10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2003

[  ] 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	751719817
(State or other jurisdiction of incorporation or organization)	(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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES [  ] NO [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2003.

Common stock, $0.01 par value, 6,665,681 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 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
EX-10.1 Amended/Restated Employment Agreement
EX-10.2 Third Amendment to Employment Agreement
EX-31.1 Certification of CEO Pursuant to Sec. 302
EX-31.2 Certification of CFO Pursuant to Sec. 302
EX-32.1 Certification Pursuant to Sec. 906

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	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 2.	Changes in Securities and Use of Proceeds	29
Item 6.	Exhibits and Reports on Form 8-K	30
Signatures		31
Index to Exhibits and Exhibits		32

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

				As of			As of
				December 31,			June 30,
				2002			2003
							(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	20,815,464		$	32,006,559
	Marketable securities, short-term				16,628,465			—
	Accounts receivable, net of allowance for doubtful accounts and adjustments of approximately $4,161,000 and $4,182,000 at December 31, 2002 and June 30, 2003				16,904,889			14,994,227
	Other receivables and advances				329,568			783,773
	Prepaid and other current assets				2,747,074			2,489,265
		Total current assets			57,425,460			50,273,824
Property and equipment, net					4,432,882			3,504,069
Goodwill, net					5,265,685			5,265,685
Intangible assets, net					1,499,891			1,166,557
Other assets					1,745,532			909,154
		Total assets		$	70,369,450		$	61,119,289
			Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	9,094,823		$	7,140,480
	Accrued expenses				11,326,722			8,694,066
	Accrued payroll and benefits				1,688,815			1,957,310
	Deferred revenue				7,885,223			8,727,632
	Current portion of long-term debt and capital lease obligations				521,458			511,189
		Total current liabilities			30,517,041			27,030,677
	Long-term debt and capital lease obligations, net of current portion				416,598			158,317
	Long-term accrued expenses, net of current portion				8,888,841			7,629,606
	Minority interest				198,779			163,413
	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 - 6,807,813 and 6,822,099 at December 31, 2002 and June 30, 2003				68,078			68,221
	Additional paid-in capital				178,871,117			178,926,832
	Treasury stock, at cost, 156,418 shares of common stock at December 31, 2002 and June 30, 2003				(3,645,859	)		(3,645,859	)
	Accumulated deficit				(143,402,453	)		(147,463,973	)
	Deferred compensation				(809,338	)		(498,338	)
	Other comprehensive loss				(733,354	)		(1,249,607	)
		Total stockholders’ equity			30,348,191			26,137,276
		Total liabilities and stockholders’ equity		$	70,369,450		$	61,119,289

See accompanying notes.

3

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

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2002			2003			2002			2003
Revenue:
	Software license		$	3,122,592		$	3,464,701		$	7,266,664		$	6,140,504
	Services and maintenance			12,831,201			12,659,741			24,694,834			23,663,851
	Resale of software and equipment			2,000,300			3,241,443			5,099,369			4,540,912
	Reimbursable expenses			477,017			456,690			1,006,215			890,376
		Total revenue		18,431,110			19,822,575			38,067,082			35,235,643
Costs and expenses:
	Cost of software licenses			86,305			170,275			199,381			470,144
	Cost of services and maintenance			8,042,909			7,894,070			16,218,209			14,998,686
	Cost of resale of software and equipment			1,655,829			2,651,260			4,228,063			3,630,576
	Estimated loss on resale equipment sold to company in bankruptcy			—			—			—			456,866
	Cost of reimbursable expenses			477,017			456,690			1,006,215			890,376
	Sales and marketing			4,914,140			4,118,430			9,969,243			8,041,114
	Research and development			2,907,218			2,234,622			5,960,601			4,797,067
	General and administrative			3,018,315			3,009,549			6,195,616			5,733,063
	Amortization of intangible assets			280,293			166,668			561,300			333,335
	Warrant and stock compensation expense allocated to:
		Cost of services and maintenance		87,946			69,402			175,892			138,804
		Sales and marketing		45,446			22,400			90,892			44,800
		Research and development		45,446			33,416			90,892			66,832
		General and administrative		89,847			30,282			179,694			116,422
	Loss on lease abandonment			3,998,862			—			3,998,862			—
	Employee severance and other facility closure costs			2,487,769			—			2,487,769			—
		Total costs and expenses		28,137,342			20,857,064			51,362,629			39,718,085
Operating loss				(9,706,232	)		(1,034,489	)		(13,295,547	)		(4,482,442	)
Other income (expense):
	Interest income			302,356			84,110			633,333			247,579
	Interest expense			(20,928	)		(14,862	)		(50,816	)		(30,792	)
	Other			807,198			357,447			753,693			609,991
		Total other income (expense)		1,088,626			426,695			1,336,210			826,778
Loss before minority interest and taxes				(8,617,606	)		(607,794	)		(11,959,337	)		(3,655,664	)
Minority interest in subsidiary (income) loss				(4,150	)		(14,843	)		(9,171	)		35,366
Loss before taxes				(8,621,756	)		(622,637	)		(11,968,508	)		(3,620,298	)
Income tax provision				178,821			199,856			178,821			441,222
Net loss			$	(8,800,577	)	$	(822,493	)	$	(12,147,329	)	$	(4,061,520	)
Net loss per common share - basic and diluted				(1.34	)		(0.12	)		(1.85	)		(0.61	)
Weighted average number of common shares outstanding - basic and diluted				6,578,519			6,665,681			6,568,880			6,662,348

See accompanying notes.

4

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

					Six Months Ended
					June 30,
					2002			2003
Cash Flow from Operating Activities:
	Net loss				$	(12,147,329	)	$	(4,061,520	)
		Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
			Depreciation and amortization			2,277,576			1,399,877
			Write-down of property and equipment			1,032,408			—
			Provision for losses on receivables			1,581,825			332,889
			Amortization of deferred compensation			537,370			366,858
			Minority interest			9,171			(35,366	)
			Changes in operating assets and liabilities:
				Accounts receivable		5,958,741			1,577,773
				Other receivables and advances		126,826			(454,205	)
				Prepaids and other current assets		(681,054	)		257,809
				Other long-term assets		840,225			836,378
				Accounts payable		(11,035	)		(1,954,343	)
				Accrued payroll and benefits		281,684			268,495
				Deferred revenue		922,068			842,409
				Accrued expenses		1,841,161			(3,891,891	)
				Other		(566,652	)		(553,602	)
				Net cash provided by (used in) operating activities		2,002,985			(5,068,439	)
Cash Flow from Investing Activities:
	Purchases of property and equipment					(452,463	)		(100,381	)
	Purchase of marketable securities					(6,210,000	)		—
	Proceeds from sale and maturities of marketable securities					9,503,794			16,628,465
				Net cash provided by investing activities		2,841,331			16,528,084
Cash Flow from Financing Activities:
	Issuance of common stock for options and warrants					384,394			—
	Payments on long-term debt and capital lease obligations					(218,628	)		(268,550	)
				Net cash provided by (used in) financing activities		165,766			(268,550	)
Net increase in cash and cash equivalents						5,010,082			11,191,095
Cash and cash equivalents at beginning of period						30,250,156			20,815,464
Cash and cash equivalents at end of period					$	35,260,238		$	32,006,559

See accompanying notes.

5

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 Company operates from its headquarters in Dallas, Texas, and through its various subsidiary and sales offices serving North America, Europe, the Middle East, Asia and Australia. The accompanying unaudited consolidated financial statements include the accounts of EXE Technologies, Inc. and its 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 six month periods ended June 30, 2003 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2003. 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, 2002.

          All share and per share amounts in the accompanying financial statements and footnotes have been adjusted to reflect the Company’s one for seven reverse stock split which was effective January 2, 2003.

2.     Net Loss Per Share

          The Company computes net income (loss) per share in accordance with the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share” (SFAS 128). 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 that have been excluded from diluted earnings per share for the periods presented:

	As of June 30,
	2002		2003
Common stock options		1,298,100		1,414,596
Warrants		2,143		145,000
Total anti-dilutive securities excluded		1,300,243		1,559,596

6

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

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						Six Months Ended
	June 30,						June 30,
	2002			2003			2002			2003
Net loss	$	(8,800,577	)	$	(822,493	)	$	(12,147,329	)	$	(4,061,520	)
Foreign currency translation losses		(566,259	)		(284,949	)		(483,796	)		(460,473	)
Unrealized loss on securities available for sale		(12,032	)		—			(128,355	)		(55,780	)
Total comprehensive loss	$	(9,378,868	)	$	(1,107,442	)	$	(12,759,480	)	$	(4,577,773	)

4.     Derivative Financial Instruments

          In January 2001, the Company began a foreign currency-hedging program to hedge certain nonfunctional currency exposure. Forward currency exchange contracts are utilized by the Company to reduce foreign currency exchange 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. The Company does not hold derivative financial instruments for trading or speculative purposes.

          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 June 30, 2003, the Company did not have any outstanding forward currency exchange contracts.

5.     Stock-Based Compensation Plans

     The Company accounts for its stock-based compensation plans utilizing the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). Under APB 25, if the exercise price of an employee’s stock option equals or exceeds the fair market value of the underlying stock on the date of grant, no compensation expense is recognized. Any compensation expense associated with employee stock options is recognized ratably over the vesting period of the underlying option. The Company accounts for stock-based compensation for non-employees under the fair value method prescribed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123).

          Although SFAS 123 allows the APB 25 guidelines to be applied to accounting for stock options, SFAS 123 requires the disclosure of pro forma net income (loss) and earnings (loss) per share information as if the Company had accounted for its employee stock options under the fair value method. The following table sets forth the pro forma information as if the provisions of SFAS 123 had been applied to account for stock-based employee compensation:

7

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

5.     Stock-Based Compensation Plans (continued)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2002			2003			2002			2003
Reported net loss	$	(8,800,577	)	$	(822,493	)	$	(12,147,329	)	$	(4,061,520	)
Stock compensation expense recorded under the intrinsic value method prescribed by APB 25		268,685			155,500			537,370			366,858
Stock-based employee compensation determined under the fair value method		(1,489,677	)		(780,980	)		(2,979,354	)		(1,872,026	)
Pro forma net loss	$	(10,021,569	)	$	(1,447,973	)	$	(14,589,313	)	$	(5,566,688	)
Reported net loss per common share - basic and diluted	$	(1.34	)	$	(0.12	)	$	(1.85	)	$	(0.61	)
Pro forma net loss per common share - basic and diluted	$	(1.52	)	$	(0.22	)	$	(2.22	)	$	(0.84	)

          The fair value for options was estimated at the date of grant using a Black-Scholes options pricing model and the following weighted-average assumptions for the three and six months ended June 30, 2002 and 2003: a risk-free interest rate of 4.47% in 2002, 2.07% for the three months ended March 31, 2003, and 1.97% for the three months ended June 30, 2003; no dividend; an expected life of three to five years; and a volatility for grants of 0.93 in 2002, 0.70 for the three months ended March 31, 2003, and 0.92 for the three months ended June 30, 2003.

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 six months ended June 30, 2002 and 2003 is as follows:

							Asia Pacific
		North					and the
		America			Europe		Middle East			Eliminations		Total
Three months ended June 30, 2002
	Revenue	$	8,998,368		$	4,848,868	$	4,583,874		$	—	$	18,431,110
	Amortization of intangible assets		280,293			—		—			—		280,293
	Warrant and stock compensation expense		181,209			37,246		50,230			—		268,685
	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)		(10,028,920	)		739,736		(417,048	)		—		(9,706,232	)

8

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

6.     Segment Information (continued)

							Asia Pacific
		North					and the
		America			Europe		Middle East			Eliminations			Total
Six months ended June 30, 2002
	Revenue	$	18,275,236		$	10,103,861	$	9,687,985		$	—		$	38,067,082
	Amortization of intangible assets		560,586			714		—			—			561,300
	Warrant and stock compensation expense		362,418			74,492		100,460			—			537,370
	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)		(13,707,715	)		759,158		(346,990	)		—			(13,295,547	)
As of June 30, 2002
	Property and equipment, net	$	4,218,833		$	1,094,648	$	766,736		$	—		$	6,080,217
	Total assets		81,017,460			3,985,191		1,159,911			(4,108,034	)		82,054,528
Three months ended June 30, 2003
	Revenue	$	9,881,313		$	4,897,782	$	5,043,480		$	—		$	19,822,575
	Amortization of intangible assets		166,668			—		—			—			166,668
	Warrant and stock compensation expense		46,634			47,078		61,788			—			155,500
	Operating income (loss)		(1,260,401	)		399,066		(173,154	)		—			(1,034,489	)
Six months ended June 30, 2003
	Revenue	$	17,152,156		$	9,154,113	$	8,929,374		$	—		$	35,235,643
	Amortization of intangible assets		333,335			—		—			—			333,335
	Warrant and stock compensation expense		149,126			94,156		123,576			—			366,858
	Operating income (loss)		(4,383,734	)		551,229		(649,937	)		—			(4,482,442	)
As of June 30, 2003
	Property and equipment, net	$	2,254,843		$	744,377	$	504,849		$	—		$	3,504,069
	Total assets		47,399,251			9,764,127		8,090,552			(4,134,641	)		61,119,289

7.     Income Taxes

          Income tax provisions are primarily due to foreign withholding taxes and taxes on income earned by foreign subsidiaries. The Company has established a valuation allowance to reserve its net deferred tax assets due to the uncertainty of the timing and amount of future taxable income.

8.     Commitments and Contingencies

          The Company is involved in various legal actions and claims that 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.

9

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

9.     Employee Severance and Lease Abandonment

          During the years ended December 31, 2001 and 2002, the Company implemented various cost reduction actions to lower the Company’s cost structure, including employee severance, the write-off of equipment and the abandonment of certain leased facilities. As a result, charges totaling approximately $14.3 million and $9.7 million were charged against operating results during the years ended December 31, 2001 and 2002, respectively. Of these charges, $6.5 million were recorded during the six months ended June 30, 2002, including $1.4 million for severance and other employee related costs for the termination of approximately 60 services, sales and marketing, development and administrative employees, $4.0 million for abandoned facility losses, and $1.1 million for other facility closure costs primarily for the write-down of property and equipment. Additionally, the 2002 charges included approximately $1.4 million in severance paid to the Company’s former Chief Executive Officer in March 2003, in accordance with his employment agreement.

          The Company has made cash payments of approximately $12.5 million, of which approximately $3.6 million was paid during the six months ended June 30, 2003. Additionally, the Company has written-off approximately $1.6 million in non-cash charges against the reserves established for these various cost reduction actions.

          Substantially all of the remaining liability of $9.9 million at June 30, 2003 related to the abandoned Dallas facility lease. Approximately $6.9 million of the liability is classified as a long term liability and is expected to be paid through 2009. The estimated liability includes estimates pertaining to sublease rates and vacancy periods. Although the Company does not anticipate significant changes, the actual costs may differ from these estimates.

          At June 30, 2003, the Company occupied less than 50% of the Dallas facility, most of which has been abandoned. The Company is attempting to sublease the unoccupied leased space and continues to have discussions with the lessor regarding a restructuring or a termination of the Dallas lease. If the Company is able to reach a settlement with the lessor on terms favorable to the Company, the settlement payment could significantly increase the Company's near term cash requirements but could reduce monthly lease payments in the future. If a satisfactory settlement cannot be reached and the unoccupied space cannot be subleased, the Company will be required to continue to make significant scheduled lease payments and pay operating expenses over the remaining lease term and this could result in additional reserve requirements above those recorded at June 30, 2003.

10.     Related Party Transactions

          In October 2002, the Company entered into an agreement with a company in India to provide development services, with a minimum obligation of $2.1 million over a three-year period. A shareholder of the Company, who owns approximately 6% of the outstanding shares, has an indirect financial interest in the India operation. The Company believes that the terms of this agreement are on an arms length basis. The Company has expensed $ 0.7 million for these development services during the six months ended June 30, 2003.

10

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 December 31, 2002.

Overview

          We provide 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.

          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 and thereby subjected our common stock to possible delisting from NASDAQ. In response, effective January 2, 2003, we completed a one for seven reverse stock split.

          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 business has been adversely impacted for the last two years by a number of factors. A major factor has been the global slowdown in customer spending for large-scale IT projects. We made significant progress in lowering our cost structure in the first six months of 2003. Sales and marketing, research and development and general and administrative expenses declined approximately $3.6 million, or 16.1%, compared to the first six months of 2002. Although our business volumes improved in the second quarter of 2003 and our net loss was significantly lower than in the previous quarters, we continue to have operating losses.

          In response to the less than satisfactory operating performance, we took a number of actions in 2002 to improve operating performance. First, we have substantially reduced our cost structure to more closely align with our current levels of revenue. These actions included, among other things, a 17% reduction in global headcount, the closure of our Philadelphia office, the consolidation of our North American professional services and development operations in Dallas and expanding our lower-cost offshore development activities. We also replaced our Chief Executive Officer and Chief Financial Officer, and eliminated the Chief Operating Officer function.

          As a result of these actions in 2002 and other actions taken in 2001, we made provisions for severance and related employee costs, facility closure costs and estimated losses on abandoned facilities totaling $9.7 million and $14.3 million in 2002 and 2001, respectively. Of these charges, $6.5 million were recorded in the second quarter of 2002. The remaining liability at June 30, 2003 is approximately $9.9 million, of which, $6.9 million is long-term and expected to be paid through 2009. Should additional cost reduction actions be required in the future or if management’s estimates of the losses on the current abandoned facility leases are inadequate, future provisions could be required.

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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, 2002.

Results of Operations

Three Months Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002

Revenue

          Total Revenue. Total revenue increased $1.4 million, or 7.5%, to $19.8 million for the three months ended June 30, 2003, from $18.4 million for the three months ended June 30, 2002. International revenue accounted for 50.2% and 51.2% of total revenue during the three months ended June 30, 2003 and 2002, respectively. No single customer accounted for more than 10.0% of total revenue during the three months ended June 30, 2003 or 2002.

          Software License. Software license revenue of $3.5 million for the three months ended June 30, 2003 was $0.4 million, or 11.0%, higher than the $3.1 million recorded during the three months ended June 30, 2002. Software license revenue as a percentage of total revenue excluding reimbursable expenses was 17.9% for the three months ended June 30, 2003 versus 17.4% for the three months ended June 30, 2002. The growth in software license revenue was primarily attributable to a higher volume in Europe.

          Services and Maintenance. Services and maintenance revenue declined $0.1 million, or 1.3%, to $12.7 million for the three months ended June 30, 2003 from $12.8 million for the three months ended June 30, 2002. Services and maintenance revenue as a percentage of total revenue excluding reimbursable expenses declined to 65.4% for the three months ended June 30, 2003 from 71.5% for the three months ended June 30, 2002. This decline is largely attributed to a larger volume of resale software and equipment shipments during the three months ended June 30, 2003. Services and maintenance revenue during the current quarter increased $1.7 million, or 15.0%, when compared with the preceding three months ended March 31, 2003. This increase was attributed to a large implementation rollout project for a customer in Japan.

          Resale Software and Equipment. Resale software and equipment revenue increased $1.2 million, or 62.0%, to $3.2 million for the three months ended June 30, 2003, from $2.0 million for the three months ended June 30, 2002. Resale software and equipment as a percentage of total revenue excluding reimbursable expenses was 16.7% for the three months ended June 30, 2003 versus 11.1% for the three months ended June 30, 2002. This increase was due to a higher volume of shipments in the North American region. Resale software and equipment revenue increased $1.9 million when compared with the preceding three months ended March 31, 2002. This increase is attributed to an increase in resale revenues from our North American region.

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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 4.9% of software license revenue for the three months ended June 30, 2003 and 2.8% for the three months ended June 30, 2002. 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 June 30, 2003.

          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. As a percentage of services and maintenance revenue, cost of services and maintenance was approximately 62.4% for the three months ended June 30, 2003 compared to 62.7% for the three months ended June 30, 2002. Cost of services and maintenance decreased 1.9%, or $0.1 million, to $7.9 million for the three months ended June 30, 2003, from $8.0 million for the three months ended June 30, 2002. Increased costs during the current quarter associated with the use of a subcontractor to perform a large implementation rollout project for a customer in Japan were substantially offset by lower internal staff costs and higher staff utilization.

          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 increased $1.0 million, or 60.1%, to $2.7 million for the three months ended June 30, 2003, from $1.7 million for the three months ended June 30, 2002. This increase was due to a large resale transaction for a customer in our North American region during the current quarter. As a percentage of resale software and equipment revenue, cost of resale software and equipment was 81.8% for the three months ended June 30, 2003, and 82.8% for the three months ended June 30, 2002.

          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 declined $0.8 million, or 16.2%, to $4.1 million for the three months ended June 30, 2003, from $4.9 million for the three months ended June 30, 2002. The decline was related primarily to a 26.0% reduction in the number of sales and marketing employees and lower marketing expense. As a percentage of total revenue excluding reimbursable expenses, sales and marketing expenses declined to 21.3% for the three months ended June 30, 2003, from 27.4% for the three months ended June 30, 2002.

          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 declined $0.7 million, or 23.1%, to $2.2 million for the three months ended June 30, 2003, from $2.9 million for the three months ended June 30, 2002. As a percentage of total revenue excluding reimbursable expenses, research and development expenses decreased to 11.5% for the three months ended June 30, 2003, from 16.2% for the three months ended June 30, 2002. As a part of our cost reduction program, in late 2002 we signed a three-year agreement with a company to provide offshore development resources in India at a cost that is lower than our historic development costs. Additionally, we reduced the number of full time research and development employees in North America.

          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 were unchanged at $3.0 million for the three months ended June 30, 2003, and 2002. As a percentage of total revenue excluding reimbursable expenses, general and administrative expenses decreased to 15.5% for the three months ended June 30, 2003, from 16.8% for the three months ended June 30, 2002.

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          Amortization of Intangible Assets. Amortization of intangible assets relates primarily to acquired developed software technology and assets acquired in connection with the 1997 acquisition of Dallas Systems. Amortization of intangible assets decreased $0.1 million to $0.2 million for the three months ended June 30, 2003, from $0.3 million for the three months ended June 30, 2002. The decline from the prior year is attributed to intangible assets acquired in the 1997 acquisition of Dallas Systems that were fully amortized in the final quarter of the prior year. In November of 2001 and July of 2002, we acquired a total of $2.0 million of developed software technology that has resulted in $0.2 million in amortization during the three months ended June 30, 2003.

          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 $0.1 million to $0.2 million for the three months ended June 30, 2003, from $0.3 million for the three months ended June 30, 2002.

          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 second quarter of 2002. These actions, which included 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 in the second quarter of 2002. The 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.

          Other Income (Expense). Other income (expense) consists of gains and losses from currency fluctuations, interest expense, and interest income on investments. Other income declined $0.7 million to $0.4 million during three months ended June 30, 2003 compared to $1.1 million during the three months ended June 30, 2002. This decline was primarily due to lower foreign currency gains and lower interest earned on investment securities.

          Income Taxes. An income tax provision of $0.2 million was recognized during the three months ended June 30, 2003 and 2002. The income tax provisions were primarily due to foreign withholding taxes and taxes on income earned by foreign subsidiaries.

Six months Ended June 30, 2003 Compared to the Six months Ended June 30, 2002

Revenue

          Total Revenue. Total revenue decreased $2.9 million, or 7.4%, to $35.2 million for the six months ended June 30, 2003, from $38.1 million for the six months ended June 30, 2002. International revenue accounted for 51.3% and 52.0% of total revenue during the six months ended June 30, 2003 and 2002, respectively. No single customer accounted for more than 10.0% of total revenue during the six months ended June 30, 2003 or 2002.

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          Software License. Software license revenue of $6.1 million for the six months ended June 30, 2003 was $1.2 million, or 15.5%, lower than the $7.3 million recorded during the six months ended June 30, 2002. Software license revenue as a percentage of total revenue excluding reimbursable expenses was 17.9% for the six months ended June 30, 2003 versus 19.6% for the six months ended June 30, 2002. The lower software license revenue primarily occurred in our North America and Asia Pacific regions.

          Services and Maintenance. Services and maintenance revenue declined $1.0 million, or 4.2%, to $23.7 million for the six months ended June 30, 2003 from $24.7 million for the six months ended June 30, 2002. The lower license revenue of the last several quarters has impacted services and maintenance revenues, since there have been fewer software implementation projects. As a result, revenue from consulting services has declined. Services and maintenance revenue as a percentage of total revenue excluding reimbursable expenses increased to 68.9% for the six months ended June 30, 2003 from 66.6% for the six months ended June 30, 2002.

          Resale Software and Equipment. Resale software and equipment revenue decreased $0.6 million, or 11.0%, to $4.5 million for the six months ended June 30, 2003, from $5.1 million for the six months ended June 30, 2002. This decline was due to the exclusion of $0.5 million of revenue associated with resale equipment sold to a customer during the first quarter of 2003 that subsequently filed for bankruptcy. We did not recognize this revenue from the resale equipment sale and provided an estimated loss for the cost of the equipment. Resale software and equipment as a percentage of total revenue excluding reimbursable expenses was 13.2% for the six months ended June 30, 2003 versus 13.8% for the six months ended June 30, 2002.

Costs and Expenses

          Cost of Software Licenses. Cost of software licenses represented 7.7% of software license revenue for the six months ended June 30, 2003 and 2.7% for the six months ended June 30, 2002. 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 six months ended June 30, 2003.

          Cost of Services and Maintenance. Cost of services and maintenance were lower by 7.5%, or $1.2 million, to $15.0 million for the six months ended June 30, 2003, from $16.2 million for the six months ended June 30, 2002. As a percentage of services and maintenance revenue, cost of services and maintenance was approximately 63.4% for the six months ended June 30, 2003 compared to 65.7% for the six months ended June 30, 2002. This improvement was due to improved utilization of our staff and the reduced number of full time services and maintenance employees.

          Cost of Resale Software and Equipment. Cost of resale software and equipment decreased $0.6 million, or 14.1%, to $3.6 million for the six months ended June 30, 2003, from $4.2 million for the six months ended June 30, 2002. As a percentage of resale software and equipment revenue, cost of resale software and equipment was improved to 80.0% for the six months ended June 30, 2003, compared to 82.9% for the six months ended June 30, 2002, due to sales of higher margin database software during 2003.

          Estimated Loss on Resale Equipment Sold to Company in Bankruptcy. We sold approximately $0.5 million of resale equipment early in the first quarter of 2003 to a customer who subsequently filed bankruptcy in April 2003. As a result, we did not recognize the revenue from the equipment sale and provided $0.5 million loss for the cost of the equipment.

          Sales and Marketing. Sales and marketing expenses declined $2.0 million, or 19.3%, to $8.0 million for the six months ended June 30, 2003, from $10.0 million for the six months ended June 30, 2002. The decline was related primarily to a 25.0% reduction in the number of sales and marketing employees. As a percentage of total revenue excluding reimbursable expenses, sales and marketing expenses declined to 23.4% for the six months ended June 30, 2003, from 26.9% for the six months ended June 30, 2002.

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          Research and Development. Research and development expenses declined $1.2 million, or 19.5%, to $4.8 million for the six months ended June 30, 2003, from $6.0 million for the six months ended June 30, 2002. As a percentage of total revenue excluding reimbursable expenses, research and development expenses decreased to 14.0% for the six months ended June 30, 2003, from 16.1% for the six months ended June 30, 2002. As a part of our cost reduction program, in late 2002 we signed a three-year agreement with a company to provide offshore development resources in India at a cost that is lower than our historic development costs. Additionally, we reduced the number of full time research and development employees in North America.

          General and Administrative. General and administrative costs declined $0.5 million, or 7.5%, to $5.7 million for the six months ended June 30, 2003, from $6.2 million for the six months ended June 30, 2002. The decline is largely attributed to lower depreciation costs due to asset disposals and retirements and lower payroll cost due to staff reductions. As a percentage of total revenue, excluding reimbursable expenses, general and administrative expenses were 16.7% for both the six months ended June 30, 2003 and 2002.

          Amortization of Intangible Assets. Amortization of intangible assets relates primarily to acquired developed software technology and assets acquired in connection with the 1997 acquisition of Dallas Systems. Amortization of intangible assets decreased $0.3 million to $0.3 million for the six months ended June 30, 2003, from $0.6 million for the six months ended June 30, 2002. The decline from the prior year is attributed to intangible assets acquired in the 1997 acquisition of Dallas Systems that were fully amortized in the final quarter of the prior year. 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 six months ended June 30, 2003.

          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 $0.1 million to $0.4 million for the six months ended June 30, 2003, from $0.5 million for the six months ended June 30, 2002.

          Estimated Provisions for Lease Abandonment, Employee Severance and Other Facility Closure Costs. During the years ended December 31, 2001 and 2002, the Company implemented various cost reduction actions to lower the Company’s cost structure, including employee severance, the write-off of equipment and the abandonment of certain leased facilities. As a result, charges totaling approximately $14.3 million and $9.7 million were charged against operating results in 2001 and 2002, respectively. Of these charges, $6.5 million were recorded during the six months ended June 30, 2002.

          We have made payments of approximately $12.5 million, of which approximately $3.6 million were paid during the six months ended June 30, 2003, and have written-off approximately $1.6 million in non-cash charges against the reserves established for the various cost reduction actions that occurred during 2002 and 2001. The remaining liability at June 30, 2003 is approximately $9.9 million, of which $6.9 million is long-term and is expected to be paid though 2009. The reserves include estimates pertaining to sublease rates, vacancy periods, employee separation costs and settlement of contractual obligations. Although we do not anticipate significant changes, the actual costs may differ from these estimates.

          Other Income (Expense). Other income declined $0.5 million to $0.8 million during the six months ended June 30, 2003 compared to $1.3 million during the six months ended June 30, 2002. This decline was primarily due to lower foreign currency gains and lower interest earned on investment securities.

          Income Taxes. An income tax provision of $0.4 million and $0.2 million was recognized during the six months ended June 30, 2003 and 2002, respectively. The income tax provisions were primarily due to foreign withholding taxes and taxes on income earned by foreign subsidiaries.

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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 June 30, 2003 we had approximately $32.0 million in cash and marketable securities, a decline of approximately $5.4 million from the end of 2002.

          Net cash used by operating activities was approximately $5.1 million for the six months ended June 30, 2003. The net loss adjusted for non-cash adjustments (depreciation and amortization, provision for losses on receivables, amortization of deferred compensation, and minority interest) was approximately $2.0 million, and operating assets and liabilities consumed approximately $3.1 million of cash. Although we generated approximately $1.6 million of cash by lowering our receivable days from 80 days in the fourth quarter of 2002 to 68 days in the second quarter of 2003, we used approximately $4.7 million of cash primarily from the reduction of accounts payable and accrued liabilities. The reduction of accounts payable was primarily due to payments to resale software and equipment vendors related to resale equipment deliveries that were made in the fourth quarter of 2002. The reduction of accrued liabilities was due primarily to payments for employee severance and lease payments on our abandoned Dallas facility related to cost reduction actions taken during 2002. Net cash provided by operating activities was approximately $2.0 million for the comparable six month period in 2002.

          During the six months ended June 30, 2003, we used approximately $0.1 million for capital expenditures and approximately $0.3 million for scheduled debt payments. Capital expenditures in the first half of 2002 were approximately $0.5 million. Net cash provided by financing activities was $0.2 million for the six months ended June 30, 2002. We expect that capital expenditures will not exceed $1.0 million for the next 12 months.

          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 a minimum $10.0 million cash and marketable securities balance, restrictions on dividends 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 fee on the unused portion of the line of credit of 0.375% per annum. As of June 30, 2003, we have had no borrowings under this agreement.

          We currently have operating lease obligations of approximately $40.7 million. Approximately $37.2 million of the total lease obligations relate to our Dallas facility lease for approximately 195,000 square feet, which expires in 2015. Currently, we occupy less than 50% of the Dallas facility and we are attempting to sublease the unoccupied leased space. A provision has been made for estimated losses on the portion of the Dallas lease that has been abandoned (see Note 9 of the Notes to the Consolidated Financial Statements included elsewhere herein), but cash payments will be required for the remaining term of the existing lease obligation.

          We have had discussions with the lessor regarding a restructuring or a termination of the Dallas lease. To date, we have been unable to reach an agreement acceptable to us. If we are able to reach a settlement with the lessor on terms favorable to the Company, the settlement payment could significantly increase our near term cash requirements, but could reduce monthly lease payments in the future. If a satisfactory settlement cannot be reached and the unoccupied space cannot be subleased, we will be required to continue to make the significant scheduled lease payments and pay operating expenses over the remaining lease term and this could result in additional reserve requirements above those recorded at June 30, 2003.

          We believe that our existing working capital and the availability of cash under the 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.

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Special Note Regarding Forward-Looking Statements

          In addition to historical information, this filing and our Annual Report on Form 10-K contain forward-looking statements. Any statements contained herein (including, without limitation, statements to the effect that EXE or its management “believes,” “expects,” “anticipates,” “plans,” “estimates,” “predicts,” “seeks,” “intends” and similar expressions) that relate to future events or conditions should be considered forward-looking statements. The forward-looking statements are made pursuant to safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 and in subsequently and previously filed reports. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake 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.

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 $63.9 million in 2001, $23.8 million in 2002 and $4.1 million for the six months ended June 30, 2003. We may continue to incur losses on both a quarterly and an annual basis. Moreover, we expect to continue to

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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 non-cancelable, long-term lease of office space in Dallas, Texas is substantially in excess of our expected facility requirements resulting in significant future cash obligations for unused office space, which could negatively impact our financial condition in the future.

          We lease approximately 195,000 square feet of office space in Dallas, Texas under a lease that extends to 2015. Amounts due the landlord over the remaining term of the lease are in excess of $37.2 million. Currently, we occupy less than 50% of the Dallas facility and we are attempting to sublease the unoccupied leased space. A provision has been made for estimated losses on the portion of the Dallas lease that has been abandoned (see Note 9 of the Notes to the Consolidated Financial Statements included elsewhere herein), but cash payments will be required for the remaining term of the existing lease obligation.

          We have had discussions with the lessor regarding a restructuring or a termination of the Dallas lease. To date, we have been unable to reach an agreement acceptable to us. If we are able to reach a settlement with the lessor on terms favorable to the Company, the settlement payment could significantly increase our near term cash requirements, but could reduce monthly lease payments in the future. If a satisfactory settlement cannot be reached and the unoccupied space cannot be subleased, we will be required to continue to make the significant scheduled lease payments and pay operating expenses over the remaining lease term and this could result in additional reserve requirements above those recorded at June 30, 2003.

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 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 customer’s decision to license our software usually involves the

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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. 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.

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.

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 portion of our revenues in the future from new and enhanced products currently being developed, including EXceed AIM and EXceed SNx. 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

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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.

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 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 have 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 are subject to heightened risks. If any of these risks actually occur, our earnings could decline.

          International revenue accounted for approximately 51.3% of our total revenue during the six months ended June 30, 2003, 52.2% of our total revenue during the year ended December 31, 2002, and 46.6% of our total revenue during the year ended December 31, 2001.

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          Our international operations are 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.

          In addition, we have expanded our offshore research and development activities. In the instance of a political upheaval in certain regions, our development process could be severely disrupted. Our operating results could be negatively impacted if these or other factors affect international operations.

          Approximately 25.3% of our revenues were from our Asia Pacific region during the six months ended June 30, 2003, where the Severe Acute Respiratory Syndrome (SARS) outbreak has occurred. Although we are hopeful that our business will not be significantly impacted by the uncertainty caused by the SARS outbreak, revenues could be negatively impacted until this illness is controlled.

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. Exchange rate fluctuations have caused and will continue to cause currency transaction gains and losses. We experienced currency transaction gains (losses) of $0.7 million for the six months ended June 30, 2003, $1.2 million for the year ended December 31, 2002, and $(0.5) million for the year ended December 31, 2001. 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.

          Our operating performance, personnel reductions and lower stock price over the last two years has made it difficult to retain key personnel. There is no assurance we will be able to retain our key personnel in the future.

          Also, we believe our success will depend on our ability to productively manage our personnel. Any significant 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 operating performance will suffer if we

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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.

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 2001 and 2002, we terminated approximately 343 of our services, sales, development and administrative personnel. It is possible that some of 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.

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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” of our Annual Report on Form 10-K for the year ended December 31, 2002.

Should our stock price fall below $1 per share for a period of time our common stock could be de-listed from the NASDAQ National market.

          During the last half of 2002 our common stock price was subject to de-listing on the NASDAQ National Market due to our stock price being below $1 per share for a specified period of time. Our shareholders approved a one for seven reverse stock split which was effective in January 2003. As a result of the reverse stock split, our stock price increased substantially above $1 per share. Should our stock price fall below $1 per share again, we could be subject to de-listing again.

          If our common stock is de-listed 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. De-listing 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 de-listed 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 that 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 40% 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.

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-

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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;

• 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.

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          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.

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We market and sell our products in North America, South America, Europe, the Middle East, Asia and Australia. Revenues outside the United States were 46.6%, 52.2% and 51.3% of our total revenues for the years ended December 31, 2001 and 2002, and for the six months ended June 30, 2003, 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 $(0.5) million, $1.2 million and $0.7 million for the years ended December 31, 2001 and 2002, and for the six months ended June 30, 2003, 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.

          Our net assets denominated in currencies other than U.S. dollars as of June 30, 2003 were approximately $9.1 million. A potential loss in the value of these net assets resulting from a hypothetical 10% adverse change in foreign exchange rates would be approximately $0.9 million.

          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 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. At June 30, 2003, we do not have any outstanding foreign currency exchange contracts.

          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 enter into a new credit facility in the future, future interest expense could be subject to fluctuations based on the general level of U.S. interest rates.

ITEM 4. CONTROLS AND PROCEDURES

          Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms.

          During our fiscal quarter ended June 30, 2003, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Use of Proceeds

          (d) The Company completed its initial public offering of 1,142,857 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 and other fees and expenses of approximately $1.8 million.

          From the date of receipt through June 30, 2003, we have used the proceeds as follows:

Repayment of indebtedness	$	16.6 million
Acquisition of businesses		4.4 million
Working capital		21.3 million
Total	$	42.3 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.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1	Amended and Restated Employment Agreement dated May 13, 2003 between Kenneth R. Vines and the Company.
10.2	Third Amendment to Amended and Restated Employment Agreement between Mark R. Weaser and the Company.
31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

          On April 25, 2003, the Company filed a current report on Form 8-K under Item 9. Regulation FD Disclosure (pursuant to Item 12. Results of Operations and Financial Condition) announcing that on April 24, 2003, the Company issued a press release with its fiscal 2003 first quarter results.

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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: August 13, 2003	By:	/s/ Joseph L. Cowan
	Joseph L. Cowan
	President and Chief Executive Officer
Date: August 13, 2003	By:	/s/ Kenneth R. Vines
	Kenneth R. Vines
	Senior Vice President, Chief Financial
	Officer, Secretary and Treasurer

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INDEX TO EXHIBITS

10.1	Amended and Restated Employment Agreement dated May 13, 2003 between Kenneth R. Vines and the Company.
10.2	Third Amendment to Amended and Restated Employment Agreement between Mark R. Weaser and the Company.
31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1 3 d08050exv10w1.htm EX-10.1 AMENDED/RESTATED EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EXE Technologies, Inc.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 13th day of May 2003 (the “Effective Date”) by and between Kenneth R. Vines, a resident of Texas (the “Employee”), and EXE Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”) with its headquarters in Dallas, Texas.

     WHEREAS, the Company is engaged in the business of providing software for warehouse management, supply chain execution, order fulfillment, inventory planning and supply network execution and related services for warehouse, distribution and logistics facilities worldwide (the “Business”),

     WHEREAS, the Company hired the Employee on May 13, 2002 (the “Start Date”) pursuant to a Summary of Terms dated April 26, 2002 (the “Term Sheet”), which was subsequently superceded by a definitive Employment Agreement dated as of May 13, 2002 (the “Employment Agreement”);

     WHEREAS, the Company has employed Employee from the Start Date through the Effective Date (such initial period of employment being the “Initial Term”) pursuant to the Employment Agreement;

     WHEREAS, the Company continues to desires to employ the Employee and the Employee desires to continue to be employed by the Company continuing into the future upon amended and restated terms hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the parties, subject to the terms and conditions set forth herein, agree as follows:

     1.     Employment and Term. The Company hereby employs the Employee and the Employee hereby accepts employment with the Company for the position detailed in Schedule A hereto, for a period of two (2) years from the Effective Date (the “Second Term”). At the end of the Second Term, this Agreement shall automatically renew for successive additional periods of one (1) year, unless terminated by either party upon no less than ninety (90) days prior written notice to the other party prior to the expiration of the Second Term or any such renewal period. The Initial Term of employment, the Second Term of Employment and any renewal periods hereunder, subject to the provisions of Section 8 hereof, are hereinafter referred to as the “Term.”

     2.     Duties. During the Term, the Employee shall serve the Company faithfully and to the best of the Employee’s ability devote his full time, attention, skill and efforts to the performance of the duties required by or appropriate for the Position. The Employee shall report to the Chief Executive Officer (the “Reporting Manager”). The Employee shall assume such duties and responsibilities as may be customarily incident to such a position, and such additional and other duties as may be assigned to the Employee from time to time by the Reporting Manager or the Board of Directors of the Company (the “Board”), including, without limitation, the duties and responsibilities set forth in Schedule B attached hereto, provided that such duties, functions, responsibilities, and authority are reasonable and customary for a person serving as Senior Vice President and Chief Financial Officer of an enterprise comparable to the Company.

     3.     Other Business Activities. During the Term, the Employee shall not, without the prior written consent of the Company in its sole discretion, directly or indirectly engage in any other business activities or pursuits whatsoever, except: activities in connection with charitable or civic activities; personal investments; serving as an executor, trustee or in other similar fiduciary capacity; provided that such activities do not interfere in any material respect with the Employee’s performance of the Employee’s responsibilities and obligations pursuant to this Agreement; and provided further that the Employee complies with all applicable policies and procedures of the Company. Notwithstanding the foregoing, the Employee shall be permitted to remain an officer and a director of Triton Network Systems, Inc. (“Triton”) until such time as Triton is able to fully complete its previously announced liquidation program, provided that such activities do not interfere in any material respect with the Employee’s performance of the Employee’s responsibilities and obligations pursuant to this Agreement.

     4.     Compensation. The Company shall pay the Employee, and the Employee hereby

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agrees to accept, as compensation for all services rendered hereunder and for the Employee’s intellectual property covenants and assignments and covenant not to compete as provided for in Sections 6 and 7 hereof, the compensation set forth in this Section 4.

          4.1 Salary. The Company shall pay the Employee an initial base salary at the annual rate detailed in Schedule A attached hereto (the “Base Salary”). The Base Salary shall be inclusive of all applicable income, social security and other taxes and charges that are required by law to be withheld by the Company or are requested to be withheld by the Employee. Such amounts shall be withheld and paid in accordance with the Company’s normal payroll practice for its similarly situated employees from time to time in effect. The Base Salary may be increased from time to time by the Compensation Committee of the Board in its discretion, provided, however, that at no time will the Employee’s salary be less than the initial Base Salary of $225,000.

          4.2 Bonus Program. With respect to each calendar year, the Company will pay a bonus to the Employee, in cash and/or stock options in accordance with the Company’s usual practices and in the discretion of the Reporting Manager, based upon the achievement of criteria to be determined as mutually agreed upon in writing by the Employee and the Reporting Manager. The Employee’s annualized bonus target will be fifty per cent (50%) of the Base Salary. The Employee’s actual bonus payments will vary depending on Company performance and will be payable in accordance with the Company’s usual practices and in the discretion of the Reporting Manager.

          4.3 Equity Participation. In connection with the Employment Agreement, the Company granted to the Employee a stock option to purchase shares of common stock of the Company (“Common Stock”), the exercise price, par value and other details of which are detailed in Schedule A attached hereto. The option is subject to and in accordance with the provisions of the 1997 Stock Option Plan of the Company, as amended (the “Plan”), substantially in the form of Schedule C. Subsequent to the foregoing option, the Company has granted Employee additional options in accordance with the terms approved by the Board of Directors of the Company, or one of its appropriate Committee’s, and may grant additional options in the future in its sole discretion.

          4.4 Fringe Benefits. The Employee shall be entitled to participate in any health or dental programs or other non-salary consideration (such as disability, vacation, sick leave) as are Company standard, or as otherwise described in Schedule E attached hereto and as such standards may be changed from time to time.

          4.5 Reimbursement of Expenses. The Employee shall be reimbursed for all normal items of travel and entertainment and miscellaneous expenses reasonably incurred by the Employee on behalf of the Company, provided that such expenses are documented and submitted to the Company all in accordance with the reimbursement policies of the Company as in effect from time to time.

          4.6 Indemnification. The Employee, in any capacity on behalf of the Company or any of its subsidiaries or affiliates, shall be entitled to exculpation, indemnification, and advancement of expenses to the fullest extent not prohibited by Delaware or other applicable law, all as more fully described by an Indemnification Agreement that has been entered into between the Employee and the Company substantially in the form used by the Company with its executive officers. The Employee shall also be entitled to coverage under each directors’ and officers’ liability insurance policy, if any, maintained by or on behalf of the Company’s directors and officers.

     5.     Confidentiality. The Employee recognizes and acknowledges that the Proprietary Information (as hereinafter defined) is a valuable, special and unique asset of the Company. As a result, both during the Term and for a period of five (5) years thereafter, the Employee shall not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for the Employee’s own benefit, or for any purpose other than the exclusive benefit of the Company, any confidential, proprietary, business and technical information or trade secrets of the Company or of any subsidiary or affiliate of the Company (the “Proprietary Information”) revealed, obtained or developed in the course of the Employee’s employment with the Company. Proprietary Information shall include, but shall not be limited to: the intangible personal property described in Section 6(b) hereof; any information relating to methods of production, manufacture and research; hardware and software configurations, computer codes or instructions (including source

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and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer inputs and outputs (regardless of the media on which stored or located) and computer processing systems, techniques, designs, architecture, and interfaces; the identities of, the Company’s relationship with, the terms of contracts and agreements with, the needs and requirements of, and the Company’s course of dealing with, the Company’s actual and prospective customers, contractors and suppliers; and any other materials prepared by the Employee in the course of the Employee’s employment by the Company, or prepared by any other employee or contractor of the Company for the Company or its customers (including concepts, layouts, flow charts, specifications, know-how, user or service manuals, plans, sketches, blueprints, costs, business studies, business procedures, finances, marketing data, methods, plans, personnel information, customer and vendor credit information and any other materials that have not been made available to the general public). Nothing contained herein shall restrict the Employee’s ability to make such disclosures during the course of the Employee’s employment as may be necessary or appropriate to the effective and efficient discharge of the duties required by or appropriate for the Position or as such disclosures may be required by law. Furthermore, nothing contained herein shall restrict the Employee from divulging or using for the Employee’s own benefit or for any other purpose any Proprietary Information that is readily available to the general public so long as such information did not become available to the general public as a direct or indirect result of the Employee’s breach of this Section 5. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

     6.     Property.

          (a) All right, title and interest in and to Proprietary Information shall be and remain the sole and exclusive property of the Company. During the Term, the Employee shall not remove from the Company’s offices or premises any documents, records, notebooks, drawings, sketches, program listings, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in accordance with the duties and responsibilities required by or appropriate for the Position and, in the event that such materials or property are removed, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall serve its specific purpose. The Employee shall not make, retain, remove and/or distribute any copies of any of the foregoing for any reason whatsoever, except as may be necessary in the discharge of the assigned duties, and shall not divulge to any third person the nature of and/or contents of any of the foregoing or of any other oral or written information to which the Employee may have access or with which for any reason the Employee may become familiar, except as disclosure shall be necessary in the performance of the duties; and upon the earlier of (i) a request by the Company or (ii) the termination of the Employee’s employment with the Company, the Employee shall return to the Company all originals and copies of the foregoing then in the possession, whether prepared by the Employee or by others.

          (b) (i) The Employee acknowledges that all right, title and interest in and to any and all writings, documents, inventions, improvements, discoveries, methods, developments, works of authorship, computer programs or instructions (whether in source code, object code, or any other form and whether patentable or not), algorithms, formulae, plans, memoranda, tests, research, designs, innovations, systems, analyses, specifications, models, data, diagrams, flow charts, and/or techniques (whether reduced to written or electronic form or otherwise) that the Employee creates, makes, conceives, discovers, develops or reduces to practice, either solely or jointly with any other person, on behalf of the Company at any time during the Term, whether during working hours or at the Company’s facility or at any other time or location, and that relate to or are useful in any way in connection with the Business now or hereafter carried on by the Company (collectively, “Intellectual Work Product”) shall be the sole and exclusive property of the Company. The Employee shall promptly disclose to the Company all Intellectual Work Product, and the Employee shall have no claim for additional compensation for the Intellectual Work Product. In addition the Employee hereby waives all claims to moral rights in any Intellectual Work Product.

               (ii) The Employee acknowledges that all the Intellectual Work Product that is copyrightable shall be considered a work made for hire under United States Copyright Law. To the extent that any copyrightable Intellectual Work Product may not be considered a work made for hire under the applicable provisions of the United States Copyright Law, or to the extent that, notwithstanding the foregoing provisions, the Employee may retain an interest in any Intellectual Work Product that is not copyrightable, the Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Employee may have in

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the Intellectual Work Product under copyright, patent, trade secret, trademark and other intellectual property laws, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company shall be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, and trademarks with respect thereto.

               (iii) The Employee shall reveal promptly all information relating to the Intellectual Work Product to an appropriate officer of the Company, cooperate with the Company and execute such documents as may be necessary or appropriate (A) in the event that the Company desires to seek copyright, patent, trademark or other analogous protection thereafter relating to the Intellectual Work Product, and when such protection is obtained, renew and restore the same, or (B) to defend any opposition proceedings in respect of obtaining and maintaining such copyright, patent, trademark or other analogous protection.

               (iv) In the event that the Company is unable after reasonable effort to secure the Employee’s signature on any of the documents referenced in Section 6(b)(iii) hereof, whether because of the Employee’s physical or mental incapacity or for any other reason whatsoever, the Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Employee’s agent and attorney-in-fact, to act for and in the Employee’s behalf and stead to execute and file any such documents and to do all other lawfully permitted acts to further the prosecution and issuance of any such copyright, patent, trademark or other analogous protection with the same legal force and effect as if executed by the Employee.

               (v) The Employee represents that the innovations, designs, systems, analyses, ideas for marketing programs, and all copyrights, patents, trademarks and trade names, or similar intangible personal property identified on Schedule D hereof comprises all of the innovations, designs, systems, analyses, ideas for marketing programs, and all copyrights, patents, trademarks and trade names, or similar intangible personal property that the Employee has made or conceived of prior to the date hereof, and same are excluded from the operation of the other provisions of this Section 6(b).

     7.     Covenant not to Compete.

          (a) In consideration of the compensation, including but not limited to equity participation, and other covenants by the Company under this Agreement, the Employee shall not, anywhere in the world, during the Term and for a period of one (1) year thereafter (the “Restricted Period”), do any of the following, either alone or in association with others, without the prior written consent of the Company in its sole discretion:

               (i) engage or participate, directly or indirectly, in any business whose primary or principal business derives thirty percent (30%) or more of its gross revenues from providing software for warehouse management, supply chain execution, order fulfillment, inventory planning and supply network execution and related services for warehouse, distribution and logistics facilities (a “Competitive Business”), including without limitation those listed in Schedule A;

               (ii) become interested (as owner, proprietor, promoter, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any person, firm, corporation, association or other entity (A) that is listed in Schedule A, or (B) is otherwise engaged in any Competitive Business, or become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) any portion of the business of any person, firm, corporation, association or other entity where such portion of such business is considered a Competitive Business (notwithstanding the foregoing, the Employee may hold not more than one percent (1%) of the outstanding securities of any class of any publicly-traded securities of a company that is engaged in activities referenced in Section 7(a)(i) hereof);

               (iii) solicit or call on for a purpose competitive with the Business, either directly or indirectly, any (A) customer with whom the Company shall have dealt at any time during the one (1) year period immediately preceding the termination of the Employee’s employment hereunder, or (B) supplier or distributor with whom the Company shall have dealt at any time during the one (1) year period immediately preceding the termination of the Employee’s employment hereunder;

               (iv) influence or attempt to influence any supplier, distributor, customer or

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potential customer of the Company to terminate or modify any written or oral agreement or course of dealing with the Company; or

               (v) influence or attempt to influence any person either (A) to terminate or modify in any material respect the employment, consulting, agency, distributorship or other arrangement with the Company, or (B) to employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company as an employee, consultant, agent or distributor of the Company at any time during the one (1) year period immediately preceding the termination of the Employee’s employment hereunder.

          (b) The Employee hereby acknowledges that the limitations as to time, character or nature and geographic scope placed on the Employee’s subsequent employment by this Section 7 are reasonable and fair and will not prevent or materially impair the Employee’s ability to earn a livelihood.

     8.     Early Termination. The Employee’s employment hereunder may be terminated during the Term upon the occurrence of any one of the events described in this Section 8. Upon termination, the Employee shall be entitled only to such compensation and benefits as described in this Section 8.

          8.1 Termination for Disability.

               (a) In the event of the disability of the Employee such that the Employee is unable to perform the duties and responsibilities hereunder to the full extent required by this Agreement by reasons of illness, injury or incapacity for a period of more than sixty (60) consecutive days or more than forty-five (45) days, in the aggregate, during any ninety (90) day period (“Disability”), the Employee’s employment hereunder may be terminated by the Company.

               (b) In the event of a termination of the Employee’s employment hereunder pursuant to Section 8.1(a), the Employee will receive: (i) continuation of the Base Salary in effect as of the date of such termination for a period of twelve (12) months following the date of termination, payable on the Company’s standard payroll cycle; (ii) to the extent the Board of Director’s approves a bonus to the Company’s executive officers after completion of the calendar year in which the termination occurs, Employee’s annual bonus (or portion thereof approved by the Board), pro rated for the portion of the year during which the Employee was employed by the Company through the date of termination, payable on the dates such bonus would otherwise have been payable to Employee had Employee been employed on the date of declaration of the bonus; (iii) the right to exercise any stock option held by Employee for the reminder of its term, whether or not exercisable by Employee as of the date of termination; (iv) any amounts payable pursuant to any plans or policies of the Company; and (v) any other amounts due but not yet paid from the Company to Employee.

          8.2 Termination by Death. In the event that the Employee dies during the Term, the Employee’s employment hereunder shall be terminated thereby and the Employee’s executors, legal representatives or administrators shall be entitled to receive from the Company: (i) the Employee’s Base Salary in effect as of the date of death for a period of twelve (12) months following the date of death, which shall be paid in a lump-sum thirty (30) days following the date of death; (ii) to the extent the Board of Director’s approves a bonus to the Company’s executive officers after completion of the calendar year in which death occurs, Employee’s annual bonus (or portion thereof approved by the Board), pro rated for the portion of the year during which the Employee was employed by the Company through the date of death, payable on the dates such bonus would otherwise have been payable to Employee had Employee been employed on the date of declaration of the bonus; (iii) the right to exercise any stock option held by Employee on the date of death for the remainder of its term, whether or not exercisable by Employee on the date of death; (iv) any amounts payable on death pursuant to any plans or policies of the Company; and (v) any other amounts due but not yet paid from the Company.

          8.3 Termination for Cause.

               (a) The Company may terminate the Employee’s employment hereunder at any time for “Cause” upon written notice to the Employee. For purposes of this Agreement, “Cause” shall only mean:

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                    (i) any material breach by the Employee of any of the Employee’s obligations under this Agreement after Employee has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that Employee breached this Agreement and, provided that a cure is possible, affords Employee a period of ten (10) days to cure;

                    (ii) willful failure or repeated inability by the Employee to perform satisfactorily the duties required by or appropriate for the Position, as determined by the Chief Executive Officer of the Company and the Board of Directors of the Company in his and its sole reasonable discretion after Employee has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that Employee has not substantially performed his duties and affords Employee a period of ten (10) days to cure;

                    (iii) conduct of the Employee involving any (A) type of disloyalty to the Company that has a material detrimental effect on the Company or, (B) willful and material misconduct with respect to the Company, including without limitation fraud, embezzlement, theft or proven dishonesty in the course of the employment, or (C) any attempt by the Employee to secure any personal profit related to the Business and the business opportunities of the Company without the informed approval of the Board of Directors;

                    (iv) conviction of a felony or other criminal act punishable by more than one (1) year in prison;

                    (v) commission by the Employee of an intentional tort or an act involving moral turpitude or constituting fraud; or

                    (vi) habitual alcohol or substance abuse or addiction.

               (b) In the event of a termination of the Employee’s employment hereunder pursuant to Section 8.3(a), the Employee shall be entitled to receive all accrued but unpaid (as of the effective date of such termination) Base Salary, benefits and bonuses. All Base Salary, benefits and bonuses shall cease at the time of such termination, subject to the terms of any benefit or compensation plan then in force and applicable to the Employee. All options, including any vested or unvested portion thereof, shall be canceled at the time of such termination, and the Employee shall not be entitled to exercise any unvested options. Except as specifically set forth in this Section 8.3, the Company shall have no liability or obligation hereunder by reason of such termination.

          8.4 Termination Without Cause.

               (a) The Company may terminate the Employee’s employment hereunder at any time, for any reason, without Cause, effective upon the date designated by the Company upon written notice to the Employee.

               (b) In the event of a termination of the Employee’s employment hereunder pursuant to Section 8.4(a) (including following a Change of Control (as defined below)), the Employee shall be entitled to receive (i) all unpaid Base Salary through the date of termination and all accrued, but unpaid (at the date of termination) benefits and bonuses; (ii) severance equal to twelve (12) months Base Salary (at the date of termination), payable in equal monthly installments in accordance with the Company’s payroll practices; (iii) to the extent the Board of Director’s approves a bonus to the Company’s executive officers after completion of the calendar year in which the termination occurs, Employee’s annual bonus (or portion thereof as approved by the Board), pro rated for the portion of the year during which the Employee was employed by the Company through the termination date, payable on the dates such bonus would otherwise have been payable to Employee had Employee been employed on the date of declaration of the bonus, (iv) the immediate vesting of the remaining unvested portion of the options previously granted to Employee; (v) the right to exercise any stock option which is exercisable by Employee on the date of the termination of his employment; and (v) any other amounts due but not yet paid from the Company to Employee. Except as set forth above, all Base Salary, benefits and bonuses shall cease at the time of such termination, subject to the terms of any benefit or compensation plan then in force and applicable to the Employee. Except as specifically set forth in this Section 8.4, the Company shall have no liability or obligation hereunder by reason of such termination.

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          8.5. Termination by the Employee for Good Reason.

               (a) The Employee may terminate the Employee’s employment hereunder at any time for “Good Reason” following a written notice of the termination of employment hereunder pursuant to this Section 8.5(a), as more fully described below.

               (b) For purposes of this Agreement, “Good Reason” shall mean:

                    (i) (1) any reduction by the Company in the Base Salary as in effect on the date hereof or as the same may be increased from time to time; (2) any reduction in bonus compensation opportunities (which reduction may also occur pursuant to any assignment of performance goals and corresponding awards which are inconsistent with prior performance goals or awards); (3) the failure by the Company to continue in effect any benefit or compensation plan, life insurance plan, health and accident plan or disability plan in which the Employee was participating, which would adversely affect the Employee’s participation in or materially reduce the Employee’s benefits under any of such plans, (unless such reduction is pursuant to the general change in benefits applicable to all similarly situated employees of the Company); (4) taking of any action by the Company that would adversely affect the Employee’s participation in or materially reduce the Employee’s benefits under any of such plans (unless such reduction is pursuant to the general change in benefits applicable to all similarly situated employees of the Company); (5) deprive the Employee of any material fringe benefit enjoyed by the Employee; (6) the failure by the Company to provide the Employee with the number of paid vacation days to which the Employee is entitled; or (7) the transfer of Employee’s principal place of employment to a location more than 25 miles away from the Company’s current headquarters;

                    (ii) (1) assignment to Employee of any duties and responsibilities inconsistent with his status as Senior Vice President and Chief Financial Officer of the Company; (2) a change in Reporting Managers such that the Employee no longer directly reports to the Chief Executive Officer of the Company; or (3) the assignment of duties and responsibilities which are not customary for a person serving as Senior Vice President and Chief Financial Officer of an enterprise comparable to the Company;

                    (iii) any material and willful breach of the Company of any provision of this Agreement or any written employment agreement with Employee; or

                    (iv) a Change in Control as defined in Section 8.7 below.

               (c) A Termination for Good Reason, except pursuant to a Change of Control, shall not take effect until the following has occurred:

                    (i) the Employee has given the Board of Directors written notice of his intention to terminate his employment for Good Reason, specifying with particularity the grounds on which the proposed Good Reason Termination is contemplated;

                    (ii) the Board of Directors shall have thirty (30) days after such written notice to cure such grounds; and

                    (iii) if the Board of Directors fails to cure such grounds, then the Employee may terminate his employment by giving written notice to the Board of Directors confirming that the grounds has not been cured, whereupon the Employee’s employment shall terminate.

               (d) In the event of a termination of the Employee’s employment hereunder pursuant to Section 8.5(a) hereof, the Employee shall be entitled to receive the same consideration set forth in Section 8.4(b) hereof.

          8.6 Options; Repurchase of Shares.

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               Except as otherwise permitted herein, upon the termination of the Employee’s employment pursuant to this Section 8 for any reason, all further vesting on all stock options and/or restricted stock in the Company held by the Employee shall immediately cease as of such date and thereafter any vested stock options shall be exercisable and any restricted stock or other equity securities held by the Employee shall be subject to repurchase by the Company in accordance with their respective terms and the terms of any related agreements between the Company and the Employee.

          8.7 Change of Control.

               (a) Notwithstanding anything to the contrary and in addition to any other rights contained in this Agreement, all of the Employee’s then remaining unvested options shall automatically become vested immediately prior to the occurrence of a Change in Control of the Company. In addition, if Employee is terminated without cause following a Change in Control of the Company, Employee shall be entitled to a minimum bonus of fifteen percent (15%) of Base Salary under Section 8.4(b)(iii), regardless of whether the Board of Directors approves a bonus to the Company’s executive officers after completion of the calendar year in which the termination occurs and regardless of the pro rating calculations described in Section 8.4(b)(iii). This minimum bonus shall be payable on the date such bonus would otherwise have been payable to Employee had Employee been employed on the usual date for annual bonus payments.

               (b) For the purposes of this Agreement, a “Change of Control” shall mean: (i) the sale, transfer, assignment or other disposition (including by merger or consolidation) by stockholders of the Company, in one transaction or a series of related transactions, of a majority of the voting power represented by the then outstanding capital stock of the Company to one or more stockholders or other third parties, other than any such sales, transfers, assignments or other dispositions by such stockholders to their respective heirs or affiliates, such that the then existing shareholders of the Company do not own more than thirty-three percent (33%) of the outstanding equity; or (ii) a sale, transfer, assignment or other disposition (including by merger or consolidation), of all of the outstanding stock of the Company, or of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company.

          8.8 No Mitigation or Offset

               The Employee shall not be obligated to seek or secure new employment or to become self-employed after termination of his employment with the Company, but shall be obligated to report promptly to the Company any actual employment obtained during the period for which Employee benefits continue. There shall be no offset against any amounts due to Employee under this Agreement on account of any remuneration or benefits attributable to any subsequent employment (including, without limitation, any self-employment) that Employee may obtain.

     9.     Representations, Warranties and Covenants of the Employee.

               (a) The Employee represents and warrants to the Company that:

                    (i) There are no restrictions, agreements or understandings whatsoever to which the Employee is a party which would prevent or make unlawful the Employee’s execution of this Agreement or the Employee’s employment hereunder, or which is or would be inconsistent or in conflict with this Agreement or the Employee’s employment hereunder, or would prevent, limit or impair in any way the performance by the Employee of the obligations hereunder; and

                    (ii) The Employee has disclosed to the Company all restraints, confidentiality commitments or other employment restrictions that the Employee has with any other employer, person or entity.

               (b) Upon and after the Employee’s termination or cessation of employment with the Company and until such time as no obligations of the Employee to the Company hereunder exist, the Employee (i) shall provide a complete copy of this Agreement to any prospective employer or other person, entity or association in the Business, with whom or which the Employee proposes to be employed, affiliated, engaged,

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associated or to establish any business or remunerative relationship prior to the commencement thereof and (ii) shall notify the Company of the name and address of any such person, entity or association prior to the Employee’s employment, affiliation, engagement, association or the establishment of any business or remunerative relationship.

     10.     Survival of Provisions. The provisions of this Agreement set forth in Sections 5 through 22 hereof shall survive the termination of the Employee’s employment hereunder.

     11.     Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and the Employee and their respective successors, executors, administrators, heirs and/or permitted assigns; provided that neither the Employee nor the Company may make any assignments of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other parties hereto, except that, without such consent, the Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, provided that such successor assumes in writing all of the obligations of the Company under this Agreement.

     12.     Notice. Any notice hereunder by either party shall be given by personal delivery or by sending such notice by certified mail, return-receipt requested, or by overnight delivery with a reputable courier service, or telecopied, addressed or telecopied, as the case may be, to the other party at its address set forth below or at such other address designated by notice in the manner provided in this section. Such notice shall be deemed to have been received upon the date of actual delivery if personally delivered or, in the case of mailing, two (2) days after deposit with the U.S. mail, or if by overnight delivery, the date of delivery or, in the case of facsimile transmission, when confirmed by the facsimile machine report.

If to the Employee:
	Kenneth R. Vines 6905 Whisperfield Plano, TX 75024 Fax: 214-775-0912
with a copy to:
	Daniel W. Rabun Baker & McKenzie 2001 Ross Avenue Suite 2300 Dallas, Texas 75201 Fax: 214-978-3099
If to the Company:
	EXE Technologies, Inc. 8787 Stemmons Freeway Dallas, TX 75247 Attention: CEO Fax: 214-775-0912
with a copy to:
	EXE Technologies, Inc. 8787 Stemmons Freeway Dallas, TX 75247 Attention: Legal Department Fax: 214-775-5750

     13.     Entire Agreement; Amendments. This Agreement contains the entire agreement and

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understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature between the parties hereto relating to the employment of the Employee with the Company, including but not limited to, the Term Sheet and the Employment Agreement. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.

     14.     Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement.

     15.     Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws of any jurisdiction.

     16.     Invalidity. If any provision of this Agreement shall be determined to be void, invalid, unenforceable or illegal for any reason, then the validity and enforceability of all of the remaining provisions hereof shall not be affected thereby. If any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, then such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such amendment to apply only to the operation of such provision in the particular jurisdiction in which such adjudication is made; provided that if any provision contained in this Agreement shall be adjudicated to be invalid or unenforceable because such provision is held to be excessively broad as to duration, geographic scope, activity or subject, then such provision shall be deemed amended by limiting and reducing it so as to be valid and enforceable to the maximum extent compatible with the applicable laws of such jurisdiction, such amendment only to apply with respect to the operation of such provision in the applicable jurisdiction in which the adjudication is made.

     17.     Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.

     18.     Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and legal holidays; provided that if the final day of any time period falls on a Saturday, Sunday or day which is a legal holiday in Texas, then such final day shall be deemed to be the next day which is not a Saturday, Sunday or legal holiday.

     19.     Specific Enforcement; Extension of Period.

          (a) The Employee acknowledges that the restrictions contained in Sections 5, 6, and 7 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the Company would not have entered into this Agreement in the absence of such restrictions. The Employee also acknowledges that any breach by the Employee of Sections 5, 6, or 7 hereof will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that an adequate remedy at law exists. In the event of such breach by the Employee, the Company shall have the right to enforce the provisions of Sections 5, 6, and 7 of this Agreement by seeking injunctive or other relief in any court, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

          (b) The periods of time set forth in Sections 5, 6 and 7 hereof shall not include, and shall be deemed extended by, any time required for litigation to enforce the relevant covenant periods, provided that the Company is successful on the merits in any such litigation. The “time required for litigation” is herein defined to mean the period of time commencing on the earlier of the Employee’s first breach of such covenants or the service of process upon the Employee ending on the expiration of all appeals related to such litigation.

     20.     Arbitration. Except for claims or disputes related to the rights and obligations of the parties set forth in Sections 5, 6 and 7 hereof, the parties hereto agree that any controversy or claims arising out of or relating to this Agreement shall be settled exclusively by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA”) as then in effect. The parties hereto further agree that any arbitration proceeding commenced in connection with this Agreement shall take place in Dallas, Texas under the auspices of the AAA and judgment upon the award rendered by the Arbitrator(s) may be

Confidential Page 10 of 11

entered in any court having jurisdiction thereof. The prevailing party shall be entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and disbursements.

     21.     Consent to Suit. In the case of any dispute under or in connection with this Agreement, the Employee may only bring suit against the Company in the Courts of the State of Texas in and for the County of Dallas or in the Federal District Court for such geographic location. The Employee hereby consents to the jurisdiction and venue of the courts of the State of Texas in and for the County of Dallas or the Federal District Court for such geographic location, provided that such Federal Court has subject matter jurisdiction over such dispute, and the Employee hereby waives any claim she may have at any time as to forum non conveniens with respect to such venue. The Company shall have the right to institute any legal action arising out of or relating to this Agreement in any appropriate court and in any jurisdiction. Any judgment entered against either of the parties in any proceeding hereunder may be entered and enforced by any court of competent jurisdiction. If an action at law or in equity is necessary to enforce or interpret the terms of this Agreement, then the prevailing party shall be entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and disbursements.

     22.     Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the day and year first written above.

EXE TECHNOLOGIES, INC.

By: Joseph L. Cowan

Title: Chief Executive Officer

EMPLOYEE

Confidential Page 11 of 11

SCHEDULE A

EMPLOYMENT and COMPENSATION

Position:	Through May 14, 2002, Director of Finance Thereafter, Senior Vice President, Chief Financial Officer and Treasurer
Reporting Manager:	CEO
Base Salary:	$250,000
Bonus:	50% of Base Salary, based upon written criteria to be developed by the Reporting Manager and the Employee
Responsibilities:	Job Description attached as Schedule B
Prohibited Companies:	Manhattan Associates, Optum, TRW/Marc, Provia, Irista, High Jump, HK Systems, V3, Retek, Catalyst, OMI, McHugh Software/Red Prairie, SAP supply chain unit, PeopleSoft supply chain unit and Oracle supply chain unit.

Initial Stock Option Grant:

A stock option to purchase 250,000 shares of Common Stock, par value $.01 per share, of the Company was granted to the Employee on the Start Date. The Option grant shall be an incentive stock option to the maximum extent permitted by law. The exercise price is $1.52 per share. The vesting will be as follows:

(a)  62,500 shares on the first anniversary of the Start Date; and

(b)  the remaining 187,500 shares at a rate of 2.0833% per month on the last day of each month beginning June 30, 2003.

Confidential Page A-1

SCHEDULE B

RESPONSIBILITIES

JOB DESCRIPTION

[TO BE ADDED]

Confidential Page B-1

SCHEDULE C

EXE TECHNOLOGIES, INC.

1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

[PREVIOUSLY PROVIDED]

Confidential Page C-1

SCHEDULE D

PRIOR INVENTIONS

None.

Confidential Page D-1

SCHEDULE E
NON SALARY CONSIDERATION

1.	Holidays — 10 paid.
2.	Vacation — 4 weeks.
3.	Medical Plan — Employer/Employee paid.
4.	Dental Plan — Employer/Employee paid.
5.	Life Insurance/AD&D — equal to $50,000 — Employer paid.
6.	Vision plan — Employer paid — provides 20% to 60% discount on all vision services.
7.	Flexible Benefit Plan — enables employees to set aside pre-tax dollars for the reimbursement of certain qualified expenses.
8.	Short-term Disability — Employer paid — provides potential salary continuation to regular, full-time employees who are unavoidably absent from work due to personal illness injury or pregnancy.
9.	Long-term Disability — Employer paid — provides income protection in the event of a long-term disability, equal to 60% of basic monthly earnings.
10.	401(k) Plan — permits deferral of pre-tax dollars up to 15% of salary. Company matches 100% of first 5% contribution.
11.	Tuition Assistance — provides educational reimbursement benefits to eligible employees.

Confidential Page E-1 EX-10.2 4 d08050exv10w2.htm EX-10.2 THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

EXHIBIT 10.2

EXE TECHNOLOGIES, INC.
THIRD AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Third Amendment to Amended and Restated Employment Agreement (this “Amendment”) shall be effective as of January 1, 2003 by and between Mark R. Weaser (the “Employee”) and EXE Technologies, Inc. (the “Company”) and amends that certain Amended and Restated Employment Agreement dated as of October 18, 2000 (the “Agreement”) between the Employee and the Company.

     WHEREAS, the parties desire to amend the Agreement to reflect certain changes, in accordance with the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the mutual covenants set forth herein and intending to be legally bound herby, the parties agree as follows:

     1.     Definitions. All capitalized terms used in this Amendment shall have the same meaning as those contained in the Agreement unless otherwise defined herein.

     2.     Schedule A. Employment and Compensation.

          Schedule A-1 shall be amended to include the following stock option grants, each grant reflects the one for seven reverse stock split that was effective on January 2, 2003:

          OPTION GRANT A:
          An incentive stock option to purchase 7,143 shares of Common Stock of the Company was granted to the Employee on February 6, 2001. The exercise price is $87.50 per share. The vesting is as follows:

(a) 1,785 shares on the first anniversary date following February 6, 2001; and

(b) the remaining 5,358 shares vest on a pro-rata basis over a thirty six month period on the last date of each month following February, 2002.

          OPTION GRANT B:
          An incentive stock option to purchase 14,285 shares of Common Stock of the Company was granted to the Employee on November 2, 2001. The exercise price is $16.87 per share. The shares vest on a pro-rata basis over a thirty six month period on the last date of each month beginning with November, 2001.

          OPTION GRANT C:
          An incentive stock option to purchase 14,286 shares of Common Stock of the Company was granted to the Employee on August 6, 2002. The exercise price is $7.91 per share. The vesting is as follows:

(a) 3,571 shares on the first anniversary date following August 2, 2002; and

(b) the remaining 10,715 shares vest on a pro-rata basis over a thirty six month period on the last date of each month following August, 2003.

     3.     Schedule E. NON SALARY CONSIDERATION (Singapore Domicile)

The parties acknowledge that the Employer shall pay an annual medical claim of S$1200 per each of

Employee’s immediate family members.

     4.     Miscellaneous. The Agreement shall remain in full force and effect, subject only to the changes herein specified. The Agreement, as modified by this Amendment, constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes any prior understandings and/or written or oral agreements between them. All references to the Agreement in any other documents shall mean the Agreement as amended hereby and from time to time hereafter in writing. This Amendment shall be governed by the laws of the State of Texas, without regard to the principles of conflicts of laws of any jurisdiction.

     IN WITNESS WHEREOF, the parties have executed this Amendment on the date first above written.

EMPLOYEE:	EXE TECHNOLOGIES, INC.
	By:
Mark R. Weaser
	Title:

EX-31.1 5 d08050exv31w1.htm EX-31.1 CERTIFICATION OF CEO PURSUANT TO SEC. 302

EXHIBIT 31.1

CERTIFICATIONS

I, Joseph L. Cowan, Chief Executive Officer of the registrant certify that:

1.	I have reviewed this quarterly report on Form 10-Q of EXE Technologies, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 13, 2003

/s/ Joseph L. Cowan

Chief Executive Officer

EX-31.2 6 d08050exv31w2.htm EX-31.2 CERTIFICATION OF CFO PURSUANT TO SEC. 302

EXHIBIT 31.2

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 EXE Technologies, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 13, 2003

/s/ Kenneth R. Vines

Chief Financial Officer

EX-32.1 7 d08050exv32w1.htm EX-32.1 CERTIFICATION PURSUANT TO SEC. 906

EXHIBIT 32.1

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 June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Joseph L. Cowan, 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/ Joseph L. Cowan
Dated: August 13, 2003	Joseph L. Cowan
	Chief Executive Officer
	/s/ Kenneth R. Vines
Dated: August 13, 2003	Kenneth R. Vines
	Chief Financial Officer

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