent auditor and senior
management, reviews the adequacy and quality of the Company's financial
reporting processes and systems of internal controls. The committee meets with
the Company's independent auditor, with and without management present, to
discuss the results of their audits and reviews, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The committee reviews with senior management and, where appropriate,
the independent auditor, the financial information contained in the Company's
quarterly earnings releases and quarterly and annual reports (i.e., Forms 10-Q
and 10-K), and determines whether to recommend the inclusion of the Company's
audited financial statements in its annual report for filing with the Securities
and Exchange Commission.
The information contained in this Proxy Statement with respect to the
Audit Committee charter and the independence of the members of the Audit
Committee shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission, nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), except to the extent that the Company
specifically incorporates it by reference in such filing.
The Compensation Committee, which presently consists of J. Michael
Cline, Chairman, William G. Nelson and William H. Janeway, held three meetings
during fiscal 2003. During fiscal 2003, the committee was responsible for the
approval and administration of the compensation program for Gregory J. Owens,
the Company's Chief Executive Officer. The committee was also responsible for
the grant of options to the Company's executive officers under the Company's
various stock option plans and administered the plans.
The Corporate Governance Committee, which consists of Lynn C. Fritz,
Chairman, Joseph H. Jacovini and William H. Janeway, was organized on January
22, 2003. No formal meetings were held during fiscal 2003. The Committee is
responsible for matters related to the governance of the Company and also serves
as the nominating committee of the Board of Directors. The committee monitors
and reviews emerging corporate governance issues and principles and relevant
regulatory developments; recommends rules and processes relating to corporate
governance matters to the Board of Directors; nominates for election, at annual
or special meetings of the shareholders of the Company, candidates to serve on
the Board of Directors; and nominates, for the approval of the full Board of
Directors, candidates to fill vacancies on the Board of Directors. In early
fiscal 2004, the Board adopted
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a Corporate Governance Committee charter, and the committee commenced
activities.
No director attended fewer than 75% of the aggregate of (1) the total
number of Board meetings held during the period he was a director and (2) the
total number of meetings of the board committee or committees on which he served
during the period he served on such committee or committees.
CORPORATE GOVERNANCE INITIATIVES
The Company and the Board of Directors have established several
corporate governance initiatives. Those initiatives include updating the
Company's Audit Committee Charter, which is attached as Exhibit A to this proxy
statement, appointing a Lead Independent Director, and having the Board
committees be composed solely of independent directors by the time the 2004
Annual Meeting of Shareholders is held. In June 2003, the Board of Directors
created a new position of Lead Independent Director. The independent members of
the board will designate who among them will serve as Lead Independent Director
on an annual basis. The Lead Independent Director will coordinate the activities
of the independent directors, including scheduling, developing the agenda for
and presiding at all meetings of the independent directors of the Board, and act
as principal liaison between the independent directors and the Chairman of the
Board. In June 2003, the independent directors, Messrs. Cline, Fritz, Janeway
and Nelson, designated Mr. Cline to serve as Lead Independent Director.
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OWNERSHIP OF MANUGISTICS GROUP, INC. STOCK
The following table sets forth certain information, as of May 31, 2003,
with respect to the beneficial ownership of shares of Common Stock by (i) each
shareholder known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock; (ii) each director of
the Company; (iii) each executive officer named in the Summary Compensation
Table appearing below under "Executive Compensation"; and (iv) all executive
officers and directors as a group. Except as indicated in the footnotes to the
table, the persons and entities named in the table have sole voting and
investment power with respect to all shares of Common Stock which they
respectively own beneficially. Beneficial ownership is based on 70,114,376
outstanding shares of Common Stock as of May 31, 2003. Under applicable rules
promulgated under the Securities Exchange Act of 1934, as amended, a person is
deemed to be the beneficial owner of shares of Common Stock if, among other
things, he or she directly or indirectly has or shares voting power or
investment power with respect to such shares. A person is also considered to
beneficially own shares of Common Stock which he or she does not actually own
but has the right to acquire presently or within the next sixty (60) days, by
exercise of stock options or otherwise.
The address of each person who is an officer or director of the Company
is 9715 Key West Avenue, Rockville, MD 20850.
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------------------------ ------------------ --------
Gregory J. Owens(1)................................................. 4,551,466 6.10
Raghavan Rajaji (2)................................................. 48,063 *
Terrence A. Austin(3)............................................... 295,458 *
Everett G. Plante (4)............................................... 15,000 *
James J. Jeter (5).................................................. 194,770 *
Jeffrey L. Holmes (6)............................................... 188,088 *
J. Michael Cline(7)................................................. 120,400 *
Lynn C. Fritz (8)................................................... 158,900 *
Joseph H. Jacovini (9).............................................. 194,400 *
William H. Janeway(10).............................................. 7,623,400 10.87
William G. Nelson (11).............................................. 306,400 *
Thomas A. Skelton (12).............................................. 1,193,682 1.70
William M. Gibson (13) 9,261,272 13.21
Mellon Financial Corporation (14)................................... 4,497,180 6.41
Brown Capital Management, Inc. (15)................................. 11,430,372 16.30
P.A.W. Capital Corp. (16)........................................... 4,836,000 6.90
Warburg Pincus Private Equity VIII, L.P. (17)....................... 7,619,800 10.87
Credit Suisse Asset Management, LLC (18)............................ 3,625,142 5.17
Directors and executive officers as a group
(18 persons)(19).................................................... 15,114,166 19.81%
* Less than 1% of the outstanding Common Stock.
(1) Includes 4,550,166 shares issuable upon exercise of options and 1,300
shares held in an individual retirement plan.
(2) Includes 39,813 shares issuable upon exercise of options and 3,250 shares
held in the Company's employee stock purchase plan.
(3) Includes 294,458 shares issuable upon exercise of options and 1,000 shares
held with his wife. Mr. Austin resigned as an executive officer of the
Company effective as of January 5, 2003.
(4) Includes 15,000 shares issuable upon exercise of options.
(5) Includes 192,770 shares issuable upon exercise of options and 2,000 shares
held with his wife.
(6) Includes 188,088 shares issuable upon exercise of options.
(7) Includes 120,400 shares issuable upon exercise of options.
(8) Includes 150,400 shares issuable upon exercise of options.
(9) Includes 125,728 shares issuable upon exercise of options, 2,672 shares
held by his wife and 26,000 shares held in an individual retirement plan.
(10) Includes 3,600 shares issuable upon exercise of options held by Mr. Janeway
and a total of 7,619,800 shares held by Warburg Pincus Private Equity VIII,
L.P, including three related limited partnerships ("WP VIII"). Warburg
Pincus & Co. is the sole general partner of WP VIII. WP VIII is managed by
Warburg Pincus LLC. The address of the Warburg Pincus entities is 466
Lexington Avenue, New York, NY 10017. Mr. Janeway disclaims beneficial
ownership of the shares held by WP VIII.
8
(11) Includes 90,400 shares issuable upon exercise of options and 216,000 shares
held with his wife.
(12) Includes 152,400 shares issuable upon exercise of options, 12,619 shares
held by his wife and 116,299 shares held in a family limited partnership.
(13) Includes 18,000 shares issuable upon exercise of options, 776,000 shares
held by his wife, 660,300 shares held in a non-profit corporation, with
respect to which Mr. Gibson shares voting and dispositive control, and
7,806,972 shares held in a family limited partnership. Mr. Gibson serves as
the sole general partner of the limited partnership and, in such capacity,
has sole voting and dispositive control of the shares held in the
partnership. Mr. Gibson's address is 780 Godfrey Road, Villanova, PA 19085.
(14) Based solely on reports filed by this entity with the Securities and
Exchange Commission as of January 14, 2003. The address of Mellon Financial
Corporation is One Mellon Center, Pittsburgh, Pennsylvania 15258.
(15) Based solely on information provided to the Company by or on behalf of
Brown Capital Management, Inc., all of the shares of Common Stock are owned
by various investment advisory clients of Brown Capital Management, Inc.
("Brown"), 1201 N. Calvert Street, Baltimore, MD 21202, which is deemed to
be a beneficial owner of those shares pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, due to Brown's discretionary power to make
investment decisions over such shares for its clients and Brown's ability
to vote such shares. In all cases, persons other than Brown have the right
to receive, or the power to direct the receipt of, dividends from, or the
proceeds from the sale of the shares. No individual client of Brown holds
more than five percent of the outstanding shares of Common Stock.
(16) Based solely on information provided to the Company by or on behalf of the
named beneficial owner, P.A.W. Capital Corp., 4 Greenwich Office Park,
Greenwich, CT 06831, such shares are owned solely as a result of its
serving as an investment advisor to its various clients.
(17) The shareholder is WP VIII. Warburg Pincus & Co. is the sole general
partner of WP VIII. WP VIII is managed by Warburg Pincus LLC. The address
of the Warburg Pincus entities is 466 Lexington Avenue, New York, NY 10017.
(18) Based solely on information provided to the Company by or on behalf of the
named beneficial owner, Credit Suisse Asset Management, LLC, 466 Lexington
Avenue, New York, NY 10017, such shares are owned solely as a result of its
serving as an investment advisor to its various clients.
(19) Includes 6,170,063 shares issuable upon exercise of options and 10,549
shares held in the Company's employee stock purchase plan.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth summary information regarding
compensation paid or accrued by the Company for services during fiscal years
2003, 2002 and 2001 to the Company's Chief Executive Officer, each of the four
most highly compensated executive officers other than the Chief Executive
Officer whose individual total salary and bonus on an annual basis exceeded
$100,000 for fiscal 2003, and one former executive officer of the Company, Mr.
Austin, who would have been among the four most highly compensated executive
officers but for the fact that he was not serving as an executive officer of the
Company at the end of fiscal 2003 (the "Named Executives"). Mr. Plante joined
the Company during fiscal 2002; accordingly, the annual compensation reported
for him in fiscal 2002 is for a partial year.
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------------------------- ------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION* OPTIONS (#) COMPENSATION
--------------------------- ---- ------ ----- ------------- ----------- ------------
Gregory J. Owens......................................... 2003 $358,250 -- $114,246(1) 150,000 $ 3,219(2)
Chief Executive Officer 2002 351,563 $285,939 173,632(3) 1,000,000 7,831(4)
2001 375,000 375,000 245,141(5) -0- 14,657(6)
Raghavan Rajaji.......................................... 2003 $262,717 -- -- 60,000 $ 6,093(7)
Executive Vice President and 2002 257,813 $135,000 -- 75,000 70,010(8)
Chief Financial Officer 2001 275,000 180,000 -- 30,000 39,609(9)
Terrance A. Austin (10).................................. 2003 $201,306 -- $ 73,353(11) 80,000 $254,552(12)
Former Executive Vice President, 2002 209,375 $243,750 -- 85,000 126,491(13)
President, European Operations 2001 200,000 275,090 -- 80,000 3,245(14)
Everett G. Plante........................................ 2003 $191,067 $ 75,000 -- 105,000 $ 74,793(15)
Senior Vice President, Engineering and Technology
Solutions 2002 27,680 37,500 -- 150,000 --
James J. Jeter........................................... 2003 $200,620 -- -- 50,000 $ 284(16)
Senior Vice President, Global Marketing 2002 196,875 $106,875 -- 65,000 533(16)
2001 210,000 160,000 -- 30,000 533(16)
Jeffrey L. Holmes........................................ 2003 $195,843 -- -- 60,000 $ 4,676(17)
Executive Vice President, 2002 192,188 132,500 -- 85,000 3,944(18)
President of Government, Aerospace and Defense Operations 2001 205,053 350,000 -- 90,000 3,944(18)
* All amounts shown for usage of a charter plane are calculated using the
incremental cost basis to the Company. The amount for usage of a charter plane
for fiscal 2002 and fiscal 2001 was previously calculated and reported for all
employees in our 2002 and 2001 proxy statements using the taxable amount
attributed to the employee as determined under an IRS formula (Reg. 1.61-21(g))
that is based on Standard Industry Fare Level (SIFL) flight mileage rates, a
terminal charge and the weight of the aircraft. The taxable amount attributed to
Mr. Owens, as disclosed in our 2002 and 2001 proxy statements, was $72,314 and
$49,014, respectively, and is $42,876 for fiscal 2003. All employee taxes,
including income taxes, payable by employees of the Company for usage of a
charter plane have been borne by the employee.
(1) Includes $87,581 for use of a charter plane fractionally owned by the
Company.
(2) Represents $611 for additional life insurance premiums and a $2,608
employer contribution to the Company's 401(k) Plan.
(3) Includes $156,032 for use of a charter plane leased and/or fractionally
owned by the Company.
(4) Represents $657 for additional life insurance premiums, $4,624 for
additional long term disability insurance premiums and a $2,550 employer
contribution to the Company's 401(k) Plan.
(5) Includes $161,506 for use of a charter plane leased by the Company.
(6) Represents $6,826 for housing and relocation expenses, $657 for additional
life insurance premiums, $4,624 for additional long term disability
insurance premiums and a $2,550 employer contribution to the Company's
401(k) Plan.
(7) Represents $3,305 for additional life insurance premiums and a $2,788
employer contribution to the Company's 401(k) Plan.
(8) Represents $64,203 for housing and relocation expenses, $3,257 for
additional life insurance premiums and a $2,550 employer contribution to
the Company's 401(k) Plan.
(9) Represents $33,802 for housing and relocation expenses, $3,257 for
additional life insurance premiums and a $2,550 employer contribution to
the Company's 401(k) Plan.
(10) Mr. Austin resigned as an executive officer of the Company effective as of
January 5, 2003.
(11) Includes $53,296 for tax equalization payments and foreign taxes paid by
the Company on his behalf.
(12) Represents $252,217 for housing and relocation expenses overseas, 1,688 for
an employer contribution to the Company's 401(k) Plan and $647 for
additional life insurance premiums.
(13) Represents $123,246 for housing and relocation expenses overseas, $695 for
additional life insurance premiums and a $2,550 employer contribution to
the Company's 401(k) Plan.
10
(14) Represents $695 for additional life insurance premiums and a $2,550
employer contribution to the Company's 401(k) Plan.
(15) Represents $74,611 for housing and relocation expenses and $182 for
additional life insurance premiums.
(16) Represents additional life insurance premiums.
(17) Represents $1,355 for relocation expenses, $619 for additional life
insurance premiums and a $2,702 employer contribution to the Company's
401(k) Plan.
(18) Represents $1,394 for additional life insurance premiums and a $2,550
employer contribution to the Company's 401(k) Plan.
STOCK OPTIONS
The following table sets forth certain information concerning the grant
of options to the Chief Executive Officer and other Named Executives in fiscal
2003. The Company has not granted any stock appreciation rights ("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT
PERCENT OF ASSUMED ANNUAL RATES
TOTAL OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% 10%
----------------------------------------------------------------------------------------------------------
Gregory J. Owens 150,000(1) 5.05% $ 3.9800 7/25/12 $375,450 $951,464
Raghavan Rajaji 60,000(1) 2.02% $ 3.9800 7/25/12 150,180 380,586
Terrance A. Austin 80,000(1)(2) 2.69% $ 3.9800 7/25/12 200,240 507,448
Everett G. Plante 75,000(1) 2.53% $ 3.9800 7/25/12 187,725 475,732
30,000(3) 1.01% $ 2.4000 1/2/13 45,280 114,749
James J. Jeter 50,000(1) 1.68% $ 3.9800 7/25/12 125,150 317,155
Jeffrey L. Holmes 60,000(1) 2.02% $ 3.9800 7/25/12 150,180 380,586
(1) Each option vests in 60 equal monthly installments over a five-year period
beginning on August 25, 2002. The options have an exercise price equal to
the fair market value of the Common Stock on the date of grant.
(2) As part of Mr. Austin's termination of employment, the exercise period for
his options expires August 5, 2003.
(3) Each option vests in 60 equal monthly installments over a five-year period
beginning on February 2, 2003. The options have an exercise price equal to
the fair market value of the Common Stock on the date of grant.
11
The following table summarizes the value realized upon exercise of
outstanding stock options during fiscal 2003 and the value of the outstanding
options held by the Chief Executive Officer and the other Named Executives.
AGGREGATED OPTION EXERCISES IN FISCAL 2003 AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END FISCAL YEAR-END ($) (2)
SHARES ACQUIRED VALUE -------------------------------------------------------------
NAME ON EXERCISE (#) REALIZED ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-----------------------------------------------------------------------------------------------------------------------
Gregory J. Owens 200,000 2,959,786.75 3,891,834 2,149,166 - -
Raghavan Rajaji 5,000 68,100.00 388,250 211,750
Terrance A. Austin - - 294,458 - - -
Everett G. Plante - - 49,877 205,123 - -
James J. Jeter 14,000 173,588.40 183,500 142,500 - -
Jeffrey L. Holmes 16,000 221,019.20 190,900 183,000 - -
(1) Computed by multiplying the number of shares of Common Stock acquired upon
exercise of options by the difference between (i) the per share fair market
value of the Common Stock on the date of exercise and (ii) the exercise
price per share.
(2) Computed by multiplying the number of options by the difference between (i)
the per share market value of the Common Stock on February 28, 2003 of
$2.36 and (ii) the exercise price per share.
12
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information regarding our equity
compensation plans as of February 28, 2003:
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (a))
(a) (b) (c)
------------------------------ ----------------------- -------------------- -----------------------
EQUITY COMPENSATION PLANS
APPROVED BY SECURITY HOLDERS 12,002,573 $10.19 6,581,522
EQUITY COMPENSATION PLANS NOT
APPROVED BY SECURITY HOLDERS 8,668,751 $17.79 --
---------- ------ ---------
TOTAL 20,671,324 $13.38 6,581,522
Equity Compensation Plans Not Approved by Securityholders
The Company grants or has granted stock option awards under the
following equity compensation plans that are not approved by the shareholders:
the Company's Amended and Restated 2000 Non-Qualified Stock Option Plan ("2000
SOP") and six stock option plans with three individuals.
2000 SOP. The 2000 SOP contains substantially the same terms and
conditions as the 1998 SOP, with the following exceptions: (1) the 2000 SOP has
not been approved by shareholders; (2) no incentive stock options may be issued
under the 2000 SOP; (3) the 2000 SOP does not contain any limitation on
decreasing the exercise price of options; and (4) the maximum number of shares
of Common Stock in respect of which options may be granted to any one employee
is 250,000 in any one calendar year.
On July 27, 2001, the Company terminated the 2000 SOP as to all
unissued options on that date. No further options will be granted under the 2000
SOP, except that options to be granted in exchange for options cancelled under
the Company's Option Exchange Program that were originally granted under the
2000 SOP or the Company's 1996 Fifth Amended and Restated Stock Option Plan will
be granted under the 2000 SOP. The effective date of the 2000 SOP was September
13, 2000; although terminated as to most new option grants (other than the
replacements just mentioned), it continues to govern outstanding grants).
As of May 31, 2003, a total of 265,588 shares of Common Stock are
issuable on account of outstanding options under the 2000 SOP, and a total of
423,205 shares of Common Stock are issuable on account of options to be issued
in exchange for options cancelled under the Company's Option Exchange Program.
As of May 31, 2003, there were approximately 479 employees and no directors
participating in the 2000 SOP. All shares issuable under the 2000 SOP have been
registered.
Individual Stock Option Plans. The Company also has six stock option
plans with individuals that were entered into in connection with those
individuals' employment with the Company. Three of the six plans grant options
to the Company's current Chairman and Chief Executive Officer, and three plans
grant options to two former executive officers of the Company. These plans have
not been approved by the shareholders of the Company. The six stock plans
contain substantially the same terms and conditions as those of the 1998 SOP
except as described below. All of the shares issuable under these plans have
been registered.
With the exception of one plan with a former executive officer that
provided for immediate vesting and exercisability, the options issued under
these stock option plans vest and become exercisable in equal monthly
installments over terms of 48 or 60 months. With the exception of one plan with
a former executive officer, each of these stock option plans contains change in
control rights, which provide that 50% of the option vests immediately upon the
occurrence a change in control of the Company, and 100% of the option vests
immediately if the employee's responsibilities are diminished or the employee is
constructively terminated following a change in control. A change in control is
deemed to have occurred if 51% of the Company's voting stock is acquired by any
person or affiliated group of persons in a single or series of related
transactions. With the exception of one plan with a former executive officer,
under the terms of these stock option plans, vesting is accelerated for six
monthly installments in the event the employee is terminated without cause by
the Company. The period of exercise following such a termination is three months
from the date of termination.
13
Each of these six stock option plans provides for a term of ten years,
unless sooner terminated. The plans with the two former executive officers will
expire in August 2003 and October 2003, respectively. One of the three plans
with the Company's current Chairman and Chief Executive Officer expires in April
2009 and the other two plans expire in December 2009.
As of May 31, 2003, a total of 880,000 shares of Common Stock are
isssuable under these six stock plans, of which 223,000 will expire in August
2003 and 509,500 will expire in October 2003. The Company's Option Exchange
Program did not apply to options granted under the six individual stock option
plans.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Owens,
Austin (who resigned from the Company effective January 5, 2003), Jeter and
Rajaji in fiscal 2000 and with Mr. Plante in fiscal 2002 in connection with the
commencement of their employment with the Company under which each receives a
minimum annual base salary. Under the agreements, Messrs. Owens, Austin and
Plante are each eligible for a bonus of up to 100% of their respective annual
base salaries, Mr. Rajaji is eligible for an annual bonus of up to $180,000, and
Mr. Jeter is eligible to receive an annual bonus of up to 60% of his annual base
salary. Fifty percent of these bonuses is based upon the financial performance
of the Company, and 50% is based upon satisfaction of management objectives.
(The maximum annual incentive cash bonus Mr. Owens is eligible to receive was
increased in fiscal 2002, and the basis on which bonuses are awarded has been
modified. Mr. Rajaji and Mr. Jeter are now eligible to receive an increased
percentage of their annual base salary as an annual bonus.) Under the terms of
these agreements, the Company also provides to each of Messrs. Owens, Rajaji,
Holmes, Jeter and Plante, and provided to Mr. Austin, certain benefits,
including medical, life and disability insurance, participation in the Company's
Employee Stock Purchase Plan, and fringe benefits.
Under the respective agreements and pursuant to a letter agreement with
Mr. Holmes, if the Company terminates the executive's employment other than for
cause, the Company will make severance payments to the executive in the amount
of his base salary and benefits during the six-month period (a twelve-month
period for Mr. Owens) commencing on the termination date. The severance payments
to the executive will cease if he obtains alternative employment during the
six-month period (a twelve-month period for Mr. Owens) commencing on the
termination date. In addition, under the terms of the respective employment
agreements the vesting of options granted in the employment agreement will
continue for a period of up to six months beginning on the date of the
termination of the executive's employment for any reason other than cause. Mr.
Holmes' letter agreement provides that on his termination of employment by the
Company other than for cause, all options granted to him shall continue to vest
during the term he receives severance payments. Some or all of the executive's
options may immediately vest in the event of a change of control of the Company,
under the terms of the employment agreement or subsequent option grants.
In connection with his resignation, the Company entered into a
termination agreement with Mr. Austin under which the Company waived its right
to require Mr. Austin to reimburse the Company for a pro rata portion of the
relocation costs and relocation allowance paid by the Company in relocating Mr.
Austin from the United States to France. The benefits that Mr. Austin was
entitled to under his employment agreement ceased as of the date of his
resignation. Because the termination of Mr. Austin's employment was due to his
voluntary resignation, Mr. Austin did not receive any severance pay or bonus pay
following the date of his resignation. The vesting of Mr. Austin's options is in
accordance with their existing terms and the terms of the plans under which they
were granted. As additional consideration for Mr. Austin to enter into the
termination agreement, the exercise period for those options which, on the date
the agreement was fully executed, had an exercise price equal to or higher than
the fair market value of the stock underlying the options was extended until
August 5, 2003.
On June 23, 2003, Jeremy P. Coote was appointed as President of the
Company, responsible for global sales and marketing. Under the terms of his
employment agreement with the Company, Mr. Coote will receive an annual base
salary of $300,000 and is eligible to receive during his first twelve months of
employment a bonus of up to 75% of his annual base salary based on the financial
performance of the Company, 50% of which has been guaranteed. Mr. Coote is also
eligible to receive a bonus of up to 75% of his annual base salary based on the
achievement of certain sales goals. The bonuses are payable quarterly. The
agreement also provides for a grant of options to acquire 1.4 million shares.
The options vest monthly over five years as to 1 million shares, and upon the
earlier to occur of the achievement of certain performance criteria or 7 years,
as to 400,000 shares. Some or all of these options may vest upon a change in
control. The agreement also provides that if Mr. Coote is terminated without
cause or terminates for good reason (as defined in the agreement), the Company
will make severance payments to Mr. Coote in the amount of his base salary and
benefits for up to twelve months and his options shall continue to vest during
the period severance payments are made. The agreement also provides Mr. Coote
with certain benefits, including medical, life and disability insurance,
participation in the Company's Employee Stock Purchase Plan, and fringe
benefits.
The information set forth in the following Report of the Audit
Committee of the Board of Directors, the Report of the Compensation Committee of
the Board of Directors and in the Performance Graph shall not be deemed
incorporated by reference into any existing or future filings under the
Securities Act or the Exchange Act, which incorporate by reference this Proxy
Statement, except to the extent that the Company specifically incorporates such
information by reference.
14
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of the Company assists
the Board of Directors in fulfilling its oversight responsibilities over the
Company's auditing, accounting and financial reporting processes. The Audit
Committee is comprised of three independent directors, each of whom meets the
criteria for "independence" under NASD Rule 4200, and operates under a written
charter adopted by the Board of Directors, and reviewed by the Audit Committee
on an annual basis. The current Audit Committee Charter (which was last amended
by the Board of Directors on May 1, 2003), is attached as Exhibit A to this
proxy statement.
Management has the primary responsibility for the financial statements
and the accounting and financial reporting process, including the systems of
internal controls. The Audit Committee has reviewed and discussed with
management the Company's audited consolidated financial statements for the
fiscal year ended February 28, 2003, including a discussion of the applicability
and quality of accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements. The Audit
Committee is not providing any expert or special assurance as to the Company's
financial statements.
The Company's independent auditor is responsible for expressing an
opinion on the conformity of the Company's audited consolidated financial
statements with accounting principles generally accepted in the United States of
America. The Audit Committee has reviewed and discussed with the Company's
independent auditor the Company's audited consolidated financial statements for
the fiscal year ended February 28, 2003. The Audit Committee is not providing
any professional certification as to the independent auditor's work product.
In addition, the Audit Committee has discussed with the Company's
independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, "Communications with Audit Committees,"
relating to the conduct of the audit. The Audit Committee has received the
written disclosures from the independent auditor required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and has discussed with the independent auditor their independence.
Based on the Audit Committee's review of the Company's audited
consolidated financial statements for the fiscal year ended February 28, 2003,
and the review and discussions described in the foregoing paragraphs of this
report, the Audit Committee recommended to the Board of Directors that such
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 2003, for filing with
the Securities and Exchange Commission.
Audit Committee
William G. Nelson, Chairman
Thomas A. Skelton
Lynn C. Fritz
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
In fiscal 2003, the Compensation Committee of the Board of Directors
was directly responsible for the approval and administration of a compensation
program for Gregory J. Owens, the Company's Chief Executive Officer. The
Compensation Committee was also responsible for the administration of the
Company's stock option plans, although it delegated limited authority to the
Chief Executive Officer with respect to employees who are not executive
officers. The Compensation Committee was also responsible for recommending to
the Board of Directors, and the Board of Directors approved, the grant of
options to the Company's other executive officers under the Company's various
stock option plans. The Compensation Committee's recommendation to the Board was
based, in part, on grant recommendations made by Mr. Owens. The Compensation
Committee consisted of three non-employee directors of the Company, William G.
Nelson, Steven A. Denning and J. Michael Cline. In January 2003, Mr. William H.
Janeway was appointed to the Compensation Committee, replacing Mr. Denning who
resigned from the Board of Directors in January 2003.
In fiscal 2003, Mr. Owens was responsible for the implementation of the
Company's compensation program for the other executive officers of the Company,
including those named in the Summary Compensation Table. The Company's
compensation program for other executive officers is developed annually by Mr.
Owens and is reviewed by the Compensation Committee.
OBJECTIVES AND POLICIES
The objectives of the Company's executive compensation programs, as
implemented by the Compensation Committee and by Mr. Owens, respectively, are
to:
- Attract and retain highly qualified executives to lead and manage the
Company by providing competitive total compensation packages;
15
- Reward executives based on the business performance of the Company and
upon individual performance;
- Provide executives with incentives designed to maximize the long-term
performance of the Company and to align further their interests with
those of the shareholders of the Company; and
- Assure that objectives for corporate and individual performance are
established and measured.
COMPENSATION OF EXECUTIVE OFFICERS
In fiscal 2003, the Company's compensation program for executive
officers other than Mr. Owens consisted of cash compensation and the award of
stock options. Cash compensation consisted of base salary and cash bonuses
awarded based upon the attainment of certain performance award targets or sales
revenue goals.
BASE SALARY
Base salaries for executive officers of the Company (including the
Chief Executive Officer) have historically been determined by evaluating the
responsibilities associated with their respective positions, the experience of
the officers and by reference to salaries paid in the competitive marketplace to
executive officers with comparable ability and experience. Individual salary
increases are reviewed annually and, in fiscal year 2003, the review was based
primarily on competitive market forces affecting compensation for executive
officers and the Company's financial performance. At the close of fiscal 2003,
there were thirteen executive officers, including Mr. Owens.
In fiscal 2003, annual base salaries and cash bonuses were determined,
and stock option awards were recommended to the Compensation Committee, by Mr.
Owens for the other executive officers. Base salaries were not increased for the
executive officers in fiscal 2003, with the exception of two executive officers
whose salaries were increased in connection with promotions to a higher office
in fiscal year 2003.
CASH BONUSES
PERFORMANCE AWARDS. During fiscal 2003, executive officers were
eligible to receive an annual incentive cash bonus, in amounts ranging up to
100% of the executive officer's base salary, payable quarterly, based on the
corporate performance award targets of the Company. The corporate performance
award targets consisted of specific operational and financial goals to be
reached by the Company during the course of the fiscal year. These goals were
recommended by senior management and reviewed by the Board of Directors. These
goals consist of expected total revenue and net corporate financial results. In
formulating these goals, senior management considered, among other factors,
growth in the economy as projected by various economists and industry growth
expectations as published by AMR Research and others.
In certain instances, payment of the annual incentive cash bonus was
also conditioned upon achievement of certain management objectives established
for the executive officer. The management objectives were developed jointly by
Mr. Owens and each executive officer and approved by Mr. Owens. The management
objectives consisted of non-financial performance measurements, such as
improvements in productivity, development and introduction of new products,
improvement of product quality, relationships with customers and leadership and
management development.
The Company did not achieve its corporate performance award targets for
fiscal 2003 and no executive officer received any annual incentive cash bonus
for fiscal 2003, with the exception of one executive officer 50% of whose bonus
had been guaranteed during the first year of his employment.
SALES REVENUE AWARDS. Certain of the executive officers who shared
responsibility for sales were also eligible to receive annual cash bonuses in
amounts up to 100% of the executive officer's annual base salary, payable
quarterly, for attaining pre-determined quarterly sales revenue goals. No such
bonuses were awarded during fiscal 2003.
STOCK OPTION AWARDS
Each executive officer is also eligible to receive performance awards
in the form of stock option grants which are recommended by Mr. Owens to the
Compensation Committee for approval. In fiscal 2003, Mr. Owens based his
recommendations primarily on his evaluation of the performance of such executive
officer, competitive market forces affecting executive compensation and on the
size of previous option grants to such executive officer, together with the
number of options held by executive officers at the beginning of fiscal 2003.
These stock option grants were also intended to serve as a strong long-term
retention incentive. The Compensation Committee reviewed and considered Mr.
Owens' recommendations. Based on the Compensation Committee's
16
recommendation, the Board of Directors approved the stock option awards
recommended by Mr. Owens on terms recommended by the Committee.
CHIEF EXECUTIVE OFFICER'S COMPENSATION AND CORPORATE PERFORMANCE FOR FISCAL 2003
In determining the compensation program of Mr. Owens, the Company's
Chief Executive Officer, including base salary, cash bonuses and stock option
awards for fiscal 2003, the Compensation Committee considered specific corporate
performance goals, such as profitability, revenue targets and software license
revenue growth. Other non-financial objectives similar to those set forth above
for other executive officers were also included in establishing Mr. Owens'
compensation program.
BASE SALARY. Mr. Owens' initial annual base salary was set in fiscal
2000 upon his employment with the Company. His base salary has not been
increased subsequently.
CASH BONUSES. Mr. Owens was eligible to receive an annual incentive
cash bonus of up to $500,000, an amount equal to 133% of his annual base salary,
based on the corporate performance award targets set for the other executive
officers referred to above. The Company did not achieve its corporate
performance award targets for fiscal 2003 and Mr. Owens did not receive any
annual incentive cash bonus for fiscal 2003.
STOCK OPTION AWARD. In July 2002, as part of the Company's annual stock
option award program, the Board of Directors granted to Mr. Owens an option to
purchase a total of 150,000 shares of the Company's common stock on terms
recommended by the Compensation Committee in recognition of his substantial
efforts to restructure the operations of the Company in response to the severe
economic downturn and as an incentive to remain with the Company. At that time,
outstanding options held by Mr. Owens had exercise prices significantly higher
than the current market price of the Company's Common Stock.
Except as described above in this report, no specific weight or
relative importance was assigned to the various specific factors and detailed
compensation information considered respectively by the Committee and Mr. Owens.
Accordingly, the Company's compensation policies and practices relating to base
salaries, cash bonuses and stock option awards, including Mr. Owens', may, to
that extent, be deemed informal and subjective.
STOCK OPTION EXCHANGE OFFER
Due to the downturn in the economy and in particular in the technology
industry, the share price of the Company's Common Stock has declined over the
past few years leaving employees with stock options with exercise prices
significantly higher than the current market price of the Company's Common
Stock. The Compensation Committee believed that many of the options had little
value, were unlikely to be exercised in the foreseeable future, and no longer
provided an effective incentive to motivate and retain employees. The
Compensation Committee was also sensitive to shareholder concerns regarding the
dilutive effect of stock options. Accordingly, the Compensation Committee
recommended and the Board of Directors approved a voluntary stock option
exchange program for the Company's employees, other than Mr. Owens who was not
eligible to participate.
On February 10, 2003, the Company announced a voluntary stock option
exchange program for its employees, at which time executive officers eligible to
participate held options to purchase 1,730,012 shares eligible for exchange
under the program, of which 1,597,212 were submitted and accepted for
cancellation and exchange. Replacement options will be granted on September 16,
2003 and will have terms and conditions that are substantially the same as those
of the cancelled options. The exercise price of the replacement options will be
the greater of (a) the market value of the Company's Common Stock on the date of
grant or (b) $2.30. As of May 31, 2003, executive officers participating in the
program are entitled to receive on the grant date replacement options to
purchase 645,533 shares in the aggregate.
SECTION 162(m)
Section 162(m) of the Code limits the federal income tax deductibility
of compensation paid to the five most highly compensated executive officers of
public companies. Under this section of the Code, the Company generally may
deduct compensation paid to any such officer to the extent that it does not
exceed $1 million during any calendar year or is "performance-based" as defined
in Section 162(m). The Compensation Committee expects that the deductibility
limit of Section 162(m) will not currently have a significant effect on the
Company. Current cash compensation paid to each of the Company's executives is
less than $1 million per year and is thus generally fully deductible.
Compensation decisions will take the deduction limitation into consideration but
will not necessarily be based on full deductibility.
Compensation Committee
J. Michael Cline, Chairman
William G. Nelson
William H. Janeway
17
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to
shareholders of the Common Stock with the cumulative total return of the Nasdaq
Stock Market (US) Index and of the Nasdaq Computer and Data Processing Stocks
Index from February 28, 1998 to the end of the last fiscal year (February 28,
2003). The graph assumes that the value of the investment in the Common Stock
and each index was $100 on February 28, 1998 and that all dividends were
reinvested. The Company has not paid any cash dividends on its Common Stock and
does not intend to do so in the foreseeable future. The performance graph is not
necessarily indicative of future performance.
[LINE GRAPH]
-------------------------------------------------------------------------------------------------------------------
28-Feb-98 28-Feb-99 29-Feb-00 28-Feb-01 28-Feb-02 28-Feb-03
-------------------------------------------------------------------------------------------------------------------
Manugistics Group, Inc. $100 $ 20 $142 $155 $ 65 $ 12
Nasdaq Stock Market(US. Companies) $100 $137 $279 $134 $106 $ 82
Nasdq Computer and Data Processing Stock $100 $165 $345 $146 $116 $ 86
-------------------------------------------------------------------------------------------------------------------
AGREEMENTS WITH EMPLOYEES
All employees of the Company and its subsidiaries, including executive
officers, are required to sign a Conditions of Employment Agreement upon joining
the Company and its subsidiaries. This agreement restricts the ability of each
of the Company's employees (other than those employed by the Company in
California) to compete with the Company and its subsidiaries during his or her
employment with the Company and for a period of twelve months thereafter, and
contains certain confidentiality and invention assignment provisions.
CERTAIN BUSINESS RELATIONSHIPS
William M. Gibson
Three family members of William M. Gibson, who owns more than five
percent (5%) of the outstanding shares of Common Stock and was formerly a
director and executive officer of the Company, are employees of the Company. Mr.
Gibson's brother, Sean Gibson, has been an employee in the Company's sales
department since 1985 and received $516,962 in compensation from the Company for
the last fiscal year. Mr. Gibson's brother, Patrick Gibson, has been an employee
in the Company's solutions support department since 1985 and received $82,873 in
compensation from the Company for the last fiscal year. Mr. Gibson's daughter,
Carrie Gibson, has been an employee in the Company's human resources department
since 1997. Ms. Gibson has given notice that she will be resigning from the
Company in July 2003.
Joseph H. Jacovini
Joseph H. Jacovini, a director of the Company, is a partner and
Chairman of Dilworth Paxson LLP, counsel to the Company.
18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent (10%) of the
Common Stock (collectively, "Reporting Persons") to file initial reports of
ownership and reports of changes of ownership of the Common Stock with the
Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market.
Reporting Persons are required to furnish the Company with copies of all forms
that they file under Section 16(a). Based solely upon a review of the copies of
such forms received by the Company or written representations from Reporting
Persons, the Company believes that, with respect to fiscal year 2003, all
Reporting Persons complied with all applicable filing requirements under Section
16(a).
19
PROPOSAL 2 - TO APPROVE AMENDMENTS TO THE AMENDED AND RESTATED 1998
STOCK OPTION PLAN
The 1998 SOP was adopted by the Board on July 24, 1998 and approved
most recently by the shareholders in 2001. A copy of the 1998 SOP with proposed
amendments incorporated is attached to the Proxy Statement as Exhibit B.
The shareholders are being asked to vote on a proposal to approve an
amendment to the 1998 SOP to permit the Company to issue restricted stock, up to
a limit for an individual in a calendar year of 200,000 shares. The Board
adopted the proposed amendment on June 13, 2003, subject to shareholder approval
at the Meeting. The Board has also amended the 1998 SOP to provide that it
requires shareholder approval for any decrease in the exercise price of
outstanding stock options granted under the 1998 SOP or for any substitution of
new stock options with a lower exercise price in exchange for outstanding stock
options granted under the 1998 SOP.
The Board believes authorizing restricted stock is necessary to provide
the Company with sufficient flexibility in a changing market for equity
incentives to attract, employ, and retain employees, directors, and consultants
of outstanding ability and to increase the incentive for outstanding performance
through stock ownership on the part of key employees of the Company. The Board
chose not to increase the number of shares of Common Stock authorized for
issuance under the 1998 SOP to avoid any undue shareholder dilution. The stock
option and restricted stock grants vest over a period of time and thus encourage
employees to remain with the Company. In addition, the ultimate value of the
grants is determined by the appreciation of the price of the Company's Common
Stock, which also benefits all shareholders. The Board believes the 1998 SOP, as
amended, furthers the Company's longstanding goal of aligning the interests of
employees and shareholders.
DESCRIPTION OF THE 1998 SOP
The 1998 SOP, as amended, provides for the grant of incentive stock
options, non-qualified stock options, and restricted stock to our employees (and
employees of subsidiaries), including directors who are employees. Non-employee
directors and consultants may receive nonqualified stock options, and
non-employee directors may also receive restricted stock. A maximum of
20,475,800 shares have been authorized for issuance under the 1998 SOP, in the
form of either options or restricted stock. As of May 31, 2003, there were
approximately 9,858,571 shares authorized and available for grant, and there
were approximately 1,035 employees and six non-employee directors eligible to
participate in the 1998 SOP.
Administration. The Company's Compensation Committee administers the
1998 SOP. This committee of the Board of Directors consists of not fewer than
two members of the Board, each of whom is a "Non-Employee Director" (as defined
in Rule 16b-3 under the Exchange Act). The Compensation Committee selects
employees and directors of, and consultants to, the Company or its subsidiaries
to whom discretionary grants of options or restricted stock may be made, the
times at which options or restricted stock may be granted, whether the options
are incentive or non-qualified, the number of shares that may be purchased upon
the exercise of options or received under grants and all other terms and
conditions of each option or grant. Subject to the terms and conditions and
within the limitations of the 1998 SOP, the Compensation Committee may modify
outstanding options granted under the 1998 SOP, except that no modification of
an option may, without the consent of the optionee, impair any rights under any
option theretofore granted under the 1998 SOP, and no modification may, without
the consent of shareholders, decrease the exercise price of outstanding options.
The Compensation Committee also has the full power to construe and interpret the
1998 SOP and make any determination of fact incident to the 1998 SOP; issue,
amend, and rescind rules and regulations relating to the implementation,
operation, and administration of the 1998 SOP; delegate authority to the Chief
Executive Officer of the Company to grant options within prescribed limits to
employees of the Company other than executive officers, and make all other
determinations and take all other actions as the Committee may deem necessary or
advisable for the administration and operation of the 1998 SOP.
Limitations. No employee may receive options under the 1998 SOP to
purchase more than one million shares of Common Stock in any calendar year, nor
may grants of restricted stock to individuals exceed 200,000 shares in a
calendar year.
Price. The exercise price of all stock options and restricted stock
granted under the 1998 SOP must be at least equal to the fair market value of
the Common Stock on the date of grant, or, for incentive stock options granted
to employees who own at least 10% of our stock (as such ownership is defined in
the tax laws), at least 110% of fair market value. As amended, the plan does not
permit a decrease in the exercise price of any option previously granted except
as otherwise permitted under the 1998 SOP for corporate changes, such as in the
event of a stock split or merger.
Terms and Exercisability. An option will be exercisable at such time or
times and subject to such terms and conditions as the Compensation Committee
determines at the date of grant. Options may be exercised by an optionee only
during the period in which the optionee is employed by the Company or its
subsidiaries, except that the Compensation Committee may permit the exercise of
any
20
option for any period following the optionee's termination of employment not in
excess of the original term of the option on such terms and conditions as it
deems appropriate. If any option is subject to any vesting requirements, the
Compensation Committee may provide for the acceleration of the time in which
such option may be exercised. In no event may an incentive stock option granted
under the 1998 SOP be exercisable more than ten years after the date of the
grant, or, if granted to 10% or more owners, five years from the date of grant.
Option Exercise Payment. The 1998 SOP permits Common Stock purchased
upon the exercise of options to be paid (i) in cash or by check, (ii) through a
broker-facilitated cashless exercise procedure to the extent permitted by
applicable law, or (iii) if approved by the Compensation Committee, by delivery
of shares owned by the optionee, provided such shares have been held for at
least six months, in each case subject to the Sarbanes-Oxley Act of 2002 or
other applicable law.
Restricted Stock Grants. If the shareholders approve the amendment to
the 1998 SOP, the Compensation Committee will be able to grant restricted stock
awards entitling recipients to acquire shares of Common Stock, subject to such
terms and conditions as the Compensation Committee may determine appropriate,
including restrictions on sale or transfer and the obligation of the recipient
to forfeit the shares under certain terminations of employment, and may impose
additional restrictions upon vesting. Stock certificates issued in respect of a
restricted stock award are registered in the name of the participant and held in
escrow by the Company until expiration of the applicable restriction periods,
provided that recipients may vote the shares and may receive dividends (which
dividends will be subject to the same restrictions as the shares to which they
relate). Any restricted stock award granted to a participant will restrict the
release of the shares subject to the award for a period of at least 12 months
following the date of grant. The total shares available under the 1998 SOP for
restricted stock grants are 2,000,000, counted against the 1998 SOP's total
available shares.
Merger or Consolidation. If the Company is the surviving corporation
after a merger or consolidation, outstanding awards will pertain to the
resulting corporation, subject to adjustments as appropriate to provide that it
relates to the consideration a shareholder received. If the Company dissolves,
liquidates, or merges or consolidates but does not survive, each option will
terminate (unless assumed or replaced by a successor or related company)
provided that an optionee must have an opportunity before the transaction or
other event to exercise all his then outstanding options. Notwithstanding the
foregoing, if an employee is terminated involuntarily without cause within one
year after a consolidation or merger in which the Company is not the surviving
corporation, all outstanding options (i.e., successor options) will be
exercisable for a period of 90 days after such termination, but in no event
longer than the original expiration date set forth in the option.
Options to Non-Employee Directors. On the date of each annual meeting
of shareholders, all persons who are continuing in office as non-employee
directors receive an option to acquire 10,000 shares of Common Stock. All
non-employees who are newly elected to the Board of Directors, after March 1,
2003, at an annual meeting of shareholders receive an option to purchase 35,000
shares of Common Stock (in lieu of the 10,000 for continuing directors), and all
non-employees who are newly elected other than at an annual meeting receive an
option for a prorated portion of the 35,000 shares, based on the number of
fiscal quarters ending after the date of election and before the next annual
meeting of shareholders. Options will be priced at the fair market value of the
underlying Common Stock on the date of grant. Each option received by a director
under these provisions will vest and become exercisable quarterly over a
five-year period from the date the option is granted. Directors may also receive
discretionary grants. If a director's term of office is terminated by the death
of the director, the executor or administrator of such director's estate will
have the right to exercise the options vested on the date of death within one
year of the date of death of the director. After this one-year period, the
option will terminate. Any director leaving the Board before the quarterly
vesting date will forfeit the unvested portion of any such option grant.
However, any director asked to resign from the Board, except for Cause
(consisting of the Board's good faith determination that the director has not
acted in good faith and in a manner in, or not opposed, to the Company's best
interests, in relationship to his duties), or not nominated for election to an
additional term on the Board, except for such Cause, will retain the unvested
portion of his or her option grants, subject to their original vesting schedule.
All options to directors are subject to the general terms and conditions set
forth in the 1998 SOP.
Adjustment Upon Changes In Capital Structure. If the Company undergoes
a change in its capital structure, capitalization or common stock, such as a
stock dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization or any other
change affecting the Common Stock, the Board will make such proportionate
adjustment, if any, as it may consider appropriate to reflect such change with
respect to the maximum number of shares of Common Stock that may be issued under
the 1998 SOP, the number of shares of Common Stock subject to any outstanding
option or restricted stock grant, the per share exercise price in respect to any
outstanding option, and any other term or condition of any grant affected by any
such change.
Amendment and Termination. The Board of Directors may terminate or
amend the 1998 SOP at any time. The Company's shareholders must approve any
increase in the total number of shares available under the 1998 SOP. No awards
may be made under the 1998 SOP after July 23, 2008.
21
New Plan Benefits. Because the 1998 SOP is discretionary, benefits to
be received by individual optionees, other than non-employee directors, are not
determinable, and no outstanding grants or other benefits are contingent on
shareholder approval. Each of the directors continuing service at the Meeting
will receive an automatic option grant to purchase 10,000 shares on the date of
the Meeting with an exercise price per share equal to the closing price per
share of Common Stock on the date of the Meeting. Each non-employee director who
begins serving on or after March 1, 2003 will receive options as described above
under Director Compensation.
TAX EFFECTS OF 1998 SOP PARTICIPATION
The following briefly summarizes the federal income tax consequence of
the issuance and exercise of stock options and other stock awards under the 1998
SOP. The following discussion does not purport to be complete and does not
cover, among other things, the state, local, and foreign tax treatment
associated with the grant and exercise of options.
Nonqualified Stock Options. An optionee will not be taxed when he
receives a nonqualified stock option ("NQSO"). When the optionee exercises an
NQSO, he will generally owe taxes on ordinary income on the difference between
the value of the shares he receives and the price he pays, with the "spread"
treated like additional salary for an employee. He may then owe taxes again if
and when he sells the shares. That tax would be on the difference between the
price he received for the shares and his "basis," which is the sum of the price
he originally paid plus the value of the shares on which he originally paid
income taxes. Depending upon how long he held the shares before selling, he may
be eligible for favorable tax rates for certain kinds of capital gains. In
addition, we will receive an income tax deduction for any amounts of "ordinary
income" realized by him.
Incentive Stock Options. An optionee will not be taxed when he receives
an incentive stock option ("ISO") and will not be taxed when he exercises an
ISO, unless he is subject to the alternative minimum tax ("AMT"). If he holds
the shares purchased upon exercise of the ISO ("ISO Shares") for more than one
year after the date he exercised the option and for more than two years after
the option grant date, he generally will realize long-term capital gain or loss
(rather than ordinary income or loss) when he sells or otherwise disposes of the
ISO Shares. This gain or loss will equal the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.
If the optionee sells the ISO Shares in a "disqualifying disposition"
(that is, within one year from the date he exercises the ISO or within two years
from the date of the ISO grant), he generally will recognize ordinary
compensation income equal to the lesser of (1) the fair market value of the
shares on the date of exercise minus the price he paid or (2) the amount he
realized on the sale. For a gift or another disqualifying disposition where a
loss, if sustained, would not usually be recognized, he will recognize ordinary
income equal to the fair market value of the shares on the date of exercise
minus the price he paid. Any amount realized on a disqualifying disposition that
exceeds the amount treated as ordinary compensation income (or any loss
realized) will be a long-term or a short-term capital gain (or loss), depending,
under current law, on whether he held the shares for at least 12 months. The
Company can generally take a tax deduction on a disqualifying disposition
corresponding to the ordinary compensation income he recognized, but cannot
deduct the amount of the capital gains.
Alternative Minimum Tax. The difference between the exercise price and
the fair market value of the ISO Shares on the date of exercise is an adjustment
to income for purposes of the AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is a certain percentage of an individual taxpayer's
alternative minimum taxable income that is lower than the regular tax rate but
covers more income. Taxpayers determine their alternative minimum taxable income
by adjusting regular taxable income for certain items, increasing that income by
certain tax preference items, and reducing this amount by the applicable
exemption amount. If a disqualifying disposition of the ISO Shares occurs in the
same calendar year as the exercise of the ISO, there is no AMT adjustment with
respect to those ISO Shares. Also, upon a sale of ISO Shares that is not a
disqualifying disposition, alternative minimum taxable income is reduced when he
sells by the excess of the fair market value of the ISO Shares at exercise over
the amount paid for the ISO Shares.
Exercise by Delivery of Previously Acquired Shares. Generally, an
optionee will not recognize gain or loss upon the transfer to the Company of
previously acquired shares of common stock (the "Old Shares") in payment of all
or a portion of the exercise price of shares of common stock (the "New Shares")
acquired through the exercise of an option. The optionee's basis and holding
period in the Old Shares are transferred to that number of New Shares that
equals the number of Old Shares tendered in payment of the exercise price.
Additional New Shares have a basis equal to any income recognized by the
optionee on exercise plus any cash paid in payment of the exercise price.
However, if Old Shares are used to exercise an ISO, the disposition of the Old
Shares will be taxable generally in accordance with the rules discussed above if
the Old Shares were acquired by exercising an ISO and have not been held for the
requisite holding period.
Restricted Stock. With respect to awards granted under the 1998 SOP
involving the issuance of shares that are restricted as to transferability and
subject to a substantial risk of forfeiture, the participant generally must
recognize ordinary income equal to the fair market value of the shares at the
first time the shares become transferable or are not subject to a substantial
risk of forfeiture, whichever occurs earlier. The participant may be able to
accelerate the taxation by filing a notice with the Internal Revenue Service to
22
treat the property as taxable even though subject to restrictions. The Company
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the participant, either eventually or by this acceleration
election.
Effect of Million Dollar Deduction Limit. The tax laws limit our
ability to deduct compensation received by senior executives in certain
circumstances. Grants made by the Compensation Committee under the 1998 SOP
should be excluded from those limits, while grants made by delegation of
authority to corporate officers would not be excluded.
Tax Withholding Under the Code. The Company will be required to
withhold taxes in some circumstances associated with the participants' receiving
compensation or on vesting of restricted stock.
Payments Upon Change in Control. The 1998 SOP provides for the
acceleration of vesting on awards in the event of certain acquisition events or
other change in control of the Company, as defined in the 1998 SOP. Acceleration
of payment may cause part or all of the consideration involved to be treated as
a "parachute payment" under the Code, which may subject the recipient to a 20%
excise tax and which may not be deductible by the Company for federal income tax
purposes.
This is a summary of the general principles of current federal income
tax law applicable to the purchase of shares under the 1998 SOP. While we
believe that the description accurately summarizes existing provisions of the
Code, and its legislative history and regulations, and the applicable
administrative and judicial interpretations, these statements are only
summaries, and the rules in question are quite detailed and complicated.
Moreover, legislative, administrative, regulatory or judicial changes or
interpretations may occur that would modify these statements. Individual
financial situations may vary, and state and local tax consequences may be
significant. Therefore, no one should act based on this description without
consulting his own tax advisors concerning the tax consequences of purchasing
shares under the 1998 SOP and disposing of those shares. In addition, different
rules may apply if the optionee is subject to foreign tax laws.
RECENT CHANGES TO AND EVENTS AFFECTING THE 1998 SOP
The Board has changed the plan as follows since the 2001 annual meeting
(at which it was last approved by shareholders): (i) by allowing limited
transfers of non-qualified stock options and restricted stock for estate and
other tax planning, without prior consent, (ii) by delegating limited authority
to the Chief Executive Officer to make grants, (iii) by permitting directors to
receive discretionary grants, (iv) by decreasing from 32,000 to 10,000 the
number of shares covered by option grants to directors continuing in office on
the date of the annual meeting of shareholders, and (v) by increasing from
32,000 to 35,000 the number of shares covered by option grants to new directors.
On February 10, 2003, the Company announced a voluntary stock option
exchange program for its employees. Under the program, the Company offered to
exchange options to purchase approximately an aggregate of 6.1 million shares of
its common stock held by eligible employees, vested or unvested, that had
exercise prices equal to or greater than $7.0001 per share. All employees had
the opportunity to exchange existing eligible options for a promise to grant new
options at exchange ratios dependent on the exercise price of the exchanged
options. Members of the Board of Directors (including the Company's Chief
Executive Officer) did not participate in this program.
On March 10, 2003, the Company announced that it had accepted for
cancellation and exchange options to purchase approximately 4.8 million shares
of its common stock in exchange for approximately 1.5 million new options of its
common stock, to be granted on September 16, 2003 to persons who remain employed
by the Company on that date. As of May 31, 2003, approximately 1,013,815 and
423,205 shares are issuable under the 1998 SOP and 2000 SOP, respectively, on
account of options cancelled in the option exchange program, of which
approximately 645,533 will be granted to current executives of the Company. The
replacement options have terms and conditions that are substantially the same as
those of the cancelled options. The exercise price of the replacement options
will be the greater of (a) the market value of the Company's common stock on the
date of grant or (b) $2.30.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the Meeting will be
required to approve the amendment to the 1998 SOP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
AMENDMENT TO THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN.
23
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
The Audit Committee of the Board of Directors has selected Deloitte &
Touche LLP, as the Company's independent auditor for the fiscal year ending
February 29, 2004, and has further directed that management submit the selection
of independent auditor for ratification by the shareholders at the Meeting.
Deloitte & Touche LLP currently serves as the Company's independent
auditor, and has been the Company's independent auditor since 1988. Deloitte &
Touche's services to the Company for fiscal 2003 included the audit of the
Company's annual consolidated financial statements, reviews of interim financial
statements, services in connection with audits of the Company's income tax
returns, statutory audits of certain foreign subsidiaries and consultation on
other matters.
Representatives of Deloitte & Touche LLP will be present at the Meeting
and will be given an opportunity to make a statement. They also will be
available to respond to appropriate questions from shareholders. The Audit
Committee of the Board of Directors has determined that the provision of
non-audit services by Deloitte & Touche LLP is compatible with maintaining the
independence of Deloitte & Touche LLP with respect to the Company for the fiscal
year ended February 28, 2003.
Shareholder ratification of the selection of Deloitte & Touche as the
Company's independent auditor is not required by applicable law, or by the
Company's By-laws or other governing documents. However, the Audit Committee of
the Board is submitting the appointment of Deloitte & Touche to the shareholders
as a matter of good corporate practice. If the shareholders fail to ratify the
appointment, the Audit Committee will reconsider whether or not to retain the
firm. Even if the appointment is ratified, the Audit Committee in its discretion
may direct the appointment of a different independent auditing firm at any time
during the year if the Audit Committee determines that such change would be in
the best interest of the Company and its shareholders. The affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote at the Meeting will be required to ratify the
selection of Deloitte & Touche.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITOR.
AUDIT FEES
The following table presents fees for professional services rendered by
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their
respective affiliates (collectively, "Deloitte & Touche"), which includes
Deloitte Consulting, for the audit of the Company's annual financial statements
and review of interim financial statements for fiscal years 2002 and 2003, and
fees for other services rendered by Deloitte & Touche for fiscal years 2002 and
2003.
2002 2003
---- ----
Audit Fees (a)
Audit and quarterly reviews $ 500,000 $ 827,000
Statutory audits 147,000 192,000
SEC compliance 90,000 167,000
---------- -----------
Total Audit Fees $ 737,000 $ 1,186,000
Audit-Related Fees (b) $ 71,000 $ 99,000
Tax Fees (c) $ 133,000 $ 206,000
All Other Fees (d) $ 499,000 $ 0
---------- -----------
Total Fees $1,440,000 $1,491,000
(a) Audit Fees for the fiscal years ended 2002 and 2003 were for all services
performed in connection with the audits of the Company's annual
consolidated financial statements and quarterly reviews for the fiscal
years ended 2002 and 2003.
(b) Audit-Related Fees for the fiscal years ended 2002 and 2003 were mainly for
assurance and related services in connection with acquisitions and internal
controls analysis.
(c) Tax Fees for the fiscal years ended 2002 and 2003 were for tax compliance,
tax planning and tax advice provided to the Company and its foreign
subsidiaries.
(d) All Other Fees for the fiscal year ended 2002 were for software
implementation services, unrelated to financial information systems design
and implementation services, provided by Deloitte Tohmatsu Consulting.
24
ADDITIONAL INFORMATION
The Company has adopted a process called "householding" for mailing the
Annual Report on Form 10-K and proxy statement in order to reduce printing costs
and postage fees. Householding means that shareholders who share the same last
name and address will receive only one copy of the Annual Report on Form 10-K
and proxy statement, unless we receive contrary instructions from any
shareholder at that address. We will continue to mail a proxy card to each
shareholder of record.
If you prefer to receive multiple copies of the Annual Report on Form
10-K and proxy statement at the same address, we will provide additional copies
to you promptly upon request. If you are a shareholder of record, please contact
Nate Wallace, Vice President, Investor Relations, at 9715 Key West Drive,
Rockville, Maryland 20850, or at telephone number (301) 255-5327. Eligible
shareholders of record receiving multiple copies of the Annual Report and proxy
statement can request householding by contacting us in the same manner.
If you are a beneficial owner, you may request additional copies of the
Annual Report on Form 10-K and proxy statement or you may request householding
by contacting your broker, bank or nominee.
Copies of Manugistics' Annual Report on Form 10-K and the exhibits to
the Annual Report on Form 10-K are available at no charge upon request. To
obtain copies of the Annual Report on Form 10-K or its exhibits, please contact
Nate Wallace, Vice President, Investor Relations, at 9715 Key West Drive,
Rockville, Maryland 20850, or at telephone number (301) 255-5327.
25
SUBMISSION OF SHAREHOLDER PROPOSALS FOR THE
2004 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals submitted for inclusion in the Proxy Statement
for the 2003 Annual Meeting of Shareholders must be received by the Company at
the Company's corporate headquarters address and must be submitted in accordance
with the By-laws and Rule 14a-8 of the Exchange Act on or before March 2, 2004.
Under the Company's By-Laws, shareholder proposals which are not
submitted for inclusion in the Company's Proxy Statement for the 2004 Annual
Meeting of Shareholders must be received by the Secretary of the Company: (i) 60
days in advance of such meeting if the meeting is to be held on a day which is
within 30 days preceding the anniversary of the 2003 Meeting, or (ii) 90 days in
advance of such meeting if the meeting is to be held on a day which is on or
after the anniversary of the 2003 Meeting. Shareholder proposals not submitted
for inclusion in the Company's proxy statement relating to an annual meeting to
be held 30 days or more prior to the anniversary of the preceding year's annual
meeting or relating to a special meeting must be received no later than the
close of business on the tenth day following public announcement of the meeting
date. All notices must briefly describe the business desired to be brought
before the meeting, the shareholder's name and address as appearing on the
Company's books, the class and number of shares owned and any material interest
of the shareholder in such matter.
OTHER BUSINESS
The Board of Directors does not intend to bring any other matter before
the Meeting and does not know of any other business which others will present
for consideration at the Meeting. Except as the Board of Directors may otherwise
permit, only the business set forth and discussed in the Notice of Annual
Meeting of Shareholders and this Proxy Statement may be acted on at the Meeting.
If any other business does properly come before the Meeting, the proxy holders
will vote on such matters according to their discretion.
By Order of the Board of Directors
/s/ Timothy T. Smith
----------------------------------------------------
Timothy T. Smith
Senior Vice President, General Counsel and Secretary
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR YOUR PROMPT
ATTENTION TO THIS MATTER.
26
EXHIBIT A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF MANUGISTICS GROUP, INC. (THE "CORPORATION")
CHARTER
I. PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities with respect to the
accounting and financial reporting processes of the Corporation and
audits of the financial statements of the Corporation. The Committee's
primary functions are to:
- Serve as an independent and objective monitor of the
Corporation's financial reporting process and internal control
system.
- Select, oversee and evaluate the Corporation's independent
accountants.
- Facilitate open, ongoing communication among the Corporation's
independent accountants, senior management and the Board of
Directors concerning the Corporation's financial, audit and
accounting issues and affairs.
Although the Committee has the authority and responsibilities set forth
in this Charter, the primary role of the Committee is oversight. It is
not the duty of the Committee to conduct audits, to determine that the
Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles and applicable
laws, rules and regulations, or to otherwise assure compliance with
applicable laws, rules and regulations. These are the responsibilities
of management and the independent accountants.
II. AUTHORITY
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention. The Committee may
request any officer or employee of the Company or the Company's
independent accountants to attend a meeting of the Committee or to meet
with any members of, or advisors to, the Committee.
The Committee shall have the sole authority to appoint, determine
funding for and oversee the independent accountants. The Committee
shall also have the authority to engage and determine funding for
independent legal, accounting and other advisors as it determines
necessary to carry out its duties.
The Committee may form and delegate authority to subcommittees
consisting of one or more members (a) to grant pre-approvals of
auditing services and non-audit services provided to the Company by the
independent accountants or (b) to perform other duties (subject to
Board approval) as appropriate.
III. MEMBERSHIP REQUIREMENTS
The Committee shall consist of not less than three members, each of
whom shall be independent (as that term is defined in the relevant
Nasdaq listing standards) and able to read and understand fundamental
financial statements (or become able to do so within a reasonable
period of time after appointment to the Committee). At least one member
shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other
comparable experience or background which results in the member's
financial sophistication, and, to the extent practicable, at least one
member (who may be the same member) shall qualify as an audit committee
financial expert (as that term is defined in SEC disclosure
requirements).
IV. STRUCTURE AND PROCESSES
Appointment of Members, Chairperson. Committee members shall be
appointed by the Board of Directors at the annual organizational
meeting of the Board of Directors. The Board of Directors shall appoint
one member of the Committee to serve as Chairman of the Committee.
Meetings. The Committee shall meet at least eight times annually, or
more frequently as circumstances dictate. The
27
Committee shall meet at least annually, and more often as warranted,
with the Chief Executive Officer, the CFO and the independent
accountants in separate executive sessions to discuss any matters that
the Committee or any of these parties believes should be discussed
privately. The Committee may meet in person or telephonically. Minutes
of the meetings of the Committee shall be regularly kept by the
Secretary or a person appointed by the Committee to do so.
Conflicts of Interest. In the event that a Committee member faces a
potential or actual conflict of interest with respect to a matter
before the Committee, that Committee member shall be responsible for
alerting the Committee Chairman, or if the affected committee member is
the Committee Chairman, shall advise the remaining members of the
Committee. In the event that the Committee Chairman, or the remaining
members of the Committee, as the case may be, concur that a potential
or actual conflict of interest exists, the affected Committee member
shall not participate in the matter before the Committee.
V. RESPONSIBILITIES
The responsibilities of a member of the Committee are in addition to
those responsibilities generally pertaining to a member of the Board of
Directors. The following actions shall be taken by the Committee in
carrying out its oversight responsibilities. These actions are set
forth as a guide with the understanding that the actions taken may vary
depending on the circumstances.
- Select, appoint, determine funding for, oversee, evaluate, and,
where appropriate, replace the independent accountants, which
accountants shall be ultimately accountable to the Board of
Directors and the Committee, as representatives of the
shareholders of the Corporation.
- On an annual basis, ensure receipt of, and review with the
independent accountants, a written statement required by
Independence Standards Board (ISB) Standard No. 1, as such
standard may be modified or supplemented, discuss with the
accountants its independence, and take or recommend that the Board
of Directors take appropriate action with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the accountants to satisfy itself that the
Corporation has engaged independent accountants as required by the
federal securities acts.
- Review and pre-approve all audit services and permissible
non-audit services to be provided by the independent accountants
and the related fees and compensation for such services.
- Review the performance of the CFO and review and concur in the
appointment, replacement, reassignment or dismissal of the CFO.
- Review with senior management and the independent accountants, at
the completion of the annual audit, the following items to be
included in the Annual Report on Form 10-K for the last fiscal
year and prior to its filing:
(1) the Corporation's annual consolidated financial statements
and related footnotes;
(2) the independent accountants' audit of the consolidated
financial statements and their report thereon;
(3) any significant changes required in the independent
accountants' examination plan;
- Review with the independent accountants, at the completion of the
annual audit:
(1) any serious difficulties or disputes with the CFO or
management encountered during the course of the audit; and
(2) any other matters related to the conduct of the audit
which are to be communicated to the Committee under
generally accepted auditing standards including, items set
forth in Statement on Auditing Standards No. 61 --
Communication with Audit Committees ("SAS 61") or other
such auditing standards that may in time modify,
supplement or replace SAS 61.
- On an annual basis, in consultation with the independent
accountants and senior management, review the adequacy and quality
of the Corporation's financial reporting processes and system of
internal control.
- Prepare an Audit Committee Report for inclusion in all proxy and
information statements relating to votes of shareholders. The
Audit Committee Report must state whether the Committee:
(1) has reviewed and discussed the audited consolidated
financial statements with management;
28
(2) has discussed with the independent accountants the matters
required to be discussed by SAS 61, as such standard may
be modified or supplemented;
(3) has received the written disclosures from the independent
accountants required by ISB Standard No. 1, as such
standard may be modified or supplemented, and has
discussed with the accountants their independence;
(4) has recommended to the Board of Directors, based on the
review and discussions referred to in items (l) through
(3) above, that the Corporation's consolidated financial
statements be included in the Annual Report on Form 10-K
for the last fiscal year for filing with the Securities
and Exchange Commission;
(5) has adopted a written charter for the audit committee (and
include a copy of the Charter as an appendix to the
company's proxy statements at least once every three
years); and
(6) is comprised of independent members.
- Review with senior management and the independent accountants the
financial information contained in the Corporation's Quarterly
Report on Form 10-Q prior to its filing.
- Review with senior management and, where appropriate, the
Company's independent accountants, the financial information
contained in the Company's earnings releases, pre-announcements
and any other announcements provided to the Committee containing
material financial information not previously released.
- Review legal and regulatory matters that may have a material
impact on the Corporation's consolidated financial statements and
related compliance policies and programs.
- Establish procedures for the confidential anonymous submission by
employees of concerns regarding questionable accounting or
auditing matters.
- Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting or
auditing matters.
- Review and reassess the adequacy of the audit committee charter on
an annual basis.
- Undertake such other actions as necessary or appropriate under
law, the Corporation's charter or By-laws, and the resolutions and
other directives of the Board of Directors.
The Committee will report its actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
29
EXHIBIT B
AMENDED AND RESTATED 1998 STOCK OPTION PLAN
1. PURPOSE.
The purposes of the Amended and Restated 1998 Stock Option
Plan (the "Plan") of Manugistics Group, Inc. (the "Company") are to advance the
interests of the Company and its shareholders by strengthening the ability of
the Company to attract, retain and reward highly qualified officers and other
employees, to motivate officers and other selected employees to achieve business
objectives established to promote the long-term growth, profitability and
success of the Company, and to encourage ownership of the Common Stock of the
Company by participating officers and other selected employees. In addition, the
Plan is intended as an additional incentive to directors of the Company who are
not employees of the Company or a Subsidiary to serve on the Board of Directors
and devote themselves to the future success of the Company by providing them
with an opportunity to acquire or increase their proprietary interest in the
Company through the receipt of restricted stock or options to acquire Common
Stock. The Plan is also intended as an additional incentive to selected
consultants to the Company to devote themselves to the success of the Company by
providing them with similar benefits. The Plan authorizes stock compensation in
the form of incentive and non-qualified stock options and awards of restricted
stock.
2. DEFINITIONS.
"Board of Directors" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, or any successor statute thereto, together with the
published rulings, regulations and interpretations duly promulgated thereunder.
"Committee" means the committee of the Board of Directors
established and constituted as provided in Section 5 of the Plan.
"Common Stock" means the common stock, $.002 par value of the
Company, or any security issued by the Company in substitution or exchange
therefor or in lieu thereof.
"Company" means Manugistics Group, Inc., a Delaware
corporation, or any successor corporation.
"Employee" means any employee, including any officer of the
Company, who is on the active payroll of the Company or a Subsidiary at the
relevant time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, including all rules and regulations
promulgated thereunder.
"Fair Market Value" means in respect of any date on or as of
which a determination thereof is being or to be made, the average of the high
and low per share sale prices of the Common Stock reported on the NASDAQ
National Market System, or other established stock exchange on which the Common
Stock is then traded.
"Incentive Stock Option" means any option to purchase shares
of Common Stock granted pursuant to the provisions of Section 6 of the Plan that
is intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any option to purchase
shares of Common Stock granted pursuant to the provisions of Section 6 of the
Plan that is not an Incentive Stock Option.
"Participant" means any Employee or non-employee director of,
or consultant to, the Company or a Subsidiary who receives a Stock Option or
Restricted Stock Grant under the Plan.
"Plan" means this Amended and Restated 1998 Stock Option Plan
of the Company, as set forth herein and as hereafter amended from time to time
in accordance with the terms hereof.
"Restricted Stock" means shares of Common Stock issued
pursuant to a Restricted Stock Grant under Section 7 of the Plan so long as such
shares remain subject to the restrictions and conditions specified in the grant
agreement pursuant to which such Restricted Stock Grant is made.
30
"Restricted Stock Grant" means a grant made pursuant to the
provisions of Section 7 of the Plan.
"Stock Option" means and includes any Non-Qualified Stock
Option and any Incentive Stock Option granted pursuant to Section 6 of the Plan.
"Subsidiary" means a subsidiary of the Company as defined in
Section 424(f) of the Code.
3. EFFECTIVE DATE; TERM.
(a) EFFECTIVE DATE. The Plan became effective on July 24,
1998, with the addition of Restricted Stock as reflected herein taking effect on
July 29, 2003, if approved by the shareholders of the Company at the 2003 annual
meeting of shareholders of the Company or any adjournments thereof.
(b) TERM. The Plan shall remain in effect until July 23,
2008 unless sooner terminated by the Board of Directors. Termination of the Plan
shall not affect grants then outstanding.
4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER
THE PLAN. The maximum aggregate number of shares of Common Stock which may be
issued pursuant to the Plan, subject to adjustment as provided in Section 4(b)
of the Plan, shall be twenty million four hundred seventy-five thousand eight
hundred (20,475,800), plus any shares of Common Stock issued under the Plan that
are forfeited back to the Company or are canceled pursuant to the terms of any
grant agreement. The shares of Common Stock that may be issued under the Plan
may be authorized and unissued shares or issued shares which have been
reacquired by the Company. No fractional shares of the Common Stock shall be
issued under the Plan.
(b) ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the
event of any change in the capital structure, capitalization or Common Stock of
the Company such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Stock, such
proportionate adjustment, if any, as the Board of Directors in its discretion
may deem appropriate to reflect such change shall be made with respect to: (i)
the maximum number of shares of Common Stock which may be issued pursuant to the
Plan; (ii) the number of shares of Common Stock subject to any outstanding Stock
Option made to any Participant under the Plan; (iii) the per share exercise
price in respect of any outstanding Stock Options; (iv) the number of shares of
Common Stock which are the subject of Restricted Stock Grants then outstanding
under the Plan; and (v) any other term or condition of any grant affected by any
such change, subject to the provisions of Section 8(a) below.
5. ADMINISTRATION.
(a) THE COMMITTEE. The Plan shall be administered by a
committee to be appointed from time to time by the Board of Directors and
comprised of not less than two of the then members of the Board of Directors,
each of whom is a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Exchange Act (or has similar status under any successor provision) and is an
"outside director" within the meaning of Section 162(m) of the Code. Members of
the Committee shall serve at the pleasure of the Board of Directors. The Board
of Directors may from time to time remove members from, or add members to the
Committee. A majority of the members of the Committee shall constitute a quorum
for the transaction of business and the acts of a majority of the members
present at any meeting at which a quorum is present shall be the acts of the
Committee. Any one or more members of the Committee may participate in a meeting
by conference telephone or similar means where all persons participating in the
meeting can hear and speak to each other, which participation shall constitute
presence in person at such meeting. Action approved in writing by a majority of
the members of the Committee then serving shall be fully as effective as if the
action had been taken by unanimous vote at a meeting duly called and held. The
Company shall issue Stock Options and make Restricted Stock Grants under the
Plan in accordance with the terms and conditions specified by the Committee,
which terms and conditions shall be set forth in grant agreements and/or other
instruments in such forms as the Committee shall approve.
(b) COMMITTEE POWERS. The Committee shall have full power
and authority to operate and administer the Plan in accordance with its terms.
The powers of the Committee include, but are not limited to, the power to: (i)
select Participants from among the Employees and non-employee Directors of, and
consultants to, the Company and Subsidiaries; (ii) establish the types of, and
the terms and conditions of, all Stock Options and Restricted Stock Grants made
under the Plan, subject to any applicable limitations set forth in, and
consistent with the express terms of the Plan; (iii) award Stock Options and
Restricted Stock Grants subject to and consistent with the express provisions of
the Plan; (iv) prescribe the form or forms of grant agreements and other
instruments evidencing grants under the Plan; (v) construe and interpret the
Plan and make any determination of fact incident to the operation of the Plan;
(vi) promulgate, amend and rescind rules and regulations relating to the
implementation, operation and administration of the Plan; (vii) adopt such
modifications, procedures and subplans as may be necessary or appropriate to
comply with the laws of other countries with respect to Participants or
prospective Participants employed in such other countries; (viii) modify the
31
terms of outstanding Stock Options and Restricted Stock Grants, except that, (A)
without the consent of the recipient of a Stock Option or Restricted Stock
Grant, no such modification may impair the rights granted under any such Stock
Option or Restricted Stock Grant, and (B) without stockholder approval, the
Committee may not take any action to decrease the exercise price of previously
issued and currently outstanding Stock Options (except as provided in Section 4
of the Plan) or substitute new Stock Options with a lower exercise price in
exchange for outstanding Stock Options; (ix) delegate to other persons the
responsibility for performing administrative or ministerial acts in furtherance
of the Plan; (x) engage the services of persons and firms, including banks and
consultants, in furtherance of the Plan's activities; and (xi) delegate to the
Company's Chief Executive Officer its authority to award Stock Options and
Restricted Stock Grants to employees, other than persons deemed subject to the
reporting requirements of Section 16 of the Exchange Act, upon such terms as are
authorized by the Committee (and whose actions shall then be deemed as made by
the Committee for purposes of this Plan), and (xii) make all other
determinations and take all other actions as the Committee may deem necessary or
advisable for the administration and operation of the Plan.
(c) COMMITTEE'S DECISIONS FINAL. Any determination,
decision or action of the Committee in connection with the construction,
interpretation, administration or application of the Plan, and of any grant
agreement, shall be final, conclusive and binding upon all Participants, and all
persons claiming through Participants, affected thereby.
(d) INDEMNIFICATION OF COMMITTEE MEMBERS. In addition to
such other rights of indemnification as they may have as members of the Board or
the Committee, the members of the Committee shall be indemnified by the Company
against all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any Stock Option or Restricted Stock Grant granted under the Plan, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding;
provided, however, that any such Committee member shall be entitled to the
indemnification rights set forth in this Section 5(d) only if such member has
acted in good faith and in a manner that such member reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
conduct was unlawful, and further provided that upon the institution of any such
action, suit or proceeding a Committee member shall give the Company written
notice thereof and an opportunity to handle and defend the same before such
Committee member undertakes to handle and defend it on his own behalf.
6. STOCK OPTIONS.
(a) IN GENERAL. Options to purchase shares of Common
Stock may be granted under the Plan and may be Incentive Stock Options or
Non-Qualified Stock Options. All Stock Options shall be subject to the terms and
conditions of this Section 6 and shall contain such additional terms and
conditions, not inconsistent with the express provisions of the Plan, as the
Committee shall determine. Any option intended to qualify as an Incentive Stock
Option shall contain all of the terms required by the Code in order to receive
favorable tax treatment under the Code. If the Committee does not specify the
type of Stock Option, it shall be treated as a Non-Qualified Stock Option. Stock
Options may be granted in addition to or in tandem with or independent of
Restricted Stock Grants under Section 7 of the Plan.
(b) EMPLOYEE ELIGIBILITY AND LIMITATIONS. Any officer of
the Company and any other employee of the Company or a Subsidiary may be granted
Stock Options. The Committee shall determine, in its discretion, the Employees
to whom Stock Options will be granted, the timing of such grants, and the number
of shares of Common Stock subject to each Stock Option granted; provided, that
(i) the maximum number of shares of Common Stock in respect of which Stock
Options may be granted to any Employee during any calendar year shall be
1,000,000 and (ii) in respect of Incentive Stock Options, the aggregate Fair
Market Value (determined as of the date the Incentive Stock Option is granted)
of the shares of Common Stock with respect to which an Incentive Stock Option
becomes exercisable for the first time by an Employee during any calendar year
shall not exceed $100,000, or such other limit as may be required by the Code,
except that, any portion of any Incentive Stock Option that cannot be exercised
as such because of this limitation shall automatically be converted into and
exercised as a Non-Qualified Stock Option. The Committee as part of any
corporate transaction described in Section 424(a) of the Code shall have the
right (in any manner which the Committee in its discretion deems consistent with
Section 424(a) of the Code) to effect the assumption of, or the substitution
for, option grants previously made by any other corporation to the extent that
such corporate transaction calls for or permits such substitution or assumption
of such stock option grants.
(c) OPTION EXERCISE PRICE. The per share exercise price
of each Stock Option granted under the Plan shall be determined by the Committee
prior to or at the time of grant, but in no event shall the per share exercise
price of any Stock Option be less than 100% of the Fair Market Value of the
Common Stock on the date of the grant of such Stock Option, unless otherwise
required by law or in replacement for awards as part of an acquisition or
merger; provided, however, that the exercise price shall be increased to at
least 110% of Fair Market Value for Incentive Stock Options granted to persons
someone described in Code Sections 422(b)(6) and 424(d) (as a
more-than-10%-stockholder).
(d) OPTION TERM. The term of each Stock Option shall be
fixed by the Committee; except that in no event shall the term of any Incentive
Stock Option exceed ten years after the date such Incentive Stock Option is
granted (or five years for Incentive Stock Options granted to 10% owners covered
by Code Sections 422(b)(6) and 424(d)).
32
(e) EXERCISABILITY. A Stock Option shall be exercisable
at such time or times and subject to such terms and conditions as shall be
determined by the Committee at the date of grant. No Stock Option granted to an
Employee may be exercised unless the holder thereof is at the time of such
exercise an Employee and has been continuously an Employee since the date such
Stock Option was granted, except that the Committee may permit the exercise of
such Stock Option for any period following the holder's termination of
employment not in excess of the original term of the Stock Option on such terms
and conditions as it shall deem appropriate. In the case of any option subject
to any vesting requirements, the Committee may provide for the acceleration of
the time at which such option may be exercised.
(f) METHOD OF EXERCISE. A Stock Option may be exercised,
in whole or in part as to a minimum of 50 shares or, if fewer, the total number
of shares subject to the Stock Option, by giving written notice of exercise to
the Company specifying the number of shares of Common Stock to be purchased.
Such notice shall be accompanied by payment in full of the purchase price, plus
any required withholding taxes, in cash or by check or, if permitted by the
terms of the related grant agreement or otherwise approved in advance by the
Committee, in shares of Common Stock already owned by the Participant valued at
the Fair Market Value of the Common Stock on the date of exercise and held for a
period sufficient to avoid an accounting charge upon their use as payment. The
Committee may also permit Participants, either on a selective or aggregate
basis, to simultaneously exercise Stock Options and sell the shares of Common
Stock thereby acquired pursuant to a brokerage or similar arrangement approved
in advance by the Committee and to use the proceeds from such sale to pay the
exercise price and withholding taxes.
(g) STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS.
(i) On the date of the Annual Meeting of
Shareholders, each director who is not an employee of the Company shall receive
a Non-Qualified Stock Option to purchase shares of the Common Stock at a price
per share as determined in Section 6(c) above in the following amount: 10,000
shares commencing on the date of the first Annual Meeting to occur after the
director is initially elected or appointed to the Board and 10,000 shares on the
date of each Annual Meeting thereafter, so long as the director remains a member
of the Board. Each Non-Qualified Stock Option received by a director pursuant to
this Section 6(g)(i) shall vest quarterly on a calendar year basis over a five
year period and therefore become exercisable in 20 equal quarterly installments
on the last day of each calendar quarter commencing with the last day of the
first calendar quarter ending after the date the Non-Qualified Stock Option is
granted. Any director leaving the Board prior to the quarterly vesting date of
the Non-Qualified Stock Option grant shall forfeit the unvested portion of any
such Non-Qualified Stock Option grant, unless the exception contained in Section
6(g)(v) applies.
(ii) On January 13, 2000, each director who is not an
employee of the Company and who is presently serving as a director on such date
shall receive an additional Non-Qualified Stock Option to purchase 8,000 shares
of the Common Stock at a price per share as determined in Section 6(c) above.
Each additional Non-Qualified Stock Option received by a director pursuant to
this Section 6(g)(ii) shall vest quarterly over a four-year period and therefore
become exercisable in 16 equal installments each calendar quarter from the date
the additional Non-Qualified Stock Option is granted. Any director leaving the
Board prior to the quarterly vesting date of an additional Non-Qualified Stock
Option grant shall forfeit the unvested portion of any such additional
Non-Qualified Stock Option grant, unless the exception contained in Section
6(g)(v) applies.
(iii) Each director who is newly elected or appointed
to the Board following March 1, 2003 and who is not an employee of the Company
shall receive on the date of appointment/election a Non-Qualified Stock Option
to purchase shares of the Common Stock at a price per share as determined in
Section 6(c) above in the following amount: 35,000 shares, pro-rated as follows:
any director who is elected or appointed to the Board at any time other than an
Annual Meeting will receive a percentage of this grant on the date of his or her
election based on the number of fiscal quarters ending from the date of
appointment or election until the next Annual Meeting of Shareholders. Each
Non-Qualified Stock Option received by a director pursuant to this Section
6(g)(iii) shall vest and become exercisable in 20 equal quarterly installments
on the same date as the date of grant, provided that if the date of grant is the
last day of a month, the option shall vest on the last day of the month of such
quarterly period, whether or not the same date as the date of grant. Any
director leaving the Board prior to the quarterly vesting date of the
Non-Qualified Stock Option grant shall forfeit the unvested portion of any such
Non-Qualified Stock Option grant, unless the exception contained in Section
6(g)(v) applies.
(iv) If the director's term in office is terminated
by the death of the director, the executor or administrator of the director's
estate shall have the right to exercise with respect to all or any part of the
number of shares which were vested on the date of death, within one year of the
date of the death of the director.
(v) Any director asked to resign from the Board,
except for Cause (defined below), or not nominated for election to an additional
term on the Board, except for Cause (defined below), shall retain the unvested
portion of his or her Non-Qualified Stock Option grants, subject to their
original vesting schedule. "Cause" shall be defined as a good faith
determination by the Board that the director, in or related to the performance
of his or her duties, has not acted in good faith and in a manner to be in or
not opposed to the best interests of the Company.
(vi) Discretionary grants may also be made to
Non-Employee Directors in accordance with the terms of this Plan.
33
Notwithstanding anything contained herein to the contrary, no
Non-Qualified Stock Option shall be exercisable following ten (10) years from
the date the Non-Qualified Stock Option is granted.
(h) STOCK OPTIONS TO CONSULTANTS. The Committee may grant
Non-Qualified Stock Options to consultants to the Company on such terms and
conditions as are determined by the Committee, generally similar to those set
forth above in Sections 6(a) through 6(f), except that any restrictions required
to be set forth only in Stock Options to Employees need not be set forth in
Stock Options to consultants.
7. RESTRICTED STOCK GRANTS.
(a) IN GENERAL. A Restricted Stock Grant is the issue of
shares of Common Stock in the name of an Employee or director, which issuance is
subject to such terms and conditions as the Committee shall deem appropriate,
including, without limitation, restrictions on the sale, assignment, transfer or
other disposition of such shares and the requirement that the Participant
forfeit such shares back to the Company (i) upon termination of employment for
specified reasons within a specified period of time, or (ii) if such other
conditions as the Committee may specify are not satisfied. Restricted Stock may
be granted in addition to or in tandem with or independent of Stock Options
under Section 6 of the Plan.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the
Company and any other Employee or director of the Company or a Subsidiary
selected by the Committee may receive a Restricted Stock Grant. The Committee,
in its sole discretion, shall determine whether a Restricted Stock Grant shall
be made, the individual to receive the Restricted Stock Grant, and the
conditions and restrictions imposed on the Restricted Stock Grant. The maximum
number of shares of Common Stock that may be issued as Restricted Stock under
the Plan shall be two million, which number shall be counted against the total
set forth in Section 4(a) of the Plan. The maximum number of shares of Common
Stock that may be issued to any Participant as Restricted Stock during any
calendar year shall not exceed 200,000.
(c) WITHHOLDING TAXES. It shall be a condition of the
retention of any Restricted Stock that the Employee make satisfactory
arrangements for the payment to the Company of any withholding taxes due on
account of the Restricted Stock. The Employee shall notify the Company promptly
of any intent to make an election under Section 83(b) of the Code, so that
appropriate withholding arrangements can be made.
(d) RESTRICTION PERIOD. Restricted Stock Grants shall
provide that in order for a Participant to hold shares of Common Stock free of
restrictions, the Participant must remain in the employment or on the Board of
the Company or its Subsidiaries, subject to such exceptions as the Committee
shall deem appropriate and specify in the related grant agreement, for a period
of not less than one year commencing on the date of the grant and ending on such
later date or dates as the Committee may designate at the time of the grant (the
"Restriction Period"). The Committee, in its sole discretion, may provide for
the lapse of restrictions and the end of the Restriction Period with respect to
a portion of the Restricted Stock in installments during the Restriction Period.
(e) RESTRICTIONS. The following restrictions and
conditions shall apply to the Restricted Stock during the applicable Restriction
Period: (i) the Participant shall not be entitled to delivery of the shares of
the Restricted Stock; (ii) the Participant may not sell, assign, transfer,
pledge, hypothecate, encumber or otherwise dispose of or realize on the
Restricted Stock; and (iii) the Restricted Stock shall be forfeited to the
Company if the Participant for any reason ceases to be an Employee or director
prior to the end of the applicable Restriction Period, except due to
circumstances specified in the related granted agreement or otherwise approved
by the Committee. The Committee may in, its sole discretion, include such other
restrictions and conditions as it may deem appropriate.
(f) PAYMENT. Upon expiration of the applicable
Restriction Period and if all conditions with respect to the Restricted Stock
have been satisfied, shares of Restricted Stock will be made available to the
Participant, subject to satisfaction of any applicable withholding tax
requirements (at vesting, if different from the end of the Restriction Period,
or upon Section 83(b) election), free of all restrictions; provided, that the
Committee may, in its discretion, require (i) that the Participant not dispose
of the Restricted Stock for a period beyond the initially specified Restriction
Period or (ii) that the Restricted Stock be retained by the Company.
(g) RIGHTS AS A SHAREHOLDER. A Participant shall have,
with respect to shares of Restricted Stock, all of the rights of a shareholder
of the Company, including the right to vote the shares and receive any cash
dividends paid thereon. Stock dividends distributed with respect to shares of
Restricted Stock shall be treated as additional shares under the Restricted
Stock Grant and shall be subject to the restrictions and other terms and
conditions set forth therein that are applicable to the Restricted Stock upon
which the dividend is paid.
34
8. NON-TRANSFERABILITY OF GRANTS.
Except as hereinafter set forth, no grant under the Plan, and
no right or interest therein, shall be (a) assignable, alienable or transferable
by a Participant, except by will or the laws of descent and distribution, or (b)
subject to any obligation, or the lien or claims of any creditor, of any
Participant, or (c) subject to any lien, encumbrance or claim of any party made
in respect of or through any Participant, however arising. During the lifetime
of a Participant, Stock Options are exercisable only by, and shares of Common
Stock issued under the Plan will be issued only to, the Participant or his or
her legal representative. The Committee may, in its sole discretion, authorize
written designations of beneficiaries and authorize Participants to designate
beneficiaries with the authority to exercise Stock Options granted to a
Participant in the event of his or her death or disability. Notwithstanding the
foregoing, a Participant may transfer all or a portion of any Non-Qualified
Stock Option or Restricted Stock Grant granted to such Participant to such
Participant's parents, spouse or other life partner, children or grandchildren,
siblings, or children of siblings, or a trust for the exclusive benefit of the
Participant and/or one or more such persons, which transfer must be made as a
gift and without any consideration; or pursuant to a qualified domestic
relations order. All other transfers and any retransfer by any permitted
transferee are prohibited and any such purported transfer shall be null and
void. Each Stock Option or Restricted Stock Grant that becomes the subject of a
permitted transfer (and the Participant to whom it was granted by the Company)
shall continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option or release of restrictions on a
Restricted Stock Grant. In no event shall any permitted transfer of a Stock
Option or Restricted Stock Grant create any right in any party in respect of any
award, other than the rights of the qualified transferee in respect of such
award specified in the related grant agreement.
9. CHANGE IN CONTROL.
Subject to any required action by the shareholders of the
Company, if the Company shall be the surviving corporation in any merger or
consolidation, each outstanding Stock Option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject to
the Stock Option would have been entitled. Subject to the following paragraph, a
dissolution or liquidation of the Company, or a merger or consolidation in which
the Company is not the surviving corporation, shall cause each outstanding Stock
Option to terminate, provided that, immediately prior to such dissolution or
liquidation, or merger or consolidation in which the Corporation is not the
surviving corporation, all restrictions and conditions in respect of all
Restricted Stock Grants then outstanding shall be deemed satisfied and each
optionee shall, in such event, have the right to exercise his or her Stock
Option in whole or in part without regard to any vesting requirements or
installment provisions set forth in his or her Stock Option grant agreement.
Notwithstanding the above provisions, a Stock Option will not terminate
if assumed by the surviving or acquiring corporation, or its parent, upon a
merger or consolidation under circumstances which are not deemed a modification
of the Stock Option within the meaning of Sections 424 and 424(3)(A) of the
Code, without regard to whether the Stock Option is covered by Section 424 of
the Code.
In addition, notwithstanding anything to the contrary in this Plan or
in any Stock Option, if an Employee is terminated involuntarily without cause
within one year after a consolidation or merger in which the Company is not the
surviving corporation and the successor has assumed or replaced the Employee's
Stock Options, all unexpired Stock Options held by such Employee shall be
exercisable for a period of ninety (90) days after such termination, but in no
event after the original expiration date set forth in the applicable Stock
Option.
10. AMENDMENT OF PLAN.
The Board of Directors shall have the sole right and power to
amend or terminate the Plan at any time and from time to time; provided,
however, that the Board of Directors may not amend the Plan, without approval of
the shareholders of the Company, in a manner that would:
(a) decrease the exercise price of outstanding Stock
Options or provide for the exchange of options under an option exchange program;
(b) cause Stock Options that are intended to be Incentive
Stock Options to fail to qualify;
(c) cause the Plan or any transaction hereunder to fail
to meet the requirements of Rule 16b-3 under the Exchange Act; or
(d) violate applicable law.
35
11. GENERAL PROVISIONS.
(a) All certificates for shares of Common Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange or association upon which the Common Stock is then listed or traded,
any applicable Federal or state securities law, and any applicable corporate
law.
(b) Nothing contained in the Plan shall prevent the Board
of Directors from adopting such other or additional incentive arrangements as it
may deem desirable, including, but not limited to, the granting of stock options
and the awarding of stock otherwise than under the Plan; and such arrangements
may be either generally applicable or applicable only in specific cases.
(c) Nothing contained in the Plan or in any grant
hereunder shall be deemed to confer upon any Employee any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate or modify the
employment of any of its employees at any time.
(d) The Plan and all grants made and actions taken
hereunder shall be governed by and construed in accordance with the laws of the
State of Delaware (without regard to choice of law provisions).
(e) Any Stock Option or Restricted Stock Grant under the
Plan shall not be deemed compensation for purposes of computing benefits under
any retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under which
the availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to grants under
this Plan).
(f) A leave of absence, unless otherwise determined by
the Committee prior to the commencement thereof, shall not be considered a
termination of employment. Any Stock Option or Restricted Stock Grant under the
Plan shall not be affected by any change of employment, so long as the holder
continues to be an Employee of the Company or any Subsidiary.
(g) The obligations of the Company with respect to all
Stock Options and Restricted Stock Grants under the Plan shall be subject to (A)
all applicable laws, rules and regulations, and such approvals by any
governmental agencies as may be required, and (B) the rules and regulations of
any securities exchange or association on which the Common Stock may be listed
or traded.
(h) If any of the terms or provisions of the Plan
conflict with the requirements of Rule 16b-3 under the Exchange Act, as in
effect from time to time, or with the requirements of any other applicable law,
rule or regulation, and with respect to Incentive Stock Options, Section 422 of
the Code, then such terms or provisions shall be deemed inoperative to the
extent they so conflict with the requirements of said Rule 16b-3 or other
applicable law, rule, or regulation, and with respect to Incentive Stock
Options, Section 422 of the Code. With respect to Incentive Stock Options, if
the Plan does not contain any provision required to be included herein under
Section 422 of the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had been set out at
length herein.
(i) The grantee or permitted transferee of a Stock Option
shall have no rights as a stockholder with respect to any shares covered by such
Stock Option until the date of the issuance of a stock certificate for such
shares following the exercise of such Stock Option. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 4(b)
hereof.
(j) No provision of the Plan or any Stock Option or
Restricted Stock Grant under the Plan shall be construed to prevent the Company
from taking any corporate action deemed by the Company to be appropriate or in
its best interest, whether or not such action could have an adverse effect on
the Plan or any Stock Options or Restricted Stock Grants hereunder, and no Stock
Option or Restricted Stock Grant holder or such holder's estate, personal
representative, beneficiary or permitted transferee shall have any claim against
the Company as a result of taking such action. The adoption of the Plan shall
not affect any other stock option or incentive or other compensation plans in
effect for the Company, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees or
directors of, or consultants to, the Company.
36
DETACH HERE
PROXY
MANUGISTICS GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MANUGISTICS GROUP, INC. FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 29, 2003
The undersigned, hereby revoking any contrary proxies previously given
relating to these shares, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement in connection with the 2003 Annual
Meeting of Shareholders of Manugistics Group, Inc. (the "Annual Meeting") to be
held on Tuesday, July 29, 2003 at 9:00 A.M. E.D.T. at the Marriott Washingtonian
Center, 9751 Washingtonian Boulevard, Gaithersburg, Maryland 20878, and hereby
appoints Timothy T. Smith and Raghavan Rajaji, and each of them (with full power
to act alone), the attorneys and proxies of the undersigned, with full power of
substitution to each, to vote all shares of the Common Stock of MANUGISTICS
GROUP, INC. registered in the name provided herein which the undersigned is
entitled to vote at the Annual Meeting, and at any adjournment(s) or
postponement(s) thereof, with all the powers the undersigned would have if
personally present. Without limiting the general authorization hereby given,
said proxies are, and each of them hereby is, instructed to vote or act as
follows on the reverse side hereof on the proposals set forth in said Proxy
Statement. In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the Annual Meeting.
----------- -----------
SEE REVERSE CONTINUED AND TO BE COMPLETED, SIGNED AND DATED SEE REVERSE
SIDE ON REVERSE SIDE SIDE
----------- -----------
MANUGISTICS GROUP, INC.
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
DETACH HERE
[X] Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made, this Proxy will be voted FOR the election of the three (3)
nominees for Class II Directors listed below and FOR proposals 2 and 3.
1. Election of Class II Directors to serve for a three-year term.
Nominees: (01) Joseph H. Jacovini, (02) Gregory J. Owens, and (03)
Thomas A. Skelton
FOR WITHHELD
ALL FROM ALL
NOMINEES [ ] NOMINEES [ ]
[ ] ______________________________________
For all nominees except as noted above
2. Approval of an amendment to the Amended and Restated 1998 Stock Option
Plan of Manugistics Group, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of the ratification of the appointment of Deloitte & Touche
LLP as independent auditors for the fiscal year ending 2004.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature:_________ Date:______ Signature:__________ Date:_______