10-Q

FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-30389

EXE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 751719817
(I.R.S. Employer Identification Number)

8787 Stemmons Freeway
Dallas, Texas 75247
(Address including zip code of principal executive offices)

(214) 775-6000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES   X     NO      

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 31, 2002.

Common stock, $0.01 par value, 46,059,766 shares outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
INDEX TO EXHIBITS
EX-10.1 Amended/Restated 1997 Incentive Stock Plan
EX-99.1 Certification Pursuant to 18 USC Sec. 1350

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 2.	Changes in Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits and Reports on Form 8-K	37
Signatures		38
Index to Exhibits and Exhibits		41

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

			As of			As of
			December 31,			September 30,
			2001			2002
						(unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	30,250,156		$	28,807,344
	Marketable securities, short-term			12,842,683			5,143,873
	Accounts receivable, net of allowance for doubtful accounts and adjustments of approximately $3,721,000 and $3,898,000 at December 31, 2001 and September 30, 2002, respectively			25,029,162			14,740,921
	Other receivables and advances			572,438			487,391
	Prepaid and other current assets			2,171,409			5,044,786
		Total current assets		70,865,848			54,224,315
Marketable securities, long-term				2,203,891			8,547,870
Property and equipment, net				8,424,584			5,499,630
Goodwill, net				5,265,685			5,265,685
Intangible assets, net				1,760,666			1,863,518
Other assets				2,549,794			1,844,879
		Total assets	$	91,070,468		$	77,245,897
Liabilities and Stockholders’ Equity
Current Liabilities:
	Accounts payable		$	6,585,936		$	5,984,576
	Accrued expenses			11,557,606			10,134,107
	Accrued payroll and benefits			1,749,046			1,494,569
	Deferred revenue			9,206,736			10,343,406
	Current portion of long-term debt and capital lease obligations			435,167			532,900
		Total current liabilities		29,534,491			28,489,558
	Long-term debt and capital lease obligations, net of current portion			995,973			542,961
	Long-term accrued expenses, net of current portion			6,814,018			9,521,111
	Minority interest			169,623			184,562
Commitments and contingencies
Stockholders’ equity:
	Preferred stock, $.01 par value: shares authorized - 20,000,000; none issued or outstanding			—			—
	Common stock, voting, $.01 par value: shares authorized - 150,000,000; shares issued - 46,788,900 and 47,154,689 at December 31, 2001 and September 30, 2002, respectively			467,889			471,547
Additional paid-in capital				178,741,296			178,621,848
Note receivable from stockholder				(211,750	)		—
Treasury stock, at cost, 999,483 and 1,094,923 shares of common stock at December 31, 2001 and September 30, 2002, respectively				(3,431,464	)		(3,645,859	)
Accumulated deficit				(119,601,384	)		(135,281,100	)
Deferred compensation				(2,515,440	)		(1,266,888	)
Other comprehensive income (loss)				107,216			(391,843	)
		Total stockholders’ equity		53,556,363			38,507,705
		Total liabilities and stockholders’ equity	$	91,070,468		$	77,245,897

See accompanying notes.

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2001			2002			2001			2002
Revenue:
	Software license			$	4,935,254		$	2,694,478		$	20,466,027		$	9,961,142
	Services and maintenance				14,886,946			12,283,217			49,316,085			36,978,051
	Resale of software and equipment				2,470,094			1,319,348			6,582,444			6,418,717
	Reimbursable expenses				606,739			436,813			2,121,394			1,443,028
		Total revenue			22,899,033			16,733,856			78,485,950			54,800,938
Costs and expenses:
	Cost of software licenses				323,198			236,521			453,657			435,902
	Cost of services and maintenance				9,489,045			7,860,928			32,105,548			24,079,137
	Cost of resale of software and equipment				2,129,455			1,079,373			5,445,496			5,307,436
	Cost of reimbursable expenses				606,739			436,813			2,121,394			1,443,028
	Sales and marketing				6,225,668			4,479,519			20,865,039			14,448,762
	Research and development				3,485,964			2,853,288			11,322,910			8,813,889
	General and administrative				4,162,294			2,810,607			14,202,053			9,006,223
	Amortization of goodwill and intangible assets				2,316,749			335,848			6,520,253			897,148
	Warrant and stock compensation expense allocated to:
			Cost of services and maintenance		130,342			49,918			406,961			225,810
			Sales and marketing		44,952			38,893			285,888			129,785
			Research and development		39,882			38,893			133,958			129,785
			General and administrative		161,353			83,294			477,443			262,988
	Provision for estimated loss on lease abandonment				—			—			7,440,336			3,998,862
	Employee severance and other facility closure costs				—			—			2,489,744			2,487,769
			Total costs and expenses		29,115,641			20,303,895			104,270,680			71,666,524
Operating loss					(6,216,608	)		(3,570,039	)		(25,784,730	)		(16,865,586	)
Other income (expense):
	Interest income				554,096			242,123			2,049,341			875,456
	Interest expense				(9,618	)		(23,662	)		(29,626	)		(74,478	)
	Other				117,064			(25,152	)		(269,887	)		728,541
		Total other income			661,542			193,309			1,749,828			1,529,519
Loss before minority interest and taxes					(5,555,066	)		(3,376,730	)		(24,034,902	)		(15,336,067	)
Minority interest in subsidiary income					(45,388	)		(5,768	)		(146,059	)		(14,939	)
Loss before taxes					(5,600,454	)		(3,382,498	)		(24,180,961	)		(15,351,006	)
Income taxes					—			149,889			151,377			328,710
Net loss				$	(5,600,454	)	$	(3,532,387	)	$	(24,332,338	)	$	(15,679,716	)
Net loss per common share - basic and diluted				$	(0.12	)	$	(0.08	)	$	(0.54	)	$	(0.34	)
Weighted average number of common shares outstanding — basic and diluted					45,612,056			46,059,766			45,261,613			46,008,029
See accompanying notes

4

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

					Nine Months Ended
					September 30,
					2001			2002
Cash Flow from Operating Activities:
Net loss					$	(24,332,338	)	$	(15,679,716	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization				9,374,489			3,335,348
		Write-down of property and equipment				—			1,032,408
		Provision for doubtful accounts				2,709,209			2,502,780
		Amortization of deferred compensation				1,129,900			748,368
		Issuance of warrants for services				174,350			—
		Minority interest				154,490			14,939
		Changes in operating assets and liabilities, net of effect of acquisition:
			Accounts receivable			1,266,409			7,785,461
			Other receivables and advances			(104,881	)		85,047
			Prepaids and other current assets			100,784			(2,873,378	)
			Other long-term assets			(364,913	)		704,915
			Accounts payable			201,777			(601,360	)
			Accrued payroll and benefits			(1,085,340	)		(254,477	)
			Deferred revenue			(2,601,657	)		1,136,670
			Accrued expenses			5,852,462			1,283,592
			Other			(138,285	)		(442,114	)
				Net cash used in operating activities		(7,663,544	)		(1,221,517	)
Cash Flow from Investing Activities:
Purchases of property and equipment						(1,987,222	)		(605,241	)
Purchase of developed software technology						—			(1,000,000	)
Purchase of marketable securities						(14,500,000	)		(15,710,000	)
Proceeds from sale of marketable securities						16,799,804			17,064,831
Cash paid for AllPoints acquisition						(1,618,109	)		—
				Net cash used in investing activities		(1,305,527	)		(250,410	)
Cash Flow from Financing Activities:
Issuance of common stock for options and warrants						1,285,294			384,394
Payments on long-term debt						(134,999	)		(355,279	)
Retirement of AllPoints line of credit						(750,000	)		—
				Net cash provided by financing activities		400,295			29,115
Net decrease in cash and cash equivalents						(8,568,776	)		(1,442,812	)
Cash and cash equivalents at beginning of year						39,820,056			30,250,156
Cash and cash equivalents at end of period					$	31,251,280		$	28,807,344

See accompanying notes.

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Principles of Consolidation and Basis of Presentation

     EXE Technologies, Inc. (the Company or EXE) provides software that drives customers’ supply chain execution processes, including fulfillment, warehousing, distribution, and inventory management. The accompanying unaudited consolidated financial statements include the accounts of EXE Technologies, Inc. and our majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end financial statements. In the opinion of management, all adjustments (consisting only of normal recurring entries) considered necessary for a fair presentation of the results have been included for the interim periods presented. Operating results for the three and nine month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2002. These statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2001.

     Certain amounts in prior year financial statements have been reclassified to conform to current year presentation.

     On January 1, 2002, the Company adopted Financial Accounting Standards Board Staff Announcement Topic No. D-103, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred.” As a result, the Company began recording revenue and a related cost of revenue in its statement of operations for reimbursable expenses such as airfare, hotel lodging, meals, auto rental and other charges related to providing services to our customers. Prior to the adoption of this standard, the Company recorded these expense reimbursements as a reduction of expenses. The Company’s prior period financial statements have been reclassified to comply with the new standard.

     Effective January 1, 2002, the Company adopted Emerging Issues Task Force (EITF) 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products". EITF 00-25 requires consideration paid to resellers of the Company’s products be recorded as a reduction in revenue. The application of this EITF does not result in any impact to operating or net income (loss) in any past or future periods. The Company’s prior period financial statements have been reclassified to comply with the new standard.

     In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective for fiscal years beginning after December 15, 2001. This statement establishes new rules for determining impairment of certain other long-lived assets, including intangible assets subject to amortization, property and equipment and long-lived prepaid assets. The adoption of this standard did not have an effect on the operating results or the financial position of the Company.

     In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities, such as restructuring, involuntarily terminating employees and consolidating facilities. SFAS No. 146 excludes from its scope exit and disposal

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. Principles of Consolidation and Basis of Presentation (continued)

activities conducted in connection with a business combination and those activities to which SFAS No. 143 and 144 are applicable. SFAS No. 146 is effective for exit and disposal activities initiated after December 31, 2002. We do not expect the adoption of this statement to have a material effect on our consolidated financial position or results of operations.

2. Net Loss Per Share

     The Company computes net income (loss) per share in accordance with the provisions of SFAS No. 128, “Earnings per Share.” Basic net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding during each period.

     Diluted net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding during each period and common equivalent shares consisting of preferred stock, warrants and stock options (using the treasury stock method), if dilutive. Diluted loss per common share is the same as basic loss per common share for all periods presented because all potentially dilutive securities were anti-dilutive. The following table sets forth anti-dilutive securities which have been excluded from diluted earnings per share for the periods presented:

	As of September 30,
	2001		2002
Common stock options		8,665,665		9,327,964
Warrants		—		1,015,000
Total anti-dilutive securities excluded		8,665,665		10,342,964

3. Comprehensive Loss

     Comprehensive loss includes foreign currency translation gains (losses) and unrealized gains (losses) on securities available for sale. The following table sets forth the calculation of comprehensive loss for the periods presented:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2001			2002			2001			2002
Net loss	$	(5,600,454	)	$	(3,532,387	)	$	(24,332,338	)	$	(15,679,716	)
Foreign currency translation gains (losses)		(116,398	)		109,769			55,553			(374,027	)
Unrealized gain (loss) on securities available for sale		73,399			3,323			188,256			(125,032	)
Total comprehensive loss	$	(5,643,453	)	$	(3,419,295	)	$	(24,088,529	)	$	(16,178,775	)

4. Derivative Financial Instruments

     The Company hedges certain nonfunctional currency exposure. Forward currency exchange contracts are utilized by the Company to reduce foreign currency exchange and interest rate risks with the goal of

7

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. Derivative Financial Instruments (continued)

offsetting foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the forward contracts. The Company does not hold derivative financial instruments for trading or speculative purposes.

     As of September 30, 2002, the Company had outstanding forward currency exchange contracts of $2.0 million to sell British Pounds Sterling and $2.5 million to sell Japanese yen which hedge net balance sheet exposures. Gains and losses arising from the changes in the fair value of forward currency exchange contracts are recognized as a component of other income (expense). At September 30, 2002, the current market settlement values of the forward contracts would be immaterial.

5. Intangible Assets and Goodwill

     In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards (SFAS) No. 141, “Business Combinations” and No. 142, “Goodwill and Other Intangible Assets,” effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with these statements. Other intangible assets will continue to be amortized over their useful lives.

     The Company completed the transitional impairment test for its enterprise goodwill and determined that no impairment loss should be recorded as of January 1, 2002. During the third quarter of 2002, the Company's market capitalization declined to a level that is less than the Company's net book value. The Company's required annual analysis of the impairment to be performed under SFAS No. 142 will be performed in the fourth quarter of each calendar year. If the Company's market capitalization remains at a level less than the Company's net book value, the Company believes that an impairment charge will likely be required.

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. Intangible Assets and Goodwill (continued)

     The Company has applied the new rules on accounting for goodwill and other intangible assets beginning January 1, 2002. With the application of the nonamortization provisions of SFAS No. 142, the Company ceased amortization of goodwill as of January 1, 2002. The following table presents the quarterly results of the Company on a comparative basis assuming the nonamortization provisions of SFAS No. 142 were effective January 1, 2001:

		Three Months Ended September 30,						Nine Months Ended September 30,
		2001			2002			2001			2002
Reported net loss		$	(5,600,454	)	$	(3,532,387	)	$	(24,332,338	)	$	(15,679,716	)
	Goodwill amortization		1,885,595			—			5,286,185			—
Adjusted net loss		$	(3,714,859	)	$	(3,532,387	)	$	(19,046,153	)	$	(15,679,716	)
Reported net loss per common share - basic and dilutive		$	(0.12	)	$	(0.08	)	$	(0.54	)	$	(0.34	)
	Goodwill amortization per common share — basic and dilutive		0.04			—			0.12			—
Adjusted net loss per common share - basic and dilutive		$	(0.08	)	$	(0.08	)	$	(0.42	)	$	(0.34	)

     Intangible assets as of December 31, 2001 and September 30, 2002 were as follows:

	December 31,			September 30,
	2001			2002
Developed and acquired technology	$	4,700,000		$	5,700,000
Customer base		1,800,000			1,800,000
Less accumulated amortization		(4,739,334	)		(5,636,482	)
Net intangible assets	$	1,760,666		$	1,863,518

     In July 2002, the Company acquired developed software technology assets for an order analysis and planning system for $1.0 million. The acquisition price will be paid quarterly in four consecutive equal installments beginning in the third quarter of 2002, and the intangible assets associated with this acquisition will be amortized over a three year period.

     Amortization expense related to intangible assets totaled $0.4 million and $0.3 million during the three months ended September 30, 2001 and 2002, respectively, and $1.2 million and $0.9 million during the nine months ended September 30, 2001 and 2002, respectively. Intangible assets with definite useful lives are amortized on a straight-line basis. The weighted average amortization period is five years for developed

9

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. Intangible Assets and Goodwill (continued)

and acquired technology and six years for customer base. The estimated aggregate future amortization expense for intangible assets remaining as of September 30, 2002 is as follows:

Remainder of 2002	$	363,519
2003		666,665
2004		638,890
2005		194,444
Total	$	1,863,518

6. Segment Information

     The Company provides software that drives customers’ supply chain execution processes, including fulfillment, warehousing, distribution, and inventory management. All financial information is reviewed on a consolidated basis with additional information by geographic region used to make operating decisions and assess the results of the Company. Total assets are presented net of intercompany receivables and payables. The Company’s geographic information as of and for the three and nine months ended September 30, 2001 and 2002 is as follows:

10

								Asia Pacific
		North						and the
		America			Europe			Middle East			Eliminations			Total
Three months ended September 30, 2001
	Revenue	$	11,816,208		$	4,448,794		$	6,634,031		$	—		$	22,899,033
	Amortization of goodwill and intangible assets		2,292,394			13,450			10,905			—			2,316,749
	Warrant and stock compensation expense		154,696			63,427			158,406			—			376,529
	Operating income (loss)		(6,161,865	)		(713,262	)		658,519			—			(6,216,608	)
Nine months ended September 30, 2001
	Revenue	$	42,725,295		$	12,918,065		$	22,842,590		$	—		$	78,485,950
	Amortization of goodwill and intangible assets		6,446,862			40,624			32,767			—			6,520,253
	Warrant and stock compensation expense		692,007			232,825			379,418			—			1,304,250
	Provision for estimated loss on lease abandonment		7,154,780			285,556			—			—			7,440,336
	Employee severance and other facility closure costs		1,453,984			430,310			605,450			—			2,489,744
	Operating income (loss)		(23,873,445	)		(3,079,900	)		1,168,615			—			(25,784,730	)
As of September 30, 2001
	Property and equipment, net	$	5,637,481		$	1,405,512		$	905,901		$	—		$	7,948,894
	Total assets		104,625,475			9,322,613			15,911,394			(3,108,034	)		126,751,448
Three months ended September 30, 2002
	Revenue	$	7,529,135		$	4,997,838		$	4,206,883			—		$	16,733,856
	Amortization of goodwill and intangible assets		335,848			—			—			—			335,848
	Warrant and stock compensation expense		17,473			86,921			106,604			—			210,998
Operating income (loss)			(3,625,919	)		573,063			(517,183	)		—			(3,570,039	)
Nine months ended September 30, 2002
	Revenue	$	25,804,371		$	15,101,699		$	13,894,868		$	—		$	54,800,938
	Amortization of goodwill and intangible assets		896,434			714			—			—			897,148
	Warrant and stock compensation expense		379,891			161,413			207,064			—			748,368
	Provision for estimated loss on lease abandonment		3,900,000			98,862			—			—			3,998,862
	Employee severance and other facility closure costs		2,252,745			133,105			101,919			—			2,487,769
	Operating income (loss)		(17,333,634	)		1,332,221			(864,173	)		—			(16,865,586	)
As of September 30, 2002
	Property and equipment, net	$	3,747,104		$	1,052,949		$	699,577		$	—		$	5,499,630
	Total assets		62,046,106			10,668,946			8,638,879			(4,108,034	)		77,245,897

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. Warrants Granted to IBM

     In September 2002, the Company expanded its strategic relationship with IBM. One of the key elements of the expanded relationship was the issuance of 1,000,000 warrants to IBM to purchase the Company’s common stock at an exercise price of $0.01 per share. The warrants are exercisable over a five-year period and will vest over a three-year period based on IBM’s generation of pre-established amounts of incremental software license revenue for the Company. At September 30, 2002, none of the warrants were vested or exercisable.

8. Line of Credit

     In October 2002, the Company entered into a revolving line of credit agreement with a financial institution under which the Company can borrow up to $10.0 million over a two-year period. The agreement contains certain financial covenants, including minimum cash and marketable securities balances, and the facility is secured with all of the Company’s tangible assets. Borrowings for half of the revolving credit line will be based on a defined borrowing base, while the balance does not contain this restriction. Interest on any borrowings will be at the prime rate, and the Company will pay a fee on the unused portion of the line of credit of 0.375% per annum.

9. Commitments and Contingencies

     The Company is involved in various legal actions and claims which arise in the normal course of business. In the opinion of management, the final disposition of these matters will not have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations. The Company establishes accruals for losses related to such matters that are probable and reasonably estimable. However, an unfavorable outcome of some or all of these matters could have a material effect on the Company’s business, financial condition, cash flows and results of operations.

10. Estimated Provisions for Lease Abandonment, Employee Severance and Other Costs

     During the year ended December 31, 2001, the Company announced and implemented plans to reduce costs and improve operating efficiency. Provisions for estimated losses on lease abandonment and employee severance and other facility closure costs was $14.3 million for the year ended December 31, 2001, of which approximately $9.9 million was recognized during the nine months ended September 30, 2001. These estimated charges included: (a) $10.2 million and $7.4 million in abandonment of certain leased office space less estimated sublease rentals at facilities in North America and in Europe for the year ended December 31, 2001 and the nine months ended September 30, 2001, respectively, (b) $3.5 million and $2.4 million for severance and other employee related costs for the termination of 233 and 137 employees for the year ended December 31, 2001 and the nine months ended September 30, 2001, respectively, and (c) $0.6 million and $0.1 million for disposal of fixed assets, abandonment of leased equipment and other facility closure costs for the year ended December 31, 2001 and the nine months ended September 30, 2001, respectively.

     In response to the continued global slowdown in customer spending for large-scale IT projects, the Company launched additional cost reduction actions at the end of the second quarter of 2002. These actions, which include the consolidation of the U.S. professional services and development activities into one location in Dallas and the expansion of the Company’s offshore development operations, resulted in estimated

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. Estimated Provisions for Lease Abandonment, Employee Severance and Other Costs (continued)

provisions of approximately $6.5 million. These provisions consisted of approximately $1.4 million for estimated severance and other employee related costs for the termination of approximately 60 services, sales and marketing, development and administrative employees and approximately $1.1 million for the estimated loss on the abandonment of leased office space in Philadelphia. Additionally, the Company provided $2.9 million for additional estimated losses associated with facilities previously abandoned and $1.1 million in other facility closure costs primarily for the write-down of property and equipment.

     The Company has made cash payments of approximately $7.3 million against the reserves established for these various cost reduction actions. The remaining liability at September 30, 2002 is approximately $12.4 million, of which $8.8 million is long-term and is expected to be paid through 2009. These reserves include estimates pertaining to sublease rates, vacancy periods, employee separation costs and settlement of contractual obligations. Although the Company does not anticipate significant changes, the actual costs may differ from these estimates.

11. Related Party

     In accordance with an amended employment agreement with the Company’s former Chief Financial Officer dated February 19, 2002, the Company forgave an outstanding loan of approximately $277,000 on July 1, 2002. Accordingly, the outstanding balance was charged against operating results during the six months ended June 30, 2002.

12. Subsequent Events

     On November 14, 2002, the Company announced, subject to stockholder approval, a reverse stock split which would result in each stockholder receiving one share of common stock for a range of every five (1:5) up to fifteen (1:15) common shares currently held. It is currently expected that the stockholder meeting to approve the reverse stock split will be held in early January 2003.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of the financial condition and results of operations should be read in conjunction with the Certain Factors That May Affect Future Results included elsewhere in this Form 10-Q and the Company’s Critical Accounting Policies and Estimates included in the Company’s Form 10-K for the year ended 2001.

Overview

     EXE Technologies, Inc. provides software that drives customers’ supply chain execution processes, including fulfillment, warehousing, distribution, and inventory management. Our software solutions deliver the vital, frontline supply chain intelligence necessary to drive customer execution decisions and processes. Our products and services help customers worldwide to increase revenue, reduce distribution costs, manage inventory across the supply chain, and improve customer loyalty and satisfaction. We provide global service and support for our software from established facilities in North America, Europe, the Middle East, Asia, and Australia.

     We derive our revenue from the sale of software licenses; product related consulting, training, maintenance and support (collectively, “services and maintenance”); and the resale of software and equipment.

     Our revenues have been adversely impacted by a global slowdown in customer spending for large-scale IT projects during 2001 and 2002. This global slowdown began to adversely impact our revenues in early 2001 and was impacted further by the terrorist attacks upon the United States on September 11, 2001. While the global economic environment for large-scale IT projects remains challenging, we have remained focused on improving our performance through better sales execution and expanded product offerings, while significantly reducing global operating costs. At the end of the second quarter of 2002, we made the decision to take significant additional cost reduction actions, including the consolidation of our U.S. development and professional services operations in Dallas and expansion of our offshore development activities. These actions are expected to reduce operating costs in the future. We do not expect the full benefit of these actions to be achieved until the first quarter of 2003. The cost reduction actions resulted in special charges of approximately $6.5 million in the second quarter of 2002. The special charges included estimated severance and related costs and lease abandonment costs related to the closure of our Philadelphia office and a provision for additional estimated losses associated with facilities previously abandoned.

     The benefits from these cost reduction measures began in the three months ended September 30, 2002 as expenses for cost of services and maintenance, sales and marketing, research and development, and general and administrative declined approximately $0.9 million from the expense level during the three months ended June 30, 2002. In early October 2002, we signed a three-year offshore development agreement in accordance with our cost reduction plans. The arrangement provides offshore development resources in India at a cost lower than we have been historically incurring in the United States. We expect future reductions in research and development expenses after a transition period during the fourth quarter of 2002.

     We have reduced our full time employee headcount from 630 at the beginning of 2001 to 459 at the end of September 2002. The cost reduction actions taken at the end of June 2002 have resulted in a reduction of 20 employees through September 30, 2002 and further reductions are expected by the first quarter of 2003.

     We will continue to review and evaluate our cost structure in the future in light of the existing business environment. Further cost reduction actions will be taken, should business volumes not improve.

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     In October 2002, we were notified by the NASDAQ Stock Market, Inc. that our common stock price had failed to maintain a minimum closing bid price greater than or equal to $1.00 for 30 consecutive trading days. This failure to comply with this requirement for continued listing on the NASDAQ National Market subjects our common stock to possible delisting. In accordance with NASDAQ rules, we have 90 calendar days, or until January 21, 2003, to regain compliance with the minimum closing bid requirements.

     In order to regain compliance with the minimum closing bid price requirements, on November 14, 2002, the Company announced, subject to stockholder approval, a reverse stock split (see Note 12 to the Consolidated Financial Statements included elsewhere herein).

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and the results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make judgments regarding estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Although management evaluates these judgments on an ongoing basis, there can be no assurance that actual results will not ultimately differ from those estimates. For a more detailed explanation of these judgments, including our judgments relating to revenue recognition, allowance for doubtful accounts and adjustments, goodwill and intangible impairment, accruals for lease abandonment and employee termination costs, related party transactions, and contingencies you may refer to our Annual Report on Form 10-K for the year ended December 31, 2001.

Results of Operations

Three Months Ended September 30, 2002 Compared to the Three Months Ended September 30, 2001

Revenue

     Total Revenue. Total revenue declined $6.2 million, or 26.9%, to $16.7 million for the three months ended September 30, 2002, from $22.9 million for the three months ended September 30, 2001. International revenue accounted for 55.0% of total revenue during the three months ended September 30, 2002 and 48.3% of total revenue during the three months ended September 30, 2001. No single customer accounted for more than 10.0% of total revenue during the three months ended September 30, 2002 or 2001.

     In September 2002, the Company expanded its strategic relationship with IBM. One of the key elements of the expanded relationship was the issuance of 1,000,000 warrants to IBM to purchase the Company’s common stock at an exercise price of $0.01 per share. The warrants are exercisable over a five-year period and will vest over a three-year period based on IBM’s generation of pre-established amounts of incremental software license revenue for the Company.

     Software License. Software license revenue decreased $2.2 million, or 45.4%, to $2.7 million for the three months ended September 30, 2002, from $4.9 million for the three months ended September 30, 2001. Software license revenue as a percentage of total revenue excluding reimbursable expenses was 16.5% for the three months ended September 30, 2002 versus 22.1% for the three months ended September 30, 2001. We believe these declines continue to reflect the global slowdown in customer spending for large-scale IT projects that began during 2001 and has extended into fiscal year 2002. When compared with the

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prior year, the largest decline in license revenue occurred in our Asia Pacific region. Software license revenue declined $0.4 million or 13.7% when compared with the preceding three months ended June 30, 2002. This decline was attributed to lower license revenue in our North America and Asia Pacific regions.

     Services and Maintenance. Services and maintenance revenue declined $2.6 million, or 17.5%, to $12.3 million for the three months ended September 30, 2002 from $14.9 million for the three months ended September 30, 2001. Services and maintenance revenue as a percentage of total revenue excluding reimbursable expenses was 75.4% for the three months ended September 30, 2002 versus 66.8% for the three months ended September 30, 2001. We believe the global slowdown in customer spending for large-scale IT projects has adversely impacted our ability to generate new license revenue resulting in a shift in our revenue mix. This decline in new projects from new license revenue has contributed to the decline in services and maintenance revenue. Most of the decline was in our North America and Asia Pacific regions since these areas have been the most adversely affected by license revenue declines. Revenues from consulting services have declined 27.7% when compared to the same three month period of the prior year and is largely attributed to the continued decline of consulting revenue from our EXceed Fulfill WMS Unix-based products. In addition, revenues from the AllPoints product line have declined approximately $0.9 million as a result of our November 2001 decision to no longer sell and market these products. Services and maintenance revenue declined $0.5 million or 4.3% when compared to the preceding three months ended June 30, 2002. This decline is attributed to the European vacation season and decreased consulting revenues in Japan.

     Resale Software and Equipment. Resale software and equipment revenue decreased $1.2 million, or 46.7%, to $1.3 million for the three months ended September 30, 2002, from $2.5 million for the three months ended September 30, 2001. Resale software and equipment as a percentage of total revenue excluding reimbursable expenses was 8.1% for the three months ended September 30, 2002 versus 11.1% for the three months ended September 30, 2001. Resale software and equipment revenue decreased $0.7 million or 34.0% when compared with the preceding three months ended June 30, 2002. This decrease is attributed to a decline in resale revenues from our North American region.

Costs and Expenses

     Cost of Software Licenses. Cost of software licenses consists primarily of royalties associated with software used to develop our software products, the cost of reproduction, and the cost of complementary software applications that we purchase to sell to our customers. Cost of software licenses represented 8.8% of software license revenue for the three months ended September 30, 2002 and 6.5% for the three months ended September 30, 2001. The increase in cost of software licenses as a percentage of software license revenue was attributed to an increase in purchasing of complementary software that was sold during the three months ended September 30, 2002.

     Cost of Services and Maintenance. Cost of services and maintenance consists primarily of salaries of professional staff and costs associated with implementation, consulting and training services, hotline telephone support, new releases of software and updating user documentation. Cost of services and maintenance declined $1.6 million, or 17.2%, to $7.9 million for the three months ended September 30, 2002, from $9.5 million for the three months ended September 30, 2001. The decrease was related primarily to a reduction in the number of full time and contract services and maintenance employees. Cost of services and maintenance decreased $0.2 million or 2.3% when compared to the preceding three months ended June 30, 2002. As a percentage of services and maintenance revenue, cost of services and maintenance was approximately 64.0% for the three months ended September 30, 2002 and for the three months ended September 30, 2001 and was slightly increased from 62.7% for the three months ended June 30, 2002. The increase in cost as a percentage of services and maintenance revenue was largely due primarily to a decline in utilization attributed to the traditional third quarter European vacation season.

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     Cost of Resale Software and Equipment. Cost of resale software and equipment consists primarily of the costs of the database software tools and hardware we purchase to resell to our customers. Cost of resale software and equipment decreased $1.1 million, or 49.3%, to $1.0 million for the three months ended September 30, 2002, from $2.1 million for the three months ended September 30, 2001. As a percentage of resale software and equipment revenue, cost of resale software and equipment was 81.8% for the three months ended September 30, 2002, 86.2% for the three months ended September 30, 2001 and 82.8% for the three months ended June 30, 2002. The decrease in cost of resale as a percentage of resale software and equipment revenue was largely attributed to the increase in revenues obtained from commissions earned on resale referrals.

     Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions, bonuses, recruiting costs, travel, marketing materials and trade shows. Sales and marketing expenses decreased $1.7 million, or 28.0%, to $4.5 million for the three months ended September 30, 2002, from $6.2 million for the three months ended September 30, 2001. The decrease was related primarily to a 26.4% reduction in the number of sales and marketing employees and to lower commission expenses for sales staff and partners as a result of lower software license revenues. As a percentage of total revenue excluding reimbursable expenses, sales and marketing expenses remained steady at 27.5% for the three months ended September 30, 2002, 27.9% for the three months ended September 30, 2001, and 27.4% for the three months ended June 30, 2002. Sales and marketing expenses decreased $0.4 million or 8.8% when compared with the preceding three months ended June 30, 2002 primarily due to reduced staff headcount and lower commission expenses as a result of lower software license revenues.

     Research and Development. Research and development expenses consist primarily of salaries and other personnel-related costs for our product development activities. Research and development expenses decreased $0.6 million, or 18.1%, to $2.9 million for the three months ended September 30, 2002, from $3.5 million for the three months ended September 30, 2001. The decrease in research and development expenses was largely due to efforts to improve the utilization of development staff on billable service projects and lower travel and equipment costs as a result of our decision to close the Philadelphia facility in June of 2002. As a percentage of total revenue excluding reimbursable expenses, research and development expenses increased to 17.5% for the three months ended September 30, 2002, from 15.6% for the three months ended September 30, 2001, and from 16.2% for the three months ended June 30, 2002. Research and development expenses slightly decreased $0.1 million or 1.9% when compared with the preceding three months ended June 30, 2002. As part of our cost reduction program, we have signed a three-year agreement with a company to provide offshore development resources in India at a cost that will be lower than our historic development costs. Due to transitional costs in the final quarter of this year, reduced research and development costs from the closure of our Philadelphia development operations and the outsourcing of development from the offshore development contract are not expected to be fully realized until the first quarter of next year.

     General and Administrative. General and administrative expenses consist primarily of salaries and other personnel-related costs of our finance, human resources, information systems, administrative, legal and executive departments, insurance costs and the costs associated with legal, accounting, and other administrative services. General and administrative costs decreased $1.4 million, or 32.5%, to $2.8 million for the three months ended September 30, 2002, from $4.2 million for the three months ended September 30, 2001. The decrease in general and administrative expenses was due primarily to a 26.5% reduction in the number of general and administrative employees and contractors. As a percentage of total revenue excluding reimbursable expenses, general and administrative expenses decreased to 17.2% for the three months ended September 30, 2002, from 18.7% for the three months ended September 30, 2001, and increased from 16.8% for the three months ended June 30, 2002. General and administrative expenses decreased $0.2 million or 6.9% when compared with the preceding three months ended June 30, 2002 primarily due to efforts to reduce contractor expenses and from reduced depreciation expense caused by

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property and equipment write-offs associated with the facility closure actions during the three months ended June 30, 2002. In November 2002, we hired a new Chief Executive Officer. The existing Chief Executive Officer will continue with the Company as Chairman of the Board of Directors. As a result, we expect general and administrative expenses will increase in the future.

     Amortization of Goodwill and Intangible Assets. Amortization of goodwill and intangible assets relates primarily to assets acquired in connection with the 1997 acquisition of Dallas Systems and the 2001 acquisition of AllPoints. Amortization of goodwill and intangible assets decreased $2.0 million to $0.3 million for the three months ended September 30, 2002, from $2.3 million for the three months ended September 30, 2001, and is consistent with $0.3 million for the three months ended June 30, 2002. Of the decline from the prior year, $1.3 million of the decline is attributed to the goodwill and intangible impairment write-off of AllPoints at the end of 2001 and approximately $0.8 million is attributed to the implementation in the current year of Statement of Financial Accounting Standards Board (SFAS) No. 142, Goodwill and Other Intangible Assets, which directs that goodwill and intangible assets which are deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. In November of 2001 and July of 2002, we acquired a total of $2.0 million of developed software technology that has resulted in $0.1 million in amortization during the three months ended September 30, 2002.

     Non-Cash Warrant and Stock Compensation. Non-cash warrant and stock compensation expense relates to the amortization of deferred compensation recorded primarily in connection with stock options granted to employees. The deferred compensation recorded represented the difference between the exercise price and the deemed fair value of our common stock on the date of grant of these options. Non-cash warrant and stock compensation expense decreased $0.2 million to $0.2 million for the three months ended September 30, 2002, from $0.4 million for the three months ended September 30, 2001, and $0.3 million for the three months ended June 30, 2002.

     Other Income (Expense). Other income (expense) consists of gains and losses from currency fluctuations, interest expense, and interest income on investments. Other income decreased $0.5 million to an income of $0.2 million for the three months ended September 30, 2002, from an income of $0.7 million for the three months ended September 30, 2001. The decrease was due primarily to $0.2 million decline in foreign exchange gains and a decrease in interest income of $0.3 million due to a decline in interest rates and a decline in funds held in marketable securities during the three months ended September 30, 2002. Other income (expense) declined $0.9 million when compared with the preceding three months ended June 30, 2002 primarily due to foreign exchange gains during the three months ended June 30, 2002. Although we periodically buy forward contracts to hedge against certain foreign currency fluctuations, we may have foreign currency gains and losses that can significantly vary from quarter to quarter.

     Income Taxes. An income tax provision of $0.1 million was recognized during the three months ended September 30, 2002 compared to no income tax provision or benefit during the same period of 2001. The income tax provision was primarily due to tax on income earned by foreign subsidiaries while corresponding domestic tax benefit generated by foreign tax credits was not recognized due to the uncertainty of the timing and amount of future taxable income.

Nine Months Ended September 30, 2002 Compared to the Nine Months Ended September 30, 2001

Revenue

     Total Revenue. Total revenue decreased $23.7 million, or 30.2%, to $54.8 million for the nine months ended September 30, 2002, from $78.5 million for the nine months ended September 30, 2001. International revenue accounted for 52.9% of total revenue during the nine months ended September 30,

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2002 and 45.6% of total revenue during the nine months ended September 30, 2001. No single customer accounted for more than 10.0% of total revenue during the nine months ended September 30, 2002 or 2001.

     Software License. Software license revenue decreased $10.5 million, or 51.3%, to $10.0 million for the nine months ended September 30, 2002, from $20.5 million for the nine months ended September 30, 2001. Software license revenue as a percentage of total revenue excluding reimbursable expenses was 18.7% for the nine months ended September 30, 2002 versus 26.8% for the nine months ended September 30, 2001. We believe these declines were primarily attributed to the global slowdown in customer spending for large-scale IT projects that began during 2001 and has extended into fiscal year 2002.

     Services and Maintenance. Services and maintenance revenue decreased $12.3 million, or 25.0%, to $37.0 million for the nine months ended September 30, 2002 from $49.3 million for the nine months ended September 30, 2001. Services and maintenance revenue as a percentage of total revenue excluding reimbursable expenses was 69.3% for the nine months ended September 30, 2002 versus 64.6% for the nine months ended September 30, 2001. We believe the global slowdown in customer spending for large-scale IT projects has adversely impacted our ability to generate new license revenue resulting in a shift in our revenue mix. This decline in new projects from new license revenue has contributed to the decline in services and maintenance revenue. The decline occurred in our North America and Asia Pacific regions since these areas have been the most adversely affected by license revenue declines. Revenues from consulting services have declined 34.3% when compared to the same nine month period of the prior year and is largely attributed to the continued decline of consulting revenue from our EXceed Fulfill WMS Unix-based products. In addition, revenues from the AllPoints product line have declined approximately $2.2 million as a result of our November 2001 decision to no longer sell and market these products.

     Resale Software and Equipment. Resale software and equipment revenue decreased $0.2 million, or 2.5%, to $6.4 million for the nine months ended September 30, 2002, from $6.6 million for the nine months ended September 30, 2001. Resale software and equipment as a percentage of total revenue excluding reimbursable expenses increased to 12.0% for the nine months ended September 30, 2002 from 8.6% for the nine months ended September 30, 2001. This increase was due to improved resale revenue from Europe that accompanied a large new license and services contract during the first quarter of 2002.

Costs and Expenses

     Cost of Software Licenses. Cost of software licenses represented 4.4% of software license revenue for the nine months ended September 30, 2002 and 2.2% for the nine months ended September 30, 2001. The increase in cost of software licenses as a percentage of software license revenue was attributed to an increase in purchasing of complementary software that was sold during the nine months ended September 30, 2002.

     Cost of Services and Maintenance. Cost of services and maintenance decreased $8.0 million, or 25.0%, to $24.1 million for the nine months ended September 30, 2002, from $32.1 million for the nine months ended September 30, 2001. The decrease was related primarily to a reduction in the number of full time and contract services and maintenance employees. As a percentage of services and maintenance revenue, cost of services and maintenance was 65.1% for the nine months ended September 30, 2002 and 2001.

     Cost of Resale Software and Equipment. Cost of resale software and equipment decreased $0.1 million, or 2.5%, to $5.3 million for the nine months ended September 30, 2002, from $5.4 million for the nine months ended September 30, 2001. As a percentage of resale software and equipment revenue, cost of resale software and equipment was 82.7% for the nine months ended September 30, 2002 and 2001.

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     Sales and Marketing. Sales and marketing expenses decreased $6.4 million, or 30.8%, to $14.4 million for the nine months ended September 30, 2002, from $20.8 million for the nine months ended September 30, 2001. The decrease was related primarily to a reduction in the number of sales and marketing employees and to lower commission expenses for sales staff and partners as a result of lower software license revenues. As a percentage of total revenue excluding reimbursable expenses, sales and marketing expenses decreased to 27.1% for the nine months ended September 30, 2002, from 27.3% for the nine months ended September 30, 2001.

     Research and Development. Research and development expenses decreased $2.5 million, or 22.2%, to $8.8 million for the nine months ended September 30, 2002, from $11.3 million for the nine months ended September 30, 2001. The decrease in research and development expenses was due primarily to a reduction in the number of research and development employees and contractors. As a percentage of total revenue excluding reimbursable expenses, research and development expenses increased to 16.5% for the nine months ended September 30, 2002, from 14.8% for the nine months ended September 30, 2001. The increase was primarily due to lower revenue we have experienced since the beginning of the slowdown in global IT spending.

     General and Administrative. General and administrative costs decreased $5.2 million, or 36.6%, to $9.0 million for the nine months ended September 30, 2002, from $14.2 million for the nine months ended September 30, 2001. The decline in general and administrative expenses was largely due to a reduction in the number of general and administrative employees and contractors. As a percentage of total revenue excluding reimbursable expenses, general and administrative expenses decreased to 16.9% for the nine months ended September 30, 2002, from 18.6% for the nine months ended September 30, 2001.

     Amortization of Goodwill and Intangible Assets. Amortization of goodwill and intangible assets decreased $5.6 million to $0.9 million for the nine months ended September 30, 2002, from $6.5 million for the nine months ended September 30, 2001. Of the decline from the prior year, $3.4 million of the decline is attributed to the goodwill and intangible impairment write-off of AllPoints at the end of 2001 and approximately $2.5 million is attributed to the implementation in the current year of Statement of Financial Accounting Standards Board (SFAS) No. 142, Goodwill and Other Intangible Assets, which directs that goodwill and intangible assets which are deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. In November of 2001 and July of 2002, we acquired a total of $2.0 million of developed software technology that has resulted in $0.3 million in amortization during the nine months ended September 30, 2002.

     Non-Cash Warrant and Stock Compensation. Non-cash warrant and stock compensation expense decreased $0.6 million to $0.7 million for the nine months ended September 30, 2002, from $1.3 million for the nine months ended September 30, 2001. The decline primarily was attributed to employee reductions and the associated cancellation of the remaining vesting of options.

     Estimated Provisions for Lease Abandonment, Employee Severance and Other Facility Closure Costs. In response to the continued global slowdown in customer spending for large-scale IT projects, we launched additional cost reduction actions during the three months ended June 30, 2002. These actions, which include the consolidation of the U.S. professional services and development activities into one location in Dallas and the expansion of our offshore development operations, resulted in a charge of approximately $6.5 million. These provisions consisted of approximately $1.4 million for estimated severance and other employee related costs for the termination of approximately 60 services, sales and marketing, development and administrative employees and approximately $1.1 million for the estimated loss on the abandonment of leased office space in Philadelphia. Additionally, we provided $2.9 million for additional estimated losses associated with facilities previously abandoned and $1.1 million in other facility closure costs primarily for the write-down of property and equipment.

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     During the nine months ended September 30, 2001, we implemented cost reduction plans and recorded a pretax charge of $9.9 million that included approximately $2.4 million for severance and other employee related costs for the termination of 137 services, sales and marketing, development and administrative employees, $7.4 million for the abandonment of certain leased office space, less estimated sublease recoveries, at our North American and United Kingdom facilities, and $0.1 million for other costs associated with the downsizing of operations at our Hong Kong office.

     These provisions are based on management’s judgment of the estimated costs related to the severance, lease abandonments and other related costs. Actual future costs could vary from these estimates and result in additional provisions in the future.

     Other Income (Expense). Other income decreased $0.2 million to an income of $1.5 million for the nine months ended September 30, 2002, from an income of $1.7 million for the nine months ended September 30, 2001. The decrease was due primarily to a $1.2 million decline in interest income caused by a decline in interest rates and a decline in funds held in marketable securities during the nine months ended September 30, 2002. This decrease was offset by and increase of $1.0 million from foreign exchange gains. Although we periodically buy forward contracts to hedge against foreign currency fluctuations, we may have foreign currency gains or losses that can significantly vary from quarter to quarter.

     Income Taxes. An income tax provision of $0.3 million was recognized during the nine months ended September 30, 2002 compared to $0.2 million tax provision during the same period of 2001. The income tax provisions were primarily due to taxes on income earned by foreign subsidiaries while corresponding domestic tax benefits generated by foreign tax credits was not recognized due to the uncertainty of the timing and amount of future taxable income.

Liquidity and Capital Resources

     We have funded our operations through the issuance of our preferred and common stock, bank borrowings and cash flow from operations. As of September 30, 2002 we had approximately $42.5 million in cash and marketable securities, including long-term marketable securities, a decline of approximately $2.8 million during the first nine months of 2002.

     Net cash used by operating activities was $1.2 million for the nine months ended September 30, 2002. The net loss after deducting non-cash adjustments was approximately $8.1 million. This net cash use was significantly offset by cash generated from changes in operating assets and liabilities of approximately $6.9 million. Accounts receivable declined approximately $7.8 million, resulting from an improvement in our receivable days outstanding from 121 days at the end of 2001 to 80 days at the end of the third quarter of 2002. Additionally, accrued liabilities grew by approximately $1.3 million and deferred revenues increased by approximately $1.1 million. Prepaids and other current assets increased by $2.9 million due primarily to prepayment of insurance premiums, including director and officer liability insurance. Net cash used in operating activities was $7.7 million for the comparable nine months ended September 30, 2001.

     Net cash used in investing activities was $0.3 million for the nine months ended September 30, 2002. We acquired the rights to certain developed software technology, during the third quarter of 2002, for $1.0 million (see Note 5 to the consolidated financial statements included elsewhere herein) and purchased property and equipment of $0.6 million. Additionally, we generated approximately $1.4 million of cash from net sales of marketable securities. Net cash used in investing activities was $1.3 million for the comparable nine months ended September 30, 2001. We believe that capital expenditures over the next twelve months will not exceed $1.0 million.

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     Net cash provided by financing activities was less than $0.1 million for the nine months ended September 30, 2002. We generated cash of $0.4 million from the issuance of common stock and reduced long-term debt by approximately $0.4 million. Net cash provided by financing activities was $0.4 million for the comparable nine months ended September 30, 2001.

     In October 2002, we entered into a revolving line of credit agreement with a financial institution under which we can borrow up to $10.0 million over a two-year period. The agreement contains certain financial covenants, including minimum cash and marketable securities balances, and the facility is secured with all of our tangible assets. Borrowings for half of the revolving credit line will be based on a defined borrowing base, while the balance does not contain this restriction. Interest on any borrowings will be at the prime rate, and we will pay a facility fee on the unused portion of the line of credit of 0.375% per annum.

     We currently have operating lease obligations of approximately $44.2 million, of which $5.0 million is payable over the next year and the balance is due over an additional 13 years. Certain of the leases are abandoned and provisions have been made for the estimated losses on these leases (see Note 10 to the consolidated financial statements included elsewhere herein), but cash payments will be required for the remainder of the existing lease obligations. In October 2002, we agreed to pay the landlord of our abandoned Philadelphia facility $0.4 million in early 2003 to terminate the facility lease. If we are able to reach a settlement with the lessors of other abandoned facilities on terms favorable to the Company within the next twelve months, additional settlement payments might be required which could be considerably higher than the scheduled lease payments during that period.

     Although we expect to continue to use some cash over the next six months due to operating losses, severance and facility related costs associated with the cost reduction actions taken at the end of the second quarter of 2002 and certain other expenditures previously discussed, we believe that our existing working capital and the availability of cash under the new revolving credit line will be sufficient to fund our operations for at least the next year. However, there can be no assurance that we will not require additional financing in the future. We cannot be sure that we will be able to obtain any additional required financing or that, if we can, the terms will be acceptable to us.

     We do not engage in any activities involving special purpose entities or off-balance sheet financing.

Forward-Looking Statements

     In addition to historical information, this filing and our Annual Report on Form 10-K may contain forward-looking statements. Any statements contained herein (including without limitation statements to the effect that the Company or its management “believes,” “expects,” “anticipates,” “plans,” and similar expressions) that relate to future events or conditions, including, among others, statements relating to economic conditions, sales execution, cost reduction and restructuring actions and their impact on earnings and cash flows, sufficiency of working capital, accounting for goodwill and other intangible assets, interest rate risk, the enhancement of the Company’s software and a reverse stock split should be considered forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Certain Factors That May Affect Future Results” below. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligations to revise or publicly release the results of any revision to these forward-looking statements, whether as a result of new information, future events, or otherwise.

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Certain Factors That May Affect Future Results

Risks Relating to Our Business

Our customers may continue to delay or cancel spending on software and services because of the current economic climate.

     Since the beginning of 2001, some companies have experienced financial difficulties or uncertainty and, as a result, have delayed or canceled spending on information technology projects such as fulfillment software and services. If companies continue to delay, or cancel, their information technology initiatives because of the current economic climate, or for other reasons, our business, financial condition and results of operations could be materially adversely affected.

We can give you no assurance that we will be able to maintain or grow our level of revenue or achieve profitability in the future.

     Our future operating results may be affected by any of the following factors:

• a continued decline in general economic conditions;

• the level of market acceptance of, and demand for, our software;

• the overall growth rate of the markets in which we compete;

• our competitors’ products and prices;

• our ability to establish strategic marketing relationships;

• our ability to develop and market new and enhanced products;

• our ability to successfully train alliance companies and consulting organizations;

• our ability to control costs;

• changes in our products and services mix; and

• our ability to train and expand our direct sales force and indirect distribution channels worldwide.

We may not be profitable in the future.

     With the exception of the third and fourth quarters of the year ended December 31, 2000, we have experienced quarterly and annual losses since the formation of EXE in September 1997. We experienced net losses of $26.1 million in 1999, $3.3 million in 2000, $63.9 million in 2001, and $15.7 million for the nine months ended September 30, 2002. We may continue to incur losses on both a quarterly and an annual basis. Moreover, we expect to continue to incur significant sales and marketing, research and development and general and administrative expenses and, as a result, we will need to generate significant revenue to report net income in future periods. We may not achieve our planned growth or generate sufficient revenue to report net income in future periods.

Our revenue could decline if our customers do not continue to accept our existing products, including fulfillment and collaboration products.

     We expect to derive a majority of our product license revenue in the future from our fulfillment and collaboration products and their components. Our business depends on continued customer acceptance of these products and the release, introduction and customer acceptance of new products. We expect that we

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will continue to depend on revenue from new and enhanced versions of our fulfillment and collaboration products, and our revenue could decline if our target customers do not continue to adopt and expand their use of these products and their components.

Our quarterly operating results depend heavily on software license revenue, which is difficult to forecast and may fluctuate.

     Our quarterly software license revenue is difficult to forecast because our sales cycles, from initial evaluation to delivery of software, vary substantially from customer to customer. Revenue in any quarter is dependent on orders received, contracts signed and products shipped in that quarter. We typically recognize the majority of our revenue in the last month of the quarter, frequently in the last week or even days of the quarter. In addition, the timing of large individual license sales is difficult for us to predict, and, in some cases, transactions are concluded later than anticipated. Since our operating expenses are based on anticipated revenue levels and most of our operating expenses, particularly personnel and facilities costs, are relatively fixed in advance of any particular quarter, any revenue shortfall may cause fluctuations in operating results in any particular quarter. We can give you no assurance that revenue will grow in future periods, that revenue will grow at historical rates, or that we will achieve and maintain positive operating margins in future quarters. If revenue falls below our expectations in a particular quarter, our operating results could be harmed.

Because our sales cycles are lengthy and subject to uncertainties, it is difficult to forecast our sales, and the delay or failure of a significant software license transaction or our inability to anticipate a delay could harm our operating results.

     Our software is used for mission critical division- or enterprise-wide purposes and involves a significant commitment of resources by customers. A customers’ decision to license our software usually involves the evaluation of the available alternatives by a number of personnel in multiple functional and geographic areas, each often having specific and conflicting requirements. Accordingly, we typically must expend substantial resources educating prospective customers about the value of our solutions. For these and other reasons, the length of time between the date of initial contact with the potential customer and the execution of a software license agreement typically ranges from three to nine months, and is subject to delays over which we may have little or no control. As a result of the length and variability of the sales cycle for our software products, our ability to forecast the timing and amount of specific sales is limited, and the delay or failure to complete one or more anticipated large license transactions could harm our operating results.

We depend on the services of a number of key personnel, some of whom have recently joined us. A failure to integrate these personnel into the Company or a loss of any of these personnel could disrupt our operations and result in reduced revenue.

     Our success depends on the continued services and performance of our senior management staff. The loss of the services of any of our senior management staff or key employees could seriously impair our ability to operate and achieve our objectives, which could reduce our revenue. We have employment agreements with all of our executive officers. However, these employment agreements do not prevent key employees, from voluntarily terminating their employment with us.

     Joseph Cowan, our President and Chief Executive Officer, and Ken Vines, our Senior Vice President, Chief Financial Officer and Treasurer, joined us in November 2002 and May 2002, respectively.

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     Failure to integrate Mr. Cowan or Mr. Vines into the Company or with the senior management team could disrupt our operations and harm our business and financial results.

Failure to expand our alliance relationships with consulting firms and complementary software vendors and to establish new strategic alliances may slow acceptance of our software and delay the growth of our revenue.

     To supplement our direct sales force and our implementation capabilities, we have established strategic marketing alliances with consulting firms and complementary software vendors, and we rely on them to recommend our software to their customers and to periodically install and support our software. To increase our sales and implementation capabilities, one of our key strategies is to expand our existing relationships and establish new strategic alliances with consulting firms and complementary software vendors. The loss of, or failure to expand, existing relationships or our failure to establish new strategic alliances could limit the number of transactions we may complete, may result in our inability to recognize revenue and may harm our operating results.

We depend on a limited number of sales personnel who have recently joined us.

     We sell our software primarily through a direct sales force and through strategic relationships with systems integrators, consulting services companies, vendors of complementary software and hardware vendors. During the past year we have experienced significant turnover in our U.S. sales force. Almost all of the current members of our U.S. sales force have joined us within the past year. Our future success will depend in part on the efforts of our direct sales force. Most of the members of our sales force have not worked together in the past and, as a result, may not work together effectively as a team. In addition, our newly hired sales personnel may fail to develop the necessary skills to be productive within our organization, or if they reach productivity more slowly than anticipated, our ability to increase our revenue and grow our business will be compromised. In addition, due to the competitive nature of our industry, we may not be able to retain some or all of the members of our sales force.

If our new or enhanced products do not gain market acceptance, our business and results of operations would be harmed.

     The growth of our business will depend on the successful development, introduction and acceptance of new and enhanced versions of our products. The introduction of new or enhanced products requires that we manage the transition from existing products to these new or enhanced products. We have recently introduced our EXceed AIM and EXceed SNx software solutions to work in conjunction with our existing fulfillment software suite in order to extend our product reach into complementary markets. We expect to derive a significant portion of our revenues in the future from EXceed AIM and EXceed SNx and other new and enhanced products. If EXceed AIM and EXceed SNx and our other new and enhanced products do not gain market acceptance, our revenues may decline. Factors that may affect the market acceptance of EXceed AIM and EXceed SNx and our other new and enhanced products, some of which are beyond our control, may include:

• the changing requirements of our industry;

• the performance, quality and price of our new and enhanced products; and

• the availability, performance, quality and price of competing products and technologies.

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We may experience delays in the scheduled introduction of new or upgraded software, and our software may contain undetected errors or “bugs,” resulting in loss of revenue and harm to our reputation.

     Historically, we have issued significant new software products or new releases of our software periodically, with interim releases issued more frequently. Our software is particularly complex, because it must perform in environments operating multiple computer systems and respond to customer demand for high performance fulfillment, warehousing and distribution applications and major new product enhancements. Our software requires long development and testing periods before it is commercially released. For example, the development cycle for the introduction of our EXceed Crossdock component took approximately nine months. If we experience delays in the scheduled introduction of new software or software upgrades, our customers may become dissatisfied and our reputation and operating results could be harmed.

     Also, despite testing by us, our software may contain undetected errors or “bugs.” In the past, we have discovered software bugs in new versions of our software after its release. We may experience software bugs in the future. These bugs could result in a delay or loss of revenue, diversion of development resources, damage to our reputation, increased service and warranty costs, or impaired market acceptance and sales of this software, any of which could harm our operating results.

If we are unsuccessful in identifying, financing and integrating suitable acquisition candidates, including businesses, products and technologies, our growth could be harmed.

     Due to the intense competition we face, we may not be able to identify suitable acquisition candidates available for purchase at reasonable prices, consummate any acquisition or successfully integrate any acquired business into our operations.

     Further, acquisitions may involve a number of additional risks, including:

• diversion of management’s attention;

• failure to retain key personnel of the acquired businesses;

• unanticipated events or circumstances;

• legal liabilities; and

• impairment charges on goodwill and intangible assets.

     We expect to finance any future acquisitions with cash on hand, as well as with possible debt financing or by issuing common or preferred stock. If we were to proceed with one or more future acquisitions for cash, a substantial portion of our available cash could be used to complete them. If we were to proceed with one or more acquisitions for stock, our stockholders would suffer dilution of their interests. We can give you no assurance that we would be able to arrange for any needed debt financing on terms acceptable to us. Most of the businesses that might be attractive acquisition candidates are likely to have significant intangible assets. During 2001, amortization of acquired or existing intangible assets represents a substantial charge and has and will continue to reduce earnings. However, under new accounting rules effective for fiscal years beginning after December 15, 2001, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new rules. Other intangible assets will continue to be amortized over their useful lives.

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If we are unable to timely collect our accounts receivable, our cash flow will be harmed.

     Although we have recently improved on the time required to collect accounts receivable from our customers, there is no assurance that this trend will continue. Historically, we have experienced longer receivable collection periods that has largely been attributed to the deterioration of certain of our customers’ financial condition due to the negative economic climate in the United States and the international markets we serve. The failure of any significant customer to pay for our products on a timely basis could adversely affect our results of operations and our operating cash flow.

If we do not expand our customer base, our business may not grow.

     Our growth is dependent in part on our ability to attract new customers for our products. We derive a substantial portion of our revenue from the sale of additional products and services to our existing customers. If we are unable to expand our customer base by attracting new customers for our products, our business will suffer. In addition, a material reduction in the demand for our products and services from our existing customers would have a material adverse effect on our business, financial condition and results of operations.

Our international operations, which we could expand in the future, are subject to heightened risks. If any of these risks actually occur, our earnings could decline.

     International revenue accounted for approximately 52.9% of our total revenue during the nine months ended September 30, 2002, 46.9% of our total revenue during the year ended December 31, 2001, 40.5% of our total revenue during the year ended December 31, 2000 and approximately 36.2% of our total revenue during 1999. We expect international revenue to continue to account for a significant percentage of total revenue in the future, and we plan to continue to expand our international activities as part of our growth strategy. This expansion will require significant financial resources and management attention that could have a negative effect on our earnings. As our international operations continue to develop, they may become increasingly subject to risks inherent in international business activities, including:

• difficulty in staffing and managing geographically diverse operations;

• longer accounts receivable payment cycles in certain countries;

• compliance with a variety of foreign laws and regulations;

• unexpected changes in regulatory requirements and overlap of different tax structures;

• greater difficulty in safeguarding intellectual property;

• trade restrictions;

• changes in tariff rates and import and export licensing requirements; and

• general economic conditions in international markets.

Our earnings could decline if these or other factors affect international operations.

Because many of our customers pay us in foreign currencies, we may be exposed to exchange rate risks and our profitability may suffer due to currency fluctuations.

     A majority of the revenue and expenses incurred by our international operations are denominated in currencies other than the United States dollar. In particular, our revenue and costs of operations in Japan and Singapore are denominated in Japanese yen and Singapore dollars and in Europe some of our contracts are denominated in the Euro. In addition, with the expansion of international operations, the number of foreign

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currencies in which we must operate is likely to increase, resulting in increased exposure to exchange rate fluctuations. Exchange rate fluctuations have caused and will continue to cause currency transaction gains and losses. We experienced currency transaction gains (losses) of $0.8 million for the nine months ended September 30, 2002, $(0.5) million for the year ended December 31, 2001 and $(0.8) million for the year ended December 31, 2000. We can give you no assurance that currency transaction losses will not adversely affect our results in future periods.

Our success depends on our ability to attract and retain key personnel, in particular knowledgeable and experienced sales and marketing personnel and professional services personnel. If we are unable to attract these personnel and use them efficiently, our ability to sell and implement our software could be harmed.

     We believe our success will depend significantly on our ability to attract, motivate and retain highly skilled technical, managerial, consulting, sales and marketing personnel and professional services personnel. We compete intensely for these personnel, and we may be unable to achieve our personnel goals. Our failure to attract, motivate and retain such highly skilled personnel could seriously limit our ability to expand our business.

     Also, we believe our success will depend on our ability to productively manage our personnel. We expect future increases in the number of our sales and professional services staff. Growth may result in increased salary expenses and training costs in advance of any resulting increase in services revenue due to the typically lower productivity levels of newer personnel. Moreover, any growth in software license revenue will likely generate the need for more professional services personnel to deploy and implement software and to train customers. A shortage in the number of trained personnel, either within our Company or available from outside consulting firms, could limit our ability to implement our software on a timely and cost-effective basis. Our earnings will suffer if we generate insufficient revenue to cover growth-related expenses, significantly strain management resources with additional responsibilities, fail to successfully expand our relationships and develop additional relationships with third-party implementers and complementary software vendors or fail to have sufficiently trained sales and marketing personnel and professional services personnel.

The length and complexity of our implementation cycle may result in implementation delays, which may cause customer dissatisfaction.

     The introduction of new products and the size and complexity of some of our software implementations can result in lengthy implementation cycles and may result in delays. These delays could result in customer dissatisfaction, which could adversely affect our reputation. Additional delays could result if we fail to attract, train and retain services personnel, or if our alliance companies fail to commit sufficient resources towards implementing our software. These delays and resulting customer dissatisfaction could harm our reputation and cause our revenue to decline.

The use of fixed-price service contracts subjects us to the risk that we may not successfully complete these contracts on budget.

     We offer software implementation and related consulting services to our customers. Although we typically provide services on a “time and material” basis, we have from time to time entered into fixed-price service contracts, and we expect that some customers will demand these contracts in the future. These contracts specify certain milestones to be met by us regardless of actual costs incurred in meeting those obligations. If we are unable to successfully complete these contracts on budget, our earnings could suffer.

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We rely on software licenses that may be terminated or unavailable to us on commercially reasonable terms.

     We market and resell, under license, third party software, including:

• software embedded in our products;

• software that enables our software to interact with other software systems or databases; and

• software in conjunction with which our software operates.

We also license software tools used to develop our software and software for internal systems. We cannot assure you that the third party software or software tools will continue to be available to us on commercially reasonable terms. The loss or inability to maintain any of these software licenses could result in delays or reductions in product shipments until equivalent software could be identified and licensed or compiled, which could harm our business.

We could be subject to legal actions by former personnel, which could be costly, divert management time and attention and harm our operating results.

     During the calendar year 2001, we terminated approximately 233 of our services, sales, development and administrative personnel. Additionally, at the end of June 2002, we announced that approximately an additional 60 employees would be terminated. It is possible that these employees could bring legal actions against us under applicable federal, state or local laws. Any such claims, whether with or without merit, could subject us to costly litigation and the diversion of management time and attention, and successful claims could result in awards of damages to or reinstatement of former employees, any of which could harm our operating results.

Product liability and other claims related to our customers’ business operations could result in substantial costs.

     Many of our installations involve projects that are critical to the operations of our clients’ businesses and provide benefits that may be difficult to quantify. Any failure in a client’s system or any intellectual property infringement claims by third parties could result in a claim for substantial damages against us, regardless of our responsibility for the failure or for the alleged intellectual property infringement. We cannot assure you that our customer contracts will protect us in the event of any such claim. In addition, although we maintain general liability insurance coverage, including coverage for errors or omissions, we cannot assure you that this coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage.

     The successful assertion of one or more large claims against us that exceeds available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could result in substantial costs.

     Five customers have requested defense and indemnification from us for threatened patent claims against them by a third party relating to bar code technology. For additional information about these requests, see “Item 1. Business—Intellectual Property” in our Annual Report on Form 10-K.

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We may implement a reverse stock split in the range of one-for-five to one-for-fifteen. The effect of a reverse split on the trading price of our common stock is unpredictable.

     Our Board of Directors has approved a reverse stock split in the range of one-for-five to one-for-fifteen. This proposal is to be considered for approval by our stockholders at an upcoming Special Meeting of stockholders. We believe that, if the reverse stock split is approved, there is a greater likelihood that the minimum bid price of our common stock will be maintained at a level over $1.00 per share. There can be no assurance, however, that approval of the reverse stock split will succeed in raising the bid price of our common stock above $1.00 per share, or that a bid price of $1.00, if achieved, would be maintained, or that even if the Nasdaq’s minimum bid price requirements were satisfied, our common stock would not be delisted by the Nasdaq for other reasons. Although the theoretical effect of a reverse stock split is to increase the per share price of Common Stock, the actual price effect of a reverse stock split is difficult to predict. It is possible that the post-split trading price of our stock could be below the level one would expect based on the proportional effect of the split alone. In addition, the fewer number of shares that will be available to trade will possibly cause the trading market of the common stock to become less liquid, which could have an adverse effect on the price of the common stock.

The low price of our common stock could result in the delisting of our common stock.

     If our common stock is delisted from the Nasdaq National Market, we would likely seek to list our common stock on the Nasdaq SmallCap Market, if possible, or for quotation on the American Stock Exchange or a regional stock exchange, if available. However, listing or quotation on such a market or exchange could reduce the market liquidity for the common stock. If our common stock is not listed or quoted on another market or exchange, trading of our common stock could be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board.

     If our common stock is delisted by Nasdaq and our securities begin to trade on the OTC Bulletin Board maintained by Nasdaq, another over-the-counter quotation system, or on the pink sheets, investors may find it more difficult to dispose of or obtain accurate quotations as to the market value of the securities. In addition, we would be subject to a rule promulgated by the Securities and Exchange Commission that, if we fail to meet criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transactions prior to sale. Consequently, the rule may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. Delisting from Nasdaq will make trading our shares more difficult for investors, potentially leading to further declines in our share price. It would also make it more difficult for us to raise additional capital. Further, if we are delisted we could also incur additional costs under state blue sky laws in connection with any sales of our securities.

     Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the low share price of the common stock can result in an individual stockholder paying transaction costs that represent a higher percentage of total share value than would be the case if the share price were higher. This factor may also limit the willingness of institutions to purchase our common stock.

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We expect our results of operations to fluctuate, and the price of our common stock could fall if quarterly results differ from the expectations of securities analysts.

     Our operating results historically have fluctuated on a quarterly basis and may continue to do so in the future. If our quarterly results differ from the expectations of securities analysts, the price of our common stock could fall. Some of the factors which could cause our operating results to fluctuate include:

• general economic conditions;

• demand for our products and services;

• our competitors’ products and prices;

• the timing and market acceptance of new product introductions and upgrades by us or our competitors;

• our success in expanding our services, customer support and marketing and sales organizations, and the timing of these activities;

• the mix of products and services sold;

• delays in, or cancellations of, customer implementations;

• customers’ budget constraints;

• the level of research and development expenditures;

• the size of recurring compensation charges;

• changes in foreign currency exchange rates;

• our ability to control costs; and

• the timing of acquisitions and of the amortization or impairment of intangible assets.

     A large portion of our expenses, including expenses for facilities, equipment and personnel, is relatively fixed. Accordingly, if our revenue declines or does not grow as anticipated, we may not be able to correspondingly reduce our operating expenses in a timely manner. Failure to achieve anticipated levels of revenue could therefore significantly harm our operating results for a particular fiscal period.

Our stock price could be extremely volatile and may result in litigation against us.

     The stock market has experienced significant price and volume fluctuations, and the market price for our common stock has been in the past and could continue to be volatile. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. Litigation could result in substantial costs and a diversion of management’s attention and resources.

The concentration of ownership of our common stock may have the effect of delaying or preventing a change of control of us.

     Our directors, executive officers and their affiliated companies beneficially own more than forty percent of our outstanding common stock. As a result, these stockholders will have the ability to significantly influence the election of our directors and the outcome of corporate actions requiring stockholder approval. This concentration of ownership may have the effect of delaying or preventing a change of control of us. As a result, if these stockholders voted as a group, they would have the ability to significantly influence the outcome of corporate actions requiring stockholder approval.

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We have implemented anti-takeover provisions that may discourage a change of control.

     Our certificate of incorporation authorizes the issuance of 20,000,000 shares of preferred stock. Our board of directors has the power to determine the price and terms of any preferred stock. The ability of our board of directors to issue one or more series of preferred stock without stockholder approval could deter or delay unsolicited changes of control by discouraging open market purchases of our common stock or a non-negotiated tender or exchange offer for our common stock. Discouraging open market purchases may be disadvantageous to our stockholders who may otherwise desire to participate in a transaction in which they would receive a premium for their shares.

     In addition, some provisions of our certificate of incorporation and by-laws may also discourage a change of control by means of a tender offer, open market purchase, proxy contest or otherwise. These provisions include:

• a board that is divided into three classes, each of which is elected to serve staggered three year terms;

• provisions under which only the board of directors or our chief executive officer or secretary may call a special meeting of the stockholders;

• provisions which permit the board of directors to increase the number of directors and to fill these positions without a vote of the stockholders;

• provisions under which no director may be removed at any time except for cause and by a majority vote of the outstanding shares of voting stock; and

• provisions under which stockholder action may be taken only at a stockholders meeting and not by written consent of the stockholders.

These provisions may have the effect of discouraging takeovers and encouraging persons seeking to acquire control first to negotiate with us.

Risks Relating to Our Industry

We face intense competition from numerous competitors, some of whom have a significant competitive advantage over us. If we lose our competitive position, our revenue could decline.

     The market for fulfillment, collaboration and inventory management solutions is intensely competitive, fragmented and subject to rapid technological change. The principal competitive factors in our market include:

• adherence to emerging Internet-based technology standards;

• comprehensiveness of applications;

• adaptability and flexibility;

• immediate, interactive capability with customer and partner systems;

• financial viability;

• global capability;

• references from existing customers;

• industry domain experience and expertise;

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• ability to support specific industry requirements;

• ease of application use and deployment;

• speed of implementation;

• customer service and support; and

• initial price and total cost of ownership.

     Because we offer fulfillment, traditional supply chain, collaboration, inventory management and supply network execution software, we consider a number of companies in different market categories to be our competitors. Our competitors include companies and groups that:

• focus on providing fulfillment applications;

• offer enterprise platforms for order management, fulfillment and inventory management; and

• service internal customers, such as internal information technology groups.

     We believe that the market for integrated fulfillment, collaboration, inventory management and supply network execution solutions is still in its formative stage, and that no currently identified competitor represents a dominant presence in this market.

     We expect competition to increase as a result of software industry consolidation. New competitors could emerge and rapidly capture market share. We can give you no assurance that we can maintain our competitive position against current and potential competitors, especially those with greater name recognition, comparable or superior products, significant installed customer bases, long-standing customer relationships or the ability to price products as incremental add-ons to existing systems. If we lose our competitive position, our revenue could decline.

The market for our software is characterized by rapid technological change. If we fail to respond promptly and effectively to technological change and competitors’ innovations, our growth and operating results could be harmed.

     The market for fulfillment, warehousing, distribution, inventory management and supply network execution systems experiences rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards that may render existing products and services obsolete. Our growth and future operating results will depend in part on our ability to enhance existing applications and develop and introduce new applications or components. These new applications must:

• meet or exceed technological advances in the marketplace;

• meet changing customer requirements;

• respond to competitive products; and

• achieve market acceptance.

     Our product development and testing efforts have required, and are expected to continue to require, substantial investments. Also, we may be unable to successfully identify new software opportunities and develop and bring new software to market quickly and efficiently. Our software may not achieve market acceptance and current or future products may not conform to industry standards in the markets served. If we are unable to develop and introduce new and enhanced software in a timely manner, our growth and operating results could be harmed.

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We depend on intellectual property laws, which may not fully protect us from unauthorized use or misappropriation of our proprietary technologies.

     We rely on intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary rights in our products and technology. These measures afford only limited protection to us, particularly on an international basis. We may be unable to avoid infringement or misappropriation claims regarding current or future technology, or unable to adequately deter misappropriation or independent third-party development of our technology. In addition, policing unauthorized use of our products is difficult.

     We are unable to determine the extent to which piracy of our software products exists and software piracy could become a problem. Litigation to defend and enforce our intellectual property rights could result in substantial costs and diversion of resources, regardless of the final outcome of such litigation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We develop products in the United States and market our products in North America, Europe, the Middle East, Asia and Australia. Revenues outside the United States were 40.5%, 46.9% and 52.9% of our total revenues for the years ended December 31, 2000 and 2001 and for the nine months ended September 30, 2002, respectively. Most of our foreign subsidiaries’ sales and expenses are made in local currencies. International sales denominated in currencies other than the U.S. dollar are primarily in the Japanese Yen, Singapore dollar and the Euro. Accordingly, we are exposed to fluctuations in currency exchange rates. Foreign currency transaction gains (losses) were approximately $(0.8) million, $(0.5) million and $0.8 million for the years ended December 31, 2000 and 2001 and for the nine months ended September 30, 2002, respectively. Because most of our sales are currently made in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets.

     In January 2001, we began a foreign currency-hedging program to hedge certain nonfunctional currency exposure. Forward currency exchange contracts are utilized by us to reduce foreign currency exchange and interest rate risks with the goal of offsetting foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the forward contracts. We do not hold derivative financial instruments for trading or speculative purposes.

     As of September 30, 2002, the Company had outstanding forward currency exchange contracts of $2.0 million to sell British Pounds Sterling and $2.5 million to sell Japanese yen which hedge net balance sheet exposures. Gains and losses arising from the changes in the fair value of forward currency exchange contracts are recognized as a component of other income (expense). At September 30, 2002, the current market settlement values of the forward contracts would be immaterial.

     We used a portion of the proceeds obtained from our August 2000 initial public offering to repay all outstanding amounts under our revolving credit facility and term loan, which we subsequently terminated. To the extent that we utilize our new credit facility (see Note 8 to the Consolidated Financial Statements included elsewhere herein) in the future, future interest expense could be subject to fluctuations based on the general level of U.S. interest rates.

     We have invested the remaining proceeds from our initial public offering in investment grade corporate and government securities and money market funds. The primary objective of our investment activities is to preserve capital while at the same time maximizing the income we receive from our

34

investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. As of September 30, 2002, we had $25.4 million of securities which mature in 90 days or less, $3.1 million of securities which mature between 90 days and one year, and $8.5 million of securities which mature between one and two years. We do not believe that we have any material exposure to interest rate risk.

ITEM 4. CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in its periodic SEC filings is recorded, processed and reported within the time periods specified in the SEC’s rules and forms. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

     There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) Recent Sales of Unregistered Securities

     During the three months ended September 30, 2002, we issued warrants to purchase 1,000,000 shares of Common Stock to IBM at an exercise price of $0.01 per share. The warrants were not registered under the Securities Act of 1933.

     We believe that the transaction described above were exempt from registration under Section 3(b) or 4(2) of the Securities Act because the subject securities were issued to one entity which was believed to be a sophisticated investor or to have had a pre-existing business or personal relationship with us or our management and to have been purchasing for investment without a view to further distribution. In addition, the recipient of securities in such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the certificate issued in such transaction. The recipient had adequate access, through its relationship with us, to information about us.

(d) Use of Proceeds

     The Company completed its initial public offering of 8.0 million shares of its common stock pursuant to a Registration Statement on Form S-1 (Registration No. 333-35106, effective August 3, 2000) on August 9, 2000. Total proceeds from the offering, including the exercise of the over-allotment option, were approximately $63.9 million, net of underwriting discounts and commissions of approximately $5.0 million

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and other fees and expenses of approximately $1.8 million.

     From the date of receipt through September 30, 2002, we have used the proceeds as follows:

Repayment of indebtedness	$	16.6 million
Acquisition of businesses		3.7 million
Working capital		12.3 million
Total	$	32.6 million

     The remainder of the proceeds has been invested in investment grade corporate and government securities and money market funds. We intend to use the remaining proceeds for research and development activities; expenditures on sales and marketing, consulting services, and general and administrative personnel; systems costs; and working capital and general corporate purposes, including possible acquisitions of, or investments in, businesses and technologies that are complementary to our business. None of the net proceeds of the offering were paid by us, directly or indirectly, to any director, officer or general partner of ours or any of their associates, or to any persons owning ten percent or more of any class of our equity securities, or any affiliates of ours.

ITEM 5. OTHER INFORMATION

     The National Association of Securities Dealers, Inc. (the “NASD”) has promulgated Nasdaq Marketplace Rules requiring that listed companies have audit committees of at least three members comprised solely of “independent directors” as defined under their Marketplace Rule 4200(a)(14). The Company believes that each of the current members of the Audit Committee is an “independent director” within the meaning of NASD Marketplace Rule 4200(a)(14) except for Mr. William J. Lansing. Nasdaq Marketplace Rule 4350(d)(2)(B) establishes an exemption to the “three independent members” rule by permitting a listed company’s audit committee “under exceptional and limited circumstances” to include one director who is not independent if the Board of Directors determines that his or her membership on that committee is required “by the best interests of the company and its stockholders.”

     In the meeting of the Board of Directors of the Company on November 6, 2002, the Board of Directors determined that it is in the best interests of the Company its stockholders for Mr. Lansing to continue serving on the Audit Committee because Mr. Lansing is not an employee or immediate family member of any employee of the Company and the Board believes that Mr. Lansing’s service as managing member of General Atlantic Partners, LLC will not impair or influence his judgment. The Board has determined that because Mr. Lansing has extensive business, financial and accounting experience and significant knowledge of the Company’s industry, he will be able to provide valuable service and counsel to the Audit Committee. Accordingly, the Board of Directors determined that exceptional and limited circumstances exist which require Mr. Lansing to continue to serve as a Director on the Audit Committee. The Board believes that the interests of the Company and its stockholders are best served by Mr. Lansing’s continued membership in the Audit Committee.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1	Amended and Restated EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan, as amended.
99.1	Certification pursuant to 18 U.S.C. Section 1350.

(b)	Reports on Form 8-K
	None.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXE TECHNOLOGIES, INC.
Date: November 14, 2002	By: /s/ RAYMOND R. HOOD
	Raymond R. Hood Chairman of the Board of Directors and Chief Executive Officer
Date: November 14, 2002	By: /s/ KENNETH R. VINES
	Kenneth R. Vines Senior Vice President, Finance, Chief Financial Officer and Treasurer

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CERTIFICATIONS

I, Raymond R. Hood, Chief Executive Officer of the registrant certify that:

1.	I have reviewed this quarterly report on Form 10-Q of the registrant.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) for the registrant and have:

a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002

/s/ Raymond R. Hood

Chief Executive Officer

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CERTIFICATIONS

I, Kenneth R. Vines, Chief Financial Officer of the registrant certify that:

1.	I have reviewed this quarterly report on Form 10-Q of the registrant.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) for the registrant and have:

a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002

/s/ Kenneth R. Vines

Chief Financial Officer

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INDEX TO EXHIBITS

10.1	Amended and Restated EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan, as amended.
99.1	Certification pursuant to 18 U.S.C. Section 1350.

41 EX-10.1 3 d01083exv10w1.htm EX-10.1 AMENDED/RESTATED 1997 INCENTIVE STOCK PLAN

EXHIBIT 10.1

EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

As Amended and Restated February 6, 2001
As Amended May 30, 2002
and
August 6, 2002

EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

     Section 1. Name and Purposes of the Plan.

     (a)  Name. The Plan will be known as the EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan.

     (b)  Purposes. The purpose of the Plan is to provide key Employees and Consultants with an opportunity to share in the capital appreciation of the Common Stock of the Company. The Options granted pursuant to the Plan are intended to constitute either Incentive Stock Options or Non-Qualified Stock Options, as determined by the Administrator of the Plan at the time of grant.

     Section 2. Definitions. As used herein, the following definitions shall apply:

     (a)  “Administrator” shall be the Board or a Committee appointed by the Board pursuant to Section 3 of the Plan, which shall administer the Plan.

     (b)  “Affiliate” shall mean, whether now or hereafter existing, a person or entity that directly, or indirectly controls or is controlled by, or is under common control with, the Company, except that when used in connection with an Incentive Stock Option, “Affiliate” shall mean a Subsidiary.

     (c)  “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

     (d)  “Change of Control” shall mean the happening of an event (excluding a Public Offering) that shall be deemed to have occurred upon the earliest to occur of the following events:

          (i) the date the stockholders of the Company (or the Board, if stockholder action is not required) approve a plan or other arrangement pursuant to which the Company will be dissolved or liquidated;

          (ii) the date the stockholders of the Company (or the Board, if stockholder action is not required) approve a definitive agreement to sell or otherwise dispose of all or substantially all of the assets of the Company;

          (iii) the date the stockholders of the Company (or the Board, if stockholder action is not required) and the stockholders of the other constituent corporations (or their respective boards of directors, if and to the extent that stockholder action is not required) have approved a definitive agreement to merge or consolidate the Company with or into another corporation, other than, in either case, a merger or consolidation of the Company in which holders of shares of the Company’s voting capital stock immediately prior to the merger or

consolidation will have at least fifty percent (50%) of the ownership of voting capital stock of the surviving corporation immediately after the merger or consolidation (on a fully diluted basis), which voting capital stock is to be held by each such holder in the same or substantially similar proportion (on a fully diluted basis) as such holder’s ownership of voting capital stock of the Company immediately before the merger or consolidation;

          (iv) the date any entity, person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than (A) the Company, (B) any of its Subsidiaries, (C) any of the holders of the capital stock of the Company, as determined on the date that this Plan is adopted by the Board, (D) any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries or (E) any Affiliate of any of the foregoing, shall have acquired beneficial ownership of, or shall have acquired voting control over more than fifty percent (50%) of the outstanding shares of the Company’s voting capital stock (on a fully diluted basis), unless the transaction pursuant to which such person, entity or group acquired such beneficial ownership or control resulted from the original issuance by the Company of shares of its voting capital stock and was approved by at least a majority of directors who shall have been members of the Board for at least twelve (12) months prior to the date of such approval;

          (v) the first day after the date of this Plan when directors are elected such that there shall have been a change in the composition of the Board such that a majority of the Board shall have been members of the Board for less than twelve (12) months, unless the nomination for election of each new director who was not a director at the beginning of such twelve (12) month period was approved by a vote of at least sixty percent (60%) of the directors then still in office who were directors at the beginning of such period; or

          (vi) the date upon which the Board determines (in its sole discretion) that based on then current available information, the events described in clause (iv) are reasonably likely to occur.

     (e)  “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

     (f)  “Committee” shall mean a Committee appointed by the Board in accordance with Section 3(a) of the Plan, if one is appointed, in which event the Committee or Committees, as the case may be, shall possess the power and authority of the Board with respect to the Plan as set forth in Section 3(b) of the Plan.

     (g)  “Common Stock” shall mean the Common Stock, $.01 par value per share, of the Company.

     (h)  “Company” shall mean EXE Technologies, Inc., a Delaware corporation, and any successor in interest that agrees to assume and maintain the Plan.

     (i)  “Consultant” shall mean any person associated with the Company or a Subsidiary who is engaged by the Company or a Subsidiary to render services and is compensated by the

2

Company or Subsidiary for such services, including but not limited to, an advisor or independent contractor, but excluding any director who is not an Employee.

     (j)  “Disability” or “Disabled” with respect to an Optionee shall mean (i) when the Optionee is determined to be disabled within the meaning of any long-term disability policy or program sponsored by the Company covering the Optionee, as in effect as of the date of such determination, or (ii) if no such policy or program shall be in effect, when the Optionee is unable to engage in any substantial gainful activity by reason of a physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months. The determination of whether an Optionee is Disabled pursuant to subparagraph (ii) shall be determined by the Administrator, whose determination shall be conclusive; provided that: (A) if an Optionee is bound by the terms of an executive Employment Agreement between the Optionee and the Company, then whether the Optionee is “Disabled” for purposes of the Plan shall be determined in accordance with the procedures set forth in said Employment Agreement, if such procedures are therein provided; and (B) an Optionee bound by such an Employment Agreement shall not be determined to be Disabled under the Plan any earlier than he or she would be determined to be disabled under his or her Employment Agreement.

     (k)  “Employee” shall mean any person employed by the Company or any Subsidiary of the Company.

     (l)  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     (m)  “Fair Market Value” shall mean, as of any date, the fair market value of a share of Common Stock as determined pursuant to Section 7 hereof.

     (n)  “Incentive Stock Option” shall mean any Option that is intended to be and is designated as an incentive stock option within the meaning of Section 422 of the Code.

     (o)  “Non-Employee Director” shall have the meaning set forth in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission; provided, however, that the Administrator may, to the extent the Administrator deems it necessary or desirable to comply with Section 162(m) of the Code and applicable regulations thereunder, ensure that each Non-Employee Director also qualifies as an “outside director” as that term is defined in the regulations under Section 162(m) of the Code.

     (p)  “Non-Qualified Stock Option” shall mean any Option that is not intended to or does not qualify as an Incentive Stock Option.

     (q)  “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option, as the case may be, granted pursuant to the Plan.

3

     (r)  “Option Agreement” shall mean the written agreement by and between the Company and an Optionee under which Optionee may purchase the Shares pursuant to the exercise of an Option.

     (s)  “Optionee” shall mean an Employee or Consultant to whom an Option is granted.

     (t)  “Plan” shall mean this EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan, as amended from time to time.

     (u)  “Public Offering” shall mean the consummation of a firm commitment underwritten public offering of equity securities of the Company registered under the Securities Act.

     (v)  “Sale of the Company” shall mean the earliest of: (i) the closing of a sale, transfer or other disposition of all or substantially all of the shares of the capital stock then outstanding of the Company (except if such transferee is then an Affiliate); (ii) the closing of a sale, transfer or other disposition of all or substantially all of the assets of the Company (except if such transferee is then an Affiliate); or (iii) the merger or consolidation of the Company with or into another corporation (except an Affiliate), other than a merger or consolidation of the Company in which the holders of shares of the Company’s voting capital stock outstanding immediately before such merger or consolidation hold greater than fifty percent (50%) of the surviving entity’s voting capital stock after such consolidation or merger.

     (w)  “Securities Act” shall mean the Securities Act of 1933, as amended.

     (x)  “Share” or “Shares” shall mean a share or shares of Common Stock, as adjusted in accordance with Section 8 of the Plan, that is allocated to the Plan.

     (y)  “Subsidiary” shall mean, whether now or hereafter existing, a subsidiary or parent corporation of the Company as such term is defined in Sections 424(e), (f) and (g) of the Code.

     (z)  “Vested Amount” shall mean, with respect to each Option, a percentage of the shares for which the Option has become exercisable (subject to the further terms of the Plan) by application of the schedule set forth in Section 4(b).

     Section 3. Administration.

     (a)  Procedure. The Plan shall be administered by the Board and/or by one or more Committees, each of which shall consist of not less than two (2) persons appointed by the Board. In the event the Company has a class of equity securities registered under the Exchange Act, the Board shall administer the Plan; provided that it may appoint one or more Committees in accordance with Section 3(b).

     (b)  Committees. If one or more Committees are appointed by the Board, then the Committees shall possess the power and authority of the Board in administering the Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe, which

4

conditions may state that the Committee shall have administrative authority with respect to only a prescribed group of individuals eligible for Options under the Plan.

     Members of a Committee shall be members of the Board and shall serve for such period of time as the Board may determine. From time to time, the Board may increase the size of a Committee and appoint additional members thereto, remove members (with or without cause) and appoint new members in substitution therefore, fill vacancies however caused, or remove all members of a Committee and thereafter directly administer the Plan. Notwithstanding the foregoing, in the event the Company has a class of equity securities registered under the Exchange Act, any Committee that grants Options to individuals who are covered employees pursuant to section 162(m) of the Code and the regulations thereunder, and/or to individuals who are directors, officers or principal stockholders as determined pursuant to Section 16 of the Exchange Act, shall be composed solely of two (2) or more Non-Employee Directors.

     (c)  Powers of the Administrator. Subject to the provisions of the Plan (and, in the case of the Committee, the specific duties delegated by the Board to such Committee), the Administrator shall have the authority, in its sole discretion:

          (1) to determine whether and to what extent Options are granted hereunder;

          (2) to determine the Fair Market Value of the Common Stock based upon review of relevant information and in accordance with Section 7 of the Plan;

          (3) to determine the exercise price of the Options in accordance with Section 6(b) of the Plan;

          (4) to select the Optionees to whom Options may from time to time be granted;

          (5) to determine the number of Shares to be subject to each Option granted hereunder;

          (6) to prescribe, amend and rescind rules and regulations relating to the Plan;

          (7) to determine the terms and provisions of each Option granted under the Plan, each Option Agreement and each other agreement that in the sole discretion of the Administrator may be required (all of which agreements need not be identical with the terms of other Options, Option Agreements or other agreements);

          (8) to determine the circumstances under which the vesting or exercise date of an Option will be accelerated;

          (9) to interpret the Plan or any agreement entered into with respect to the grant or exercise of Options;

5

          (10) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Administrator or to take such other actions as may be necessary or appropriate with respect to the Company’s rights pursuant to Options or agreements relating to the granting or exercise thereof;

          (11) to determine whether and under what circumstances an Option may be exercised without a payment of cash under Section 6(c) hereof;

          (12) to terminate the Plan in the event of a Change of Control; and

          (13) to make such other determinations and establish such other procedures as it deems necessary or advisable for the administration of the Plan.

     (d)  Effect of the Administrator’s Decision. All decisions, determinations and interpretations of the Administrator pursuant to the provisions of the Plan shall be final and binding on all Optionees and any other holders of Options.

     (e)  Limitation of Liability. Notwithstanding anything herein to the contrary, no member of the Board or the Committee shall be liable for any good faith determination, act or failure to act in connection with the Plan or any Option awarded hereunder.

     Section 4. Eligibility.

     (a)  Eligible Persons. Options may be granted at any time and from time to time to any Employee or Consultant who shall be selected by the Administrator. Any grant of Options may include or exclude any Employee or Consultant as the Administrator shall determine in its sole discretion. Consultants who are not also Employees of the Company are eligible to be granted Non-Qualified Stock Options under the Plan but are not eligible to be granted Incentive Stock Options under the Plan.

     (b)  Vesting and Exercisability of Options. Subject to the provisions of Section 6 hereof and except to the extent the Administrator provides otherwise, each Option shall vest and become exercisable as follows: (i) 25% of the Option shall vest on the first anniversary of the date of grant; and (ii) the remaining 75% shall vest at a rate of 2.083% of the Option on the last day of each month after the first anniversary of the date of grant, with the number of shares vesting each month determined by rounding up to the nearest whole number of shares.

     The Administrator may, but need not, determine that the Vested Amount of each Option shall be exercisable only upon the earlier to occur of: (i) the consummation of a Public Offering; or (ii) the consummation of a Sale of the Company. The unvested portion of each Option may not be exercised. In addition, as specified in Section 3(c)(8), the Administrator may determine the circumstances under which the vesting or exercise date of an Option will be accelerated.

     (c)  Effect Upon Engagement. The Plan will not confer upon any Optionee any right with respect to the continuation of any employment, consulting or any other relationship with the Company nor will it interfere in any way with such Optionee’s right or the Company’s right to

6

terminate that Optionee’s employment, consulting or other relationship with the Company at any time, whether with or without cause.

     Section 5. Stock Subject to the Plan.

     (a)  Maximum Number of Shares. Subject to the provisions of Section 8 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is Twelve Million (12,000,000) Shares. The Shares may be authorized, but unissued or reacquired, Common Stock. In the event the Company has a class of equity securities registered under the Exchange Act, the maximum number of Shares with respect to which Options may be granted under the Plan to any Employee during any calendar year is One Million (1,000,000) Shares.

     (b)  Return of Shares to the Plan. If an Option expires, is terminated or becomes unexercisable for any reason without having been exercised in full, then the unpurchased Shares subject thereto shall, unless the Plan shall have been terminated, return to the Plan and become available for future grant under the Plan.

     Section 6. Terms and Conditions of Options.

     Each Option granted under the Plan shall be authorized by the Administrator and shall be evidenced by an Option Agreement, which shall state or incorporate by reference all other terms and conditions of the Plan including, without limitation, the following terms and conditions:

     (a)  Number of Shares. The Option Agreement shall state the number of Shares subject to the Option.

     (b)  Option Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Incentive Stock Option shall be stated in the Option Agreement and shall be no less than the Fair Market Value per share of the Common Stock on the date such Option is granted, without regard to any restriction other than a restriction that by its terms will never lapse; provided, however, that any Incentive Stock Option granted under this Plan to an Employee who, at the time such Option is granted, owns more than ten percent (10%) of the current total combined voting power of all classes of the capital stock of the Company, shall have an exercise price per Share of not less than one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date such Option is granted. The per Share exercise price for the Shares to be issued pursuant to the exercise of a Non-Qualified Stock Option shall be stated in the Option Agreement and shall be determined by the Administrator but shall be at least $.01 per Share.

     (c)  Consideration. The consideration to be paid for the Shares to be issued upon the exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of: (i) cash; (ii) check; or (iii) such other consideration and method of payment as the Administrator may from time to time determine. In making its determination as to the type of consideration to accept, the Administrator shall consider if the acceptance of such consideration may be reasonably expected to benefit the Company.

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     (d)  Form of Option. The Option Agreement shall state whether the Option granted thereunder is intended to be an Incentive Stock Option or a Non-Qualified Stock Option.

     (e)  Exercise of an Option.

          (1) Unless otherwise provided by the Administrator, the Vested Amount of any Option granted hereunder shall be exercisable, in whole or in part, at such times and under such further conditions as may be determined by the Administrator and as set forth in the Option Agreement.

          (2) An Option may not be exercised for a fraction of a Share.

          (3) An Option may not be exercised after the date of expiration of its term as shall be set forth in the Option Agreement.

          (4) An Option shall be deemed to have been exercised when written notice of such exercise has been received by the Company at its principal executive office in accordance with the terms of the Option Agreement by the person entitled to exercise the Option, and full payment for the Shares with respect to which the Option is to be exercised has been received by the Company, accompanied by any agreements required by the Administrator or the terms of the Plan and/or Option Agreement. An Optionee shall have no right to vote or receive dividends and shall have no other rights as a stockholder with respect to the Shares, notwithstanding the exercise of the Option, until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock Certificate evidencing such Shares. No adjustment shall be made for a dividend or other right for which the record date is prior to the date a stock Certificate with respect to the Shares is issued.

          (5) As soon as practicable after the proper exercise of an Option in accordance with the provisions of the Plan, the Company shall, without transfer or issue tax to the Optionee, deliver to the Optionee at the principal executive office of the Company or such other place as shall be mutually agreed upon between the Company and the Optionee, a Certificate or Certificates representing the Shares for which the Option shall have been exercised. The time of issuance and delivery of the Certificate(s) representing the Shares for which the Option shall have been exercised may be postponed by the Company for such period as may be required by the Company, with reasonable diligence, to comply with any applicable listing requirements of any national or regional securities exchange or any law or regulation applicable to the issuance or delivery of such Shares.

          (6) The exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available both for purposes of the Plan and for sale under the Option by the number of Shares as to which the Option is exercised.

     (f)  Termination of Options.

          (1) Termination in General. Unless sooner terminated as provided in this Plan, each Option shall be exercisable for the period of time as shall be determined by the

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Administrator and set forth in the Option Agreement and shall be void and unexercisable thereafter.

          (2) Termination of Relationship with the Company. Unless sooner terminated as provided in this Plan, in the event of the termination of an Optionee’s employment or consulting relationship with the Company (as the case may be) for any reason other than the death or Disability of the Optionee, such Optionee may, within three (3) months (or such other period of time as is determined by the Administrator) from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option up to the Vested Amount as of the date of termination, but only to the extent that the Optionee was entitled to exercise the Option on the date of such termination. To the extent the Optionee was not entitled to exercise the Option on the date of such termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option will terminate.

          (3) Death or Disability. Unless sooner terminated as provided in this Plan, in the event of the death or Disability of an Optionee while employed or engaged by the Company (as the case may be), Options held by such Optionee that are exercisable on the date of Disability or death shall be exercisable up to the Vested Amount as of the date of Disability or death for a period of twelve (12) months commencing on the date of the Optionee’s Disability or death. Such Options may be exercisable by the Optionee or his or her legal guardian or representative or, in the case of death, by his or her executor(s) or administrator(s); provided, however, if such disabled Optionee shall commence any employment or engagement during such twelve (12) month period with or by a competitor of the Company (including, but not limited to, full or part-time employment or independent consulting work), as determined solely in the judgment of the Administrator, then all Options held by such Optionee that have not yet been exercised shall terminate immediately upon the commencement thereof.

          (4) Agreement to Terminate. Options may be terminated at any time by agreement between the Company and the Optionee.

     (g)  Other Provisions.

          (1) Notwithstanding any provision in this Plan or an Option Agreement to the contrary, no Option granted to any Optionee under this Plan shall be treated as an Incentive Stock Option to the extent that such Option would cause the aggregate Fair Market Value of all Shares with respect to which Incentive Stock Options are exercisable by such Optionee for the first time during any calendar year (determined as of the date of grant of each such Option) to exceed $100,000. For purposes of determining whether an Incentive Stock Option granted to an Optionee would cause the aggregate Fair Market Value to exceed the $100,000 limitation, such Incentive Stock Options shall be taken into account in the order granted. For purposes of this subsection, Incentive Stock Options granted to an Optionee shall include all incentive stock options under all plans of the Company or any Subsidiary that are incentive stock option plans within the meaning of Section 422 of the Code. Options may be exercised in any order elected by the Optionee, whether or not the Optionee holds any unexercised Options under this Plan or any other plan of the Company.

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          (2) Notwithstanding any other provision of this Plan or an Option Agreement to the contrary, no Option shall be (A) granted under this Plan after ten (10) years from the date on which this Plan is adopted by the Administrator, or (B) exercisable more than ten (10) years from the date of grant; provided that if an Incentive Stock Option shall be granted under this Plan to any Employee who, at the time of the grant of such Option, owns stock possessing more than ten percent (10%) of the total combined voting power for all classes of the Company’s capital stock, the foregoing clause (B) shall be deemed modified by substituting the term “five (5) years” for the term “ten (10) years” that appears therein.

     Section 7. Fair Market Value of Common Stock.

     The Fair Market Value of a Share of Common Stock, as of any date, shall be determined as follows:

     (a)  If the Shares of Common Stock are listed on a national or regional securities exchange or traded through NASDAQ/NMS, then the Fair Market Value of a share of Common Stock shall be the closing price for a share of Common Stock on the exchange or on NASDAQ/NMS, as reported in The Wall Street Journal or such other source as the Administrator deems reliable on the relevant valuation date, or if there is no trading on that date, on the next trading date.

     (b)  If the Shares of Common Stock are traded in the over-the-counter market, then the Fair Market Value of a share of Common Stock shall be the mean of the bid and asked prices for a share of Common Stock on the relevant valuation date as reported in The Wall Street Journal or other source the Administrator deems reliable (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotations (“NASDAQ”) System or the NASD OTC Bulletin Board), or if there is no trading on such date, on the next trading date.

     (c)  In the absence of an established market for the Common Stock, the Fair Market Value of a share of Common Stock shall be determined by the Board in its sole discretion.

     Section 8. Adjustments.

     (a)  Adjustments. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares that have been authorized for issuance under the Plan but as to which no Options have yet been granted or that have been returned to the Plan upon cancellation or expiration of an Option, and the price per Share of the Common Stock covered by an Option will each be proportionately adjusted for any increase or decrease in the number of outstanding shares of Common Stock resulting from stock splits, reverse stock splits, stock dividends, reclassifications and recapitalizations or automatic conversion of shares of one class of stock to those of another by operation of the terms of such stock. Such adjustment shall be made by the Administrator whose determination in that respect will be final, binding and conclusive. Except as provided herein, no issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, will affect,

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and no adjustment by reason thereof will be made with respect to, the number or price of shares of Common Stock subject to an Option.

     (b)  No Fractional Shares. No fractional Shares shall be issuable on account of any action aforesaid, and the aggregate number of Shares into which Shares then covered by the Option, when changed as the result of such action, shall be reduced to the number of whole Shares resulting from such action, unless the Administrator, in its sole discretion, shall determine to issue scrip Certificates in respect to any fractional Shares, which scrip Certificates shall be in a form and have such terms and conditions as the Administrator in its discretion shall prescribe.

     Section 9. Rights as a Stockholder.

     An Optionee shall have no rights as a stockholder of the Company and shall not have the right to vote nor receive dividends with respect to any Shares subject to an Option until such Option has been exercised and a stock Certificate with respect to the Shares purchased upon such exercise of the Option has been issued to Optionee as set forth in Section 6(e)(4) and (5) hereof.

     Section 10. Forfeiture.

     Notwithstanding any other provision of this Plan, (a) if an Optionee’s employment with the Company is terminated by the Company pursuant to the cause termination provisions of an applicable employment agreement, or (b) if the Optionee’s employment or consulting relationship with the Company (as the case may be) is terminated and the Board makes a determination that the Optionee (1) has engaged in any type of disloyalty to the Company, including without limitation, fraud, embezzlement, theft, or dishonesty in the course of Optionee’s employment or consulting relationship, (2) has been convicted of a felony or other crime involving a breach of trust or fiduciary duty owed to the Company, (3) has made an unauthorized disclosure of trade secrets or confidential information of the Company, or (4) has breached any confidentiality agreement or non-competition agreement with the Company in any material respect, then, at the election of the Board, all unexercised Options held by the Optionee (whether or not then exercisable) shall terminate. In the event of such an election by the Board, in addition to immediate termination of all unexercised Options, the Optionee shall forfeit all Shares for which the Company has not yet delivered stock Certificates to the Optionee and the Company shall refund to the Optionee the exercise price paid to it upon exercise of the Option with respect to such Shares. Notwithstanding anything herein to the contrary, the Company may withhold delivery of stock Certificates pending the resolution of any inquiry that could lead to a finding resulting in forfeiture.

     Section 11. Time of Granting Options.

     The date of grant of an Option shall, for all purposes, be the date on which the Administrator makes the determination to grant the Option or such other date as is determined by the Administrator. Notice of the determination shall be given to each Optionee to whom an Option is so granted within a reasonable time after the date of such grant.

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     Section 12. Modification, Extension, Renewal of Option.

     Subject to the terms and conditions of the Plan, the Administrator may modify, extend or renew an Option, or accept the surrender of an Option (to the extent not theretofore exercised); provided that no Incentive Stock Option may be modified, extended or renewed if such action would cause such Option to cease to be an incentive stock option within the meaning of Section 422 of the Code.

     Section 13. Transferability.

     No Option may be sold, pledged, assigned, transferred or disposed of in any manner other than by will or by the laws of descent and distribution. During the lifetime of the Optionee, his or her Options shall be exercisable by the Optionee. In the event of the Optionee’s legal incapacity or Disability, the Option is exercisable by the Optionee’s legal guardian or representative.

     Section 14. Power of Board if Change of Control.

     Notwithstanding anything to the contrary set forth in this Plan, in the event of a Change of Control, the Board shall have the right, in its sole discretion, to accelerate the vesting of all Options that have not vested as of the date of the Change of Control and/or to establish an earlier date for the expiration of the exercise of an Option (notwithstanding a later expiration of exercisability set forth in an Option Agreement). In addition, in the event of a Change of Control of the Company, the Board shall have the right, in its sole discretion, subject to and conditioned upon a Sale of the Company: (a) to arrange for the successor company (or other entity) to assume all of the rights and obligations of the Company under this Plan; or (b) to terminate this Plan and (i) to pay to all Optionees cash with respect to those Options that are vested as of the date of the Sale of the Company in an amount equal to the difference between the Option Price and the Fair Market Value of a Share of Common Stock (determined as of the date the Plan is terminated) multiplied by the number of Options that are vested as of the date of the Sale of the Company which are held by the Optionee as of the date of the Sale of the Company, or (ii) to arrange for the exchange of all Options for options to purchase common stock in the successor corporation, or (iii) to distribute to each Optionee other property in an amount equal to and in the same form as the Optionee would have received from the successor corporation if the Optionee had owned the Shares subject to Options that are vested as of the date of the Sale of the Company rather than the Option at the time of the Sale of the Company. The form of payment or distribution to the Optionee pursuant to this Section shall be determined by the Board in its sole discretion.

     Section 15. Amendment or Termination of the Plan.

     Insofar as permitted by law and the Plan, the Board may at any time suspend, terminate, discontinue, alter or amend the Plan in any respect whatsoever; provided, however, that without prior approval of at least a majority of the stockholders entitled to vote thereon, no such revision or amendment may increase the aggregate number of Shares for which Options may be granted hereunder, change the designation of the class of Optionees eligible to receive Options or

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decrease the price at which Options may be granted. Any other provision of this Section notwithstanding, the Board specifically is authorized to adopt any amendment to this Plan deemed by the Board to be necessary or advisable to assure that the Incentive Stock Options or the Non-Qualified Stock Options available under the Plan continue to be treated as such, respectively, under all applicable laws.

     Section 16. Application of Funds.

     The proceeds received by the Company from the sale of Shares pursuant to the exercise of Options shall be used for general corporate purposes.

     Section 17. No Obligation to Exercise Option.

     The granting of an Option shall impose no obligation upon the Optionee to exercise such Option.

     Section 18. Approval of Stockholders.

     This Plan, and any amendments thereto, shall become effective on the date the Plan or amendment, as applicable, is adopted by the Board; provided that the Plan shall become limited to a non-qualified stock option plan if, either in the case of the Plan’s original adoption or in the case of an amendment increasing the number of shares reserved for award under the Plan or changing the class of employees eligible for Incentive Stock Options (“material amendment”), the Plan or such material amendment is not approved by the stockholders of a majority of the Company’s outstanding voting stock within one year (365 days) of its adoption by the Board. The Administrator may grant Options hereunder prior to approval of the Plan, or any material amendments thereto, by the holders of a majority of the Company’s outstanding voting stock; provided that any and all Options so granted shall be converted into Non-Qualified Stock Options if the Plan or material amendment, as applicable, is not approved by such stockholders within 365 days of its adoption.

     Section 19. Conditions Upon Issuance of Shares.

     (a)  Options granted under the Plan are conditioned upon the Company obtaining any required permit or order from appropriate governmental agencies, authorizing the Company to issue such Options and Shares issuable upon the exercise thereof.

     (b)  Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

     (c)  As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to execute an agreement with, and/or may require the person

13

exercising such Option to make any representation and/or warranty to, the Company as may be, in the judgment of counsel to the Company, required under applicable law or regulation, including but not limited to, a representation and warranty that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation and warranty is appropriate under any of the aforementioned relevant provisions of law.

     Section 20. Reservation of Shares.

     (a)  The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

     (b)  The Company, during the term of this Plan, shall use its best efforts to seek to obtain from appropriate regulatory agencies any requisite authorization in order to issue and sell such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain from any such regulatory agency having jurisdiction the requisite authorization(s) deemed by the Company’s counsel to be necessary for the lawful issuance and sale of any Shares hereunder, or the inability of the Company to confirm to its satisfaction that any issuance and sale of any Shares hereunder will meet applicable legal requirements, shall relieve the Company of any liability in respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

     Section 21. Other Agreements.

     Options shall be evidenced by an Option Agreement in such form or forms as the Administrator (subject to the terms and conditions of this Plan) may from time to time approve, which Option Agreement shall evidence and reflect the terms and conditions of an Option as set forth in Section 6 hereof. The Administrator may, from time to time, require such other agreements in connection with the Option as it, in its sole discretion, deems advisable. The Option Agreement and any other agreement required by the Plan or the Option Agreement, as determined by the Administrator, may contain such other provisions as the Administrator in its discretion deems advisable and that are not inconsistent with the provisions of this Plan, including, without limitation, restrictions upon or conditions precedent to the exercise of the Option.

     Section 22. Taxes, Fees, Expenses and Withholding.

     (a)  The Company shall pay all original issue and transfer taxes (but not income taxes, if any) with respect to the grant of an Option and/or the issue and transfer of Shares pursuant to the exercise thereof, and all other fees and expenses necessarily incurred by the Company in connection therewith, and will, from time to time, use its best efforts to comply with all laws and regulations that, in the opinion of counsel for the Company, shall be applicable thereto.

     (b)  The granting of Options hereunder and the issuance of Shares pursuant to the exercise thereof is conditioned upon the Company’s reservation of the right to withhold in accordance with any applicable law, from any compensation or other amounts payable to the

14

Optionee, any taxes required to be withheld under federal, state or local law as a result of the grant or exercise of such Option or the sale of the Shares issued upon exercise thereof. To the extent that compensation or other amounts, if any, payable to the Optionee is insufficient to pay any taxes required to be so withheld, the Company may, in its sole discretion, require the Optionee (or such other person entitled herein to exercise the Option), as a condition to the exercise of an Option, to pay in cash to the Company an amount sufficient to cover such tax liability or otherwise to make adequate provision for the Company’s satisfaction of its withholding obligations under federal, state and local law.

     Section 23. Notices.

     Any notice to be given to the Company pursuant to the provisions of this Plan shall be addressed to the Company in care of its Secretary (or such other person as the Company may designate from time to time) at its principal executive office, and any notice to be given to an Optionee shall be delivered personally or addressed to the Optionee at the address given beneath the signature of the Optionee on his or her Option Agreement, or at such other address as such Optionee or his or her permitted transferee (upon the transfer of the Shares) may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified, and deposited, postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. It shall be the obligation of each Optionee and each permitted transferee holding Shares purchased upon exercise of an Option to provide the Secretary of the Company, by letter mailed as provided herein, with written notice of his or her direct mailing address.

     Section 24. No Enlargement of Employee Rights.

     This Plan is purely voluntary on the part of the Company, and the continuance of the Plan shall not be deemed to constitute a contract between the Company and any Employee or Consultant, or to be consideration for or a condition of the employment or service of any Employee or Consultant as the case may be. Nothing contained in this Plan shall be deemed to give any Employee or Consultant the right to be retained in the employ or service of the Company, or to interfere with the right of the Company to discharge or retire any Employee or Consultant thereof at any time. No Employee or Consultant shall have any right to or interest in Options authorized hereunder prior to the grant thereof to such Employee or Consultant, and upon such grant such Employee shall have only such rights and interests as are expressly provided herein, subject, however, to all applicable provisions of the Company’s Certificate of Incorporation, as the same may be amended from time to time.

     Section 25. Information to Optionees.

     The Company, upon request, shall provide without charge to each Optionee copies of such annual and periodic reports as are provided by the Company to its stockholders generally.

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     Section 26. Availability of Plan.

     A copy of this Plan shall be delivered to the Secretary of the Company and shall be shown to any eligible person making reasonable inquiry concerning it.

     Section 27. Invalid Provisions.

     In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.

     Section 28. Applicable Law.

     This Plan shall be governed by and construed in accordance with the laws of the State of Delaware.

     Section 29. Administrator Action.

     Notwithstanding anything to the contrary set forth in this Plan, any and all actions of the Administrator taken under or in connection with this Plan and any agreements, instruments, documents, Certificates or other writings entered into, executed, granted, issued and/or delivered pursuant to the terms hereof, shall be subject to and limited by any and all votes, consents, approvals, waivers or other actions of all or certain stockholders of the Company or other persons required pursuant to (a) the Company’s Certificate of Incorporation (as the same may be amended and/or restated from time to time), (b) the Company’s Bylaws (as the same may be amended and/or restated from time to time), and (c) any other agreement, instrument, document or writing now or hereafter existing, between or among the Company and its stockholders or other persons (as the same may be amended from time to time).

     Section 30. Miscellaneous.

     This Plan is intended to comply with the conditions and requirements for employee benefit plans under Rule 16b-3, as promulgated under Section 16 of the Exchange Act such that Options granted pursuant to the Plan will be exempted from the provisions of Section 16(b) thereof. To the extent that any provision of the Plan would cause a conflict with such requirements, such provision shall be deemed null and void to the extent permitted by applicable law. This section shall not be applicable if no class of the Company’s equity securities is then registered pursuant to Section 12 of the Exchange Act.

AMENDMENT NO. 1 TO THE
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

     Section 5(a) of the EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan (the “Plan”) is hereby amended to increase the number of shares of Common Stock available for issuance thereunder

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from 12,000,000 shares to 15,000,000 shares and increasing the maximum number of shares of Common Stock with respect to which options may be granted under the Plan to any employee during any calendar year from 1,000,000 shares to 3,000,000 shares.

Adopted by the Board of Directors
on April 24, 2002
Adopted by the Stockholders
On May 30, 2002

AMENDMENT NO. 2 TO THE
EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

     Section 3(b) of the EXE Technologies, Inc. 1997 Incentive and Non-Qualified Stock Option Plan (the “Plan”) is hereby amended so that the Employee Stock Option Committee (which gives grants to employees and consultants, but does not give grants to individuals who are covered employees pursuant to section 162(m) of the Code and the regulations thereunder, and/or to individuals who are directors, officers or principal stockholders as determined pursuant to Section 16 of the Exchange Act) may consist of a single board member, plus at least one executive officer.

Adopted by the Board of Directors
on August 6, 2002

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EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

INCENTIVE STOCK OPTION AGREEMENT

     EXE TECHNOLOGIES, INC. (the “Company”) hereby grants to                                                      (the “Optionee”) an option (the “Option”) purchase a total of                                                    shares of Common Stock, $ .01 par value per share, of the Company (“Common Stock”), at the price and on the terms set forth herein, and in all respects subject to the terms and provisions of the EXE TECHNOLOGIES, INC. 1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN (the “Plan”) applicable to incentive stock options, which terms and provisions are incorporated herein by reference. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Plan.

     1.     Nature of the Option. The Option is intended by the Company and the Optionee to be an incentive stock option within the meaning of Section 422 of the Code.

     2.     Date of Grant; Term of Option. The Option is granted this        day of                     ,        , and it may not be exercised later than 5:00 p.m. on the        day of                     ,        .

     3.     Option Exercise Price. The Option exercise price is $       per Share, which price is the Fair Market Value per share of the Common Stock on the date hereof; or $             per share if Optionee, at the time of grant, owns stock possessing more than ten percent (10%) of the current total combined voting power of all classes of the Company’s capital stock, which price represents a price per Share equal to no less than one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date the Option is granted.

     4.     Exercise of Option. Except as otherwise provided herein, the Option shall be exercisable during its term only in accordance with the terms and provisions of the Plan and this Option Agreement as follows:

          (a) Vesting. Twenty-Five percent of the Option shall vest and become exercisable on the first anniversary of the date of grant. The remaining 75% of the Option shall vest and become exercisable at a rate of 2.083% of the Option on the last day of each month after the first anniversary of the date of grant, with the number of shares vesting each month determined by rounding up to the nearest whole number of shares.

          (b) Right to Exercise. The Vested Amount of each Option may be exercised at such times and subject to such procedures as the Company may further provide.

          (c) Method of Exercise. The Option shall be exercisable by written notice that shall state the election to exercise the Option, the number of Shares in respect to which the Option is being exercised and such other representations and agreements as to the Optionee’s investment intent with respect to such Shares as may be required by the Company hereunder or pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee (or, subject to the approval of the Administrator, a registered securities broker authorized by the Optionee to exercise the Option pursuant to an executed power of attorney) and shall be delivered in person or by certified mail to the Secretary of the Company or such other person as may be designated by the Company. The written notice shall be accompanied by payment of the purchase price and any agreements required by the Administrator, the terms of the Plan and/or this Option Agreement. The Option will be deemed to be exercised upon the receipt by the Company of such written notice, payment of the purchase price, and duly executed copies of any agreements required by the Administrator, the terms of the Plan and/or this Option Agreement. The Optionee will have no right to vote or receive dividends and will have not other rights as a stockholder with respect to such Shares notwithstanding the exercise of the Option, until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock Certificate evidencing the Shares that are being issued upon exercise of the Option. The Company will issue (or cause to be issued) such stock Certificates promptly following the exercise of the Option. The Certificate or Certificates for the Shares as to which the Option shall be exercised shall be registered in the name of the Optionee and shall contain any legend as may be required under the Plan and any agreements required by the Administrator and/or applicable law.

          (d) Method of Payment. The method of payment of the purchase price shall be determined by the Administrator and may consist entirely of cash, check, or any combination of such methods of payment, or such other consideration or method of payment as may be authorized by the Administrator and permitted under the Plan.

          (e) Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. As a condition to the exercise of the Option, the Company may require the Optionee to make any representations and warranties to the Company as may be required by any applicable law or regulation.

     5.     Investment Representations. Unless the Shares have been registered under the Securities Act, in connection with the grant of the Option, the Optionee represents and warrants as follows:

          (a) The Optionee is acquiring the Option, and upon exercise of the Option, the Optionee will be acquiring the Shares for investment for his or her own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.

          (b) The Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. The Optionee has received all

2

information as the Optionee deems necessary and appropriate to enable him or her to evaluate the financial risk inherent in making an investment in the Shares and has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof.

     6.     Termination of Employment with the Company. Subject to the provisions of Section 8 hereof, upon termination of the Optionee’s employment with the Company for any reason other than death or Disability, the Optionee shall have the right to exercise the Option at any time within the three (3) month period after the date of such termination to the extent that the Optionee was entitled to exercise the Option at the date of such termination.

     7.     Death or Disability of Optionee. Upon the death or Disability of the Optionee while in the employ of the Company, the Option may be exercised at any time within twelve (12) months after the date of death or termination due to Disability, in the case of death, by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, or, in the case of Disability, by the Optionee or his legal guardian or representative, but in any case only to the extent the Optionee was entitled to exercise the Option at such date; provided, however, that if such disabled Optionee shall commence any employment or engagement during such twelve (12) month period with or by a competitor of the Company (including, but not limited to, full or part-time employment or independent consulting work), as determined solely in the judgment of the Administrator, then the Option shall terminate immediately upon the commencement thereof. To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or to the extent the Option is not exercised within the time specified herein, the Option shall terminate. Notwithstanding the foregoing, the Option shall not be exercisable after the expiration of the term set forth in Section 2 hereof.

     8.     Forfeiture of Option. Notwithstanding any other provision of the Option Agreement, (a) if the Optionee’s employment with the Company is terminated by the Company pursuant to the cause termination provisions of an applicable employment agreement, or (b) if the Optionee’s employment with the Company is terminated and the Board makes a determination that the Optionee (i) has engaged in any type of disloyalty to the Company, including without limitation, fraud, embezzlement, theft, or dishonesty in the course of his employment, (ii) has been convicted of a felony or other crime involving a breach of trust or other fiduciary duty owed to the Company, (iii) has disclosed trade secrets or confidential information of the Company, or (iv) has breached any agreement with the Company in respect of confidentiality, non-disclosure, non-competition or otherwise, then, at the election of the Board, all unexercised Options shall terminate. In the event of such an election by the Board, in addition to immediate termination of all unexercised Options, the Optionee shall forfeit all Shares for which the Company has not yet delivered share Certificates to the Optionee and the Company shall refund to the Optionee the Option price paid to the Company with respect to those Shares. Notwithstanding anything herein to the contrary, the Company may withhold delivery of share Certificates pending the resolution of any inquiry that could lead to a determination resulting in forfeiture.

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     9.     Non-transferability of Option. The Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing and the terms of the Plan, the terms of the Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     10.     Continuation of Employment. Neither the Plan nor this Option Agreement shall confer upon any Optionee any right to continue in the employment of the Company or limit in any respect the right of the Company to discharge or release the Optionee at any time, with or without cause and with or without notice. For purposes of Sections 6, 7 and 8, “Company,” when used with reference to the employment of the Optionee, shall mean the Company and any Affiliate, as applicable.

     11.     Withholding. The Company reserves the right to withhold, in accordance with any applicable laws, from any consideration payable to Optionee any taxes required to be withheld by federal, state or local law as a result of the grant or exercise of the Option or the sale or other disposition of the Shares issued upon exercise of the Option. If the amount of any consideration payable to the Optionee is insufficient to pay such taxes or if no consideration is payable to the Optionee, then upon the request of the Company, the Optionee (or such other person entitled to exercise the Option pursuant to Section 7 hereof) shall pay to the Company an amount sufficient for the Company to satisfy any federal, state or local tax withholding requirements the Company may incur as a result of the grant or exercise of the Option or the sale or other disposition of the Shares issued upon the exercise of the Option.

     12.     The Plan. The Option is subject to, and the Company and the Optionee agree to be bound by, all of the terms and conditions of the Plan as such Plan may be amended from time to time in accordance with the terms thereof. Pursuant to the Plan, the Administrator is authorized to adopt rules and regulations not inconsistent with the Plan as it shall deem appropriate and proper. A copy of the Plan in its present form is available for inspection during business hours by the Optionee or the persons entitled to exercise the Option at the Company’s principal office.

     13.     Conversion to Non-Qualified Option. Notwithstanding anything to the contrary set forth herein, this Option is being granted subject to the condition that in the event the Plan, or any material amendment (as defined in Section 18 of the Plan) is not approved by the stockholders of the Company within 365 days of the date that the Plan or material amendment, as applicable, was adopted by the Board, this Option shall automatically be converted into a Non-Qualified Stock Option. In addition, neither the Company nor any member of the Board or Committee shall be liable for any good faith determination, act or failure to act in connection with the Option which thereafter is determined to have converted the Option into a Non-Qualified Stock Option.

     14.     Early Disposition of Stock. Subject to the fulfillment by the Optionee of any conditions upon the disposition of Shares received under the Option, the Optionee hereby agrees that if he or she disposes of any Shares received under the Option within two (2) years

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from date of grant or one (1) year after such Shares were transferred to him or her upon exercise of the Option, he or she will notify the Company in writing within thirty (30) days after the date of such disposition. The Optionee acknowledges that disposition by him or her within two (2) years from the date of grant and one (1) year from the date of exercise of the Option would disqualify him or her from capital gain treatment for any gain realized upon such disposition.

     15.     Entire Agreement. The Option, together with the Plan and the other exhibits attached thereto or hereto, represents the entire agreement between the parties.

     16.     Governing Law. This Option shall be construed in accordance with the laws of the State of Delaware, without regard to the application of the principles of conflicts of laws.

     17.     Amendment. Subject to the provisions of the Plan, this Option Agreement may only be amended by a writing signed by each of the parties hereto.

Date:	EXE TECHNOLOGIES, INC
	By:
	Title:

5

ACKNOWLEDGMENT

     The Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that he or she has read and is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan.

Date:
	Signature of Optionee
	Name
	Address
	City, State, Zip

EXE TECHNOLOGIES, INC.
1997 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

     EXE TECHNOLOGIES, INC. (the “Company”) hereby grants to                           (the “Optionee”) an option (the “Option”) to purchase a total of                                      shares of Common Stock, $ .01 par value per share, of the Company (“Common Stock”), at the price and on the terms set forth herein, and in all respects subject to the terms and provisions of the EXE TECHNOLOGIES, INC. 1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN (the “Plan”) applicable to non-qualified stock options, which terms and provisions are incorporated by reference herein. Unless otherwise defined herein, capitalized terms used but not defined herein shall have the meanings given to them in the Plan.

     1.     Nature of the Option. The Option is intended to be a nonstatutory stock option and is NOT intended to be an incentive stock option within the meaning of Section 422 of the Code, or to otherwise qualify for any special tax benefits to the Optionee.

     2.     Date of Grant; Term of Option. The Option is granted this       day of                     ,      , and it may not be exercised later than 5:00 p.m. on the       day of                ,                 ,      .

     3.     Option Exercise Price. The Option exercise price is                  ($        ) per Share.

     4.     Exercise of Option. Except as otherwise provided herein, the Option shall be exercisable during its term only in accordance with the terms and provisions of the Plan and this Option Agreement as follows:

          (a) Vesting. Twenty-Five percent of the Option shall vest and become exercisable on the first anniversary of the date of grant. The remaining 75% of the Option shall vest and become exercisable at a rate of 2.083% of the Option on the last day of each month after the first anniversary of the date of grant, with the number of shares vesting each month determined by rounding up to the nearest whole number of shares.

          (b) Right to Exercise. The Vested Amount of each Option may be exercised at such times and subject to such procedures as the Company may further provide.

          (c) Method of Exercise. The Option shall be exercisable by written notice that shall state the election to exercise the Option, the number of Shares in respect to which the Option is being exercised and such other representations and agreements as to the Optionee’s investment intent with respect to such Shares as may be required by the

Administrator or pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee (or, subject to the approval of the Administrator, a registered securities broker authorized by the Optionee to exercise the Option pursuant to an executed power of attorney) and shall be delivered in person or by certified mail to the Secretary of the Company or such other person as may be designated by the Company. The written notice shall be accompanied by payment of the purchase price and any agreements required by the Administrator, the terms of the Plan and/or this Option Agreement. The Option will be deemed to be exercised upon the receipt by the Company of such written notice, payment of the purchase price and duly executed copies of any agreements required by the Administrator, the terms of the Plan and/or this Option Agreement. The Optionee shall have no right to vote or receive dividends and shall have no other rights as a stockholder with respect to such Shares, notwithstanding the exercise of the Option, until the issuance by the Company (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock Certificate evidencing the Shares that are being issued upon exercise of the Option. The Company will issue (or cause to be issued) such stock Certificates promptly following the exercise of the Option. The Certificate or Certificates for the Shares as to which the Option shall be exercised shall be registered in the name of the Optionee and shall contain any legend as may be required under the Plan and any agreements required by the Administrator and/or applicable law.

          (d) Method of Payment. The method of payment of the purchase price shall be determined by the Administrator and may consist entirely of cash, check, or any combination of such methods of payment, or such other consideration or method of payment as may be authorized by the Administrator and permitted under the Plan.

          (e) Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. As a condition to the exercise of the Option, the Company may require the Optionee to make any representations and warranties to the Company as may be required by any applicable law or regulation.

     5.     Investment Representations. Unless the Shares have been registered under the Securities Act, in connection with the acquisition of the Option, the Optionee represents and warrants as follows:

          (a) The Optionee is acquiring the Option, and upon exercise of the Option, Optionee will be acquiring the Shares for investment for his or her own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.

          (b) The Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. The Optionee has received all such information as the Optionee deems necessary and appropriate to enable him or her to evaluate the financial risk inherent in making an investment in the Shares and has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof.

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     6.     Termination of Relationship with the Company. Subject to the provisions of Section 8 hereof, upon termination of the Optionee’s employment, consulting or other relationship with the Company (as the case may be) for any reason other than death or Disability, the Optionee shall have the right to exercise this Option up to the Vested Amount as of the date of termination for a period of three (3) months from the date of such termination, provided that the Optionee may only exercise the Option to the extent that the Optionee was entitled to exercise the Option at the date of such termination.

     7.     Death or Disability of Optionee. Upon the death or Disability of the Optionee while in the employ of or engagement by the Company (as the case may be), the Option may be exercised up to the Vested Amount at any time within twelve (12) months after the date of death or termination due to Disability provided the Optionee was entitled to exercise the Option at the date of his or her death or termination due to Disability. In the case of death, the Option may be exercised by the Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or inheritance. In the case of Disability, the Option may be exercised by the Optionee or his or her legal guardian or representative, but in any case, the Option may be exercised only to the extent that the Optionee was entitled to exercise the Option at such date; provided, however, that if such disabled Optionee shall commence any employment or engagement during such twelve (12) month period with or by a competitor of the Company (including, but not limited to, full or part-time employment or independent consulting work), as determined solely in the judgment of the Administrator, then the Option shall terminate immediately upon the commencement thereof. To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or to the extent the Option is not exercised within the time specified herein, the Option shall terminate. Notwithstanding the foregoing, the Option shall not be exercisable after the expiration of the term set forth in Section 2 hereof.

     8.     Forfeiture of Option. Notwithstanding any other provision of this Option Agreement, (a) if an Optionee’s employment with the Company is terminated by the Company pursuant to the cause termination provisions of an applicable employment agreement, or (b) if the Optionee’s employment or consulting relationship with the Company (as the case may be) is terminated and the Board makes a determination that the Optionee (i) has engaged in any type of disloyalty to the Company, including without limitation, fraud, embezzlement, theft, or dishonesty in the course of his employment or engagement, (ii) has been convicted of a felony or other crime involving a breach of trust or other fiduciary duty owed to the Company, (iii) has disclosed trade secrets or confidential information of the Company, or (iv) has breached any agreement with the Company in respect of confidentiality, non-disclosure, non-competition or otherwise, then, at the election of the Board, all unexercised Options shall terminate. In the event of such an election by the Board, in addition to immediate termination of all unexercised Options, the Optionee shall forfeit all Shares for which the Company has not yet delivered share Certificates to the Optionee and the Company shall refund to the Optionee the Option price paid to the Company with respect to those Shares. Notwithstanding anything herein to the contrary, the Company may withhold delivery of share Certificates pending the resolution of any inquiry that could lead to a determination resulting in forfeiture.

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     9.     Non-transferability of Option. The Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing and the terms of the Plan, the terms of this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     10.     Continuation of Employment or Engagement. Neither the Plan nor this Option Agreement shall confer upon any Optionee any right to continue in the service of the Company or limit, in any respect, the right of the Company to discharge or release the Optionee at any time, with or without cause and with or without notice. For purposes of Sections 6, 7, 8 and 10 “Company,” when used with reference to the employment or other service of the Optionee, shall mean the Company and any Affiliate, as applicable.

     11.     Withholding. The Company reserves the right to withhold, in accordance with any applicable laws, from any consideration payable to the Optionee any taxes required to be withheld by federal, state or local law as a result of the grant or exercise of the Option or the sale or other disposition of the Shares issued upon exercise of the Option. In addition, in the case of an Option granted to an Optionee who is not subject to the tax laws of the United States, the Optionee shall also be liable, to the extent permitted by applicable foreign law, for any taxes imposed under foreign law on the Company or Affiliate of the Company as a result of the grant or exercise of the Option or the sale or other disposition of the Shares issued upon exercise of the Option. If the amount of any consideration payable to the Optionee is insufficient to pay such taxes or if no consideration is payable to the Optionee, then upon the request of the Company, the Optionee (or such other person entitled to exercise the Option pursuant to Section 7 hereof) shall pay to the Company (a) an amount sufficient for the Company to satisfy any federal, state or local tax withholding requirements the Company may incur, or (b) an amount equal to any foreign taxes incurred by the Company or Affiliate of the Company, as a result of the grant or exercise of the Option or the sale or other disposition of the Shares issued upon the exercise of the Option.

     12.     The Plan. This Option Agreement is subject to, and the Company and the Optionee agree to be bound by, all of the terms and conditions of the Plan as such Plan may be amended from time to time in accordance with the terms thereof. Pursuant to the Plan, the Administrator is authorized to adopt rules and regulations not inconsistent with the Plan as it shall deem appropriate and proper. A copy of the Plan in its present form is available for inspection during business hours by the Optionee or the persons entitled to exercise the Option at the Company’s principal office.

     13.     Entire Agreement. This Option Agreement, together with the Plan, and any other and the other exhibits attached thereto or hereto, represents the entire agreement between the parties.

     14.     Governing Law. This Option Agreement shall be construed in accordance with the laws of the State of Delaware, without regard to the application of the principles of conflicts of laws.

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     15.     Amendment. Subject to the provisions of the Plan, this Option Agreement may only be amended by a writing signed by each of the parties hereto.

Date:	EXE TECHNOLOGIES, INC
	By:
	Title:

5

ACKNOWLEDGMENT

     The Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that he or she has read and is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan.

Date:
	Signature of Optionee
	Name
	Address
	City, State, Zip

EX-99.1 4 d01083exv99w1.htm EX-99.1 CERTIFICATION PURSUANT TO 18 USC SEC. 1350

EXHIBIT 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of EXE Technologies, Inc. (the “Company”) for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Raymond R. Hood, Chief Executive Officer of the Company, and Kenneth R. Vines, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

     (1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ RAYMOND R. HOOD
Dated: November 14, 2002	Raymond R. Hood Chief Executive Officer
	/s/ KENNETH R. VINES
Dated: November 14, 2002	Kenneth R. Vines Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

EXE Technologies, Inc.

EX-99.1

EXE Technologies, Inc.