Sample Business Contracts

Stock Option Agreement - Manugistics Group Inc. and Terry A. Austin

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                             MANUGISTICS GROUP, INC.

                             STOCK OPTION AGREEMENT


                             STOCK OPTION AGREEMENT

     This Stock  Option  Agreement,  dated as of June 16, 1999 is by and between
Manugistics  Group, Inc., a Delaware  corporation (the "Company"),  and Terry A.
Austin, an individual residing at 2180 Bay Hill Court, Half Moon Bay, California
94019 (the "Employee").


     Employee  was  employed  by the  Company as its  Executive  Vice  President
pursuant  to the  terms of that  certain  letter  agreement  dated  June 3, 1999
between Employee and the Company (the "Employment  Letter"). In order to provide
the Employee  with a direct  proprietary  interest in the future  success of the
Company and to encourage the Employee to achieve  maximum  performance  with the
Company,  the Company agreed as provided in the Employment  Letter,  to grant to
the Employee an option to purchase 240,000 shares of Common Stock of the Company
at a price of Nine and twenty-three  thirty-seconds  ($9.7188) per share, on the
terms and subject to the conditions set forth herein.

     NOW,  THEREFORE,  in view of the  foregoing,  and in  consideration  of the
promises herein  contained,  and each intending to be legally bound hereby,  the
parties agree as follows:

     1. Grant of Option; Payment of Exercise Price.

     a. The  Company  hereby  grants to the  Employee  the  right and  option to
purchase under the terms and  conditions set forth below,  240,000 shares of the
Company's  common stock,  (the  "Shares"),  at a price of Nine and  twenty-three
thirty-seconds Dollars ($9.7188) per share (the "Purchase Price") payable as set
forth below (the "Option").

     b. The Option may be  exercised,  in whole or in part as to a minimum of 50


shares or if fewer, the total number of shares subject to the Option,  by giving
written notice of exercise to the Company  specifying the number of Shares to be
purchased.  Such notice shall be  accompanied by payment in full of the purchase
price, plus any required federal, state and/or local withholding taxes, in cash,
or in shares of common stock of the Company  already  owned by the Employee with
such shares valued at their Fair Market Value.  For such purposes,  "Fair Market
Value" shall be defined as the closing  price of the common stock of the Company
on the day  immediately  preceding  the exercise  date as reported on the Nasdaq
System.  The  Employee  may also  simultaneously  exercise the Option (or a part
thereof)  and sell all or part of the Shares  thereby  acquired  pursuant to any
arrangement  then in effect  between any broker and the Company,  and to use the
proceeds from such sale to pay the exercise price and withholding taxes.

     2. Terms and Exercise of Option.

     a. The  Option  shall have a term of ten years  from the date  hereof,  and
shall vest in forty-eight  equal monthly  installments over the four year period
beginning  on the date hereof  (the  "Vesting  Period").  The Option may only be
exercised during the ten year term hereof and only to the extent it is vested.

     b. In the event of a Change in Control of the Company (defined below),  (i)
if the Employee's  responsibilities are not affected, fifty percent (50%) of the
outstanding   Option  shall   immediately  vest,  and  (ii)  if  the  Employee's
responsibilities are significantly  diminished or the Employee is constructively
terminated  (i.e.,  the Employee's  responsibilities  no longer consist of those
reasonably associated with the position of Executive Vice President) one hundred
percent  (100%)  of the  outstanding  Option  shall  immediately  vest,  in each
instance as of the effective date


of such Change in Control,  without  regard to the Vesting  Period.  A Change in
Control shall be deemed to have occurred at such time as fifty one percent (51%)
of the Company's  voting stock shall have been acquired by any person and/or its
affiliates in a single transaction or a series of related transactions.

     c.  (i)  In the  event  the  Employee's  employment  with  the  Company  is
terminated without cause by the Company,  vesting of the Option shall accelerate
for the six monthly installments  immediately following such date of termination
of  employment,  and any remaining  portion of the Option which is not vested or
accelerated as of such date of termination, shall terminate.

     (ii) If the Company changes the Employee's job status such that Employee no
longer report directly to the President,  is no longer a member of the Executive
staff,  or in any way  changes  Employee's  responsibilities  such  that they no
longer  consist of those  reasonably  associated  with the position of Executive
Vice  President,  and Employee  terminates his employment  with the Company as a
result thereof, such termination shall be treated as a termination without cause
by the Company and the  provisions  of Section  2(c)(i) above shall apply to the
vesting of the Option.

d. In the event the Employee's  employment with the Company is terminated by the
Company for cause or voluntarily by the Employee,  any portion of the Option not
vested  as of such  date of  termination  of  employment  shall  terminate.  For
purposes hereof, "cause" shall mean (i) substantial and continued failure by the
Employee to perform his duties as Executive  Vice President  which  results,  or
could reasonably be expected to result, in material harm to the business or


reputation  of the  Company,  which  failure  is not cured (if  curable)  by the
Employee  within  fifteen  (15) days  after  written  notice of such  failure is
delivered  to the  Employee by the  Company,  (ii) gross  misconduct  including,
without  limitation,  embezzlement,  fraud,  or  misappropriation,  or (iii) the
commission of a felony.

     e. In no event may this Option be exercised after the expiration of the ten
year term hereof.  Except as provided in this Paragraph 2(e), no portion of this
Option may be  exercised  unless the  Employee is employed by the Company at the
time of exercise,  and may only be exercised by the following persons, under the
following conditions,  and in all cases subject to all provisions of this Option
Agreement, and all applicable laws, rules and regulations:  (i) by the Employee,
(ii) by the  Employee's  permitted  transferees  as provided  below in Paragraph
2(f),  (iii) if the Employee  shall  become  disabled or die, and shall not have
fully   exercised   the  Option,   by  the  Employee  or  by  the  executors  or
administrators  of the  Employee  or by any  person or  persons  who shall  have
acquired the Option  directly from the Employee by bequest or  inheritance,  but
only within one year of the date of death or disability, (iv) by the Employee in
the event that the Employee's  employment with the Company is terminated without
cause  by the  Company,  but  only  within  three  months  after  such  date  of
termination  of  employment;  or (v) by the  Employee  in  the  event  that  the
Employee's employment with the Company is terminated voluntarily by the Employee
or with  cause by the  Company,  but only  within  one month  after such date of
termination of  employment.  Notwithstanding  the  foregoing,  the Option may be
exercised  only to the extent that the Option is vested  pursuant to  Paragraphs
2(a),  2(b),  2(c)  or  2(d) of this  Agreement  at the  date of the  Employee's
disability, death or termination of employment.


     f.  Except as  provided  herein,  no part of this  Option,  and no right or
interest  therein,  shall be (i)  assignable,  alienable or  transferable by the
Employee,  except  by will or the  laws of  descent  and  distribution,  or (ii)
subject  to any  obligation,  or the  lien or  claims  of any  creditor,  of the
Employee,  or (iii) subject to any lien,  encumbrance or claim of any party made
in respect of or through the Employee,  however arising.  During the lifetime of
the Employee, this Option is exercisable only by, and the Shares issued upon the
exercise  of this  Option will be issued  only to the  Employee,  his  permitted
transferees,  or his legal  representative.  Notwithstanding the foregoing,  the
Employee  may transfer  all or a portion of this  Option;  provided,  that in no
event  shall any  transfer  be made to any  person  or  persons  other  than the
Employee's  parents,  spouse or other life partner,  children or  grandchildren,
siblings,  or children of siblings,  or a trust for the exclusive benefit of one
or more such  persons,  which  transfer  must be made as a gift and  without any
consideration,  or pursuant to a qualified  domestic  relations order. All other
transfers and any retransfer by any permitted  transferee are prohibited and any
such  purported  transfer  shall be null and void.  This Option and the Employee
shall  continue to be subject to the same terms and conditions as were in effect
immediately  prior  to  such  permitted  transfer.  The  Employee  shall  remain
responsible to the Company for the payment of all withholding  taxes incurred as
a result  of any  exercise  of this  Option.  In no event  shall  any  permitted
transfer of this Option create any right in any party in respect of this Option,
other than the right of the permitted  transferee to exercise this Option to the
extent the  Employee  could have  exercised  this Option had such  transfer  not

     3.Recapitalization.  Subject to any required action by the  stockholders of


Company,  the  number of Shares  which may be  purchased  at any time  under the
Option, and the price per share therefor,  shall be proportionately adjusted for
any increase or decrease in the number of outstanding shares of the common stock
of the Company  resulting from a subdivision or  consolidation  of shares or the
payment of a stock dividend (but only on the common stock) or any other increase
or  decrease  in  the  number  of  such  shares  effected   without  receipt  of
consideration  by the Company,  such that, upon exercise of the Option from time
to time  thereafter,  the  Employee  shall be entitled to receive such number of
Shares as he would have  received  had the Option been  exercised  prior to such

     4. Consolidation; Merger; Dissolution and Conversion.

     a. Subject to any required action by the  shareholders  of the Company,  if
the Company shall be the surviving  corporation in any merger or  consolidation,
while any part of this Option remains unexercised, such unexercised part of this
Option  shall  pertain to and apply to the  securities  to which a holder of the
number of Shares  subject  hereto would have been entitled  (i.e.,  the Employee
shall be  entitled  to  purchase  such  number of  securities  as he would  have
received had this Option been exercised prior to such merger or consolidation).

     b. Subject to ss.2(b)  above,  in the event of a dissolution or liquidation
of the  Company  or a merger or  consolidation  in which the  Company is not the
surviving  corporation,  the  Employee  shall,  in such  event,  have the right,
immediately prior to such dissolution,  liquidation, merger or consolidation, to
exercise  this  Option in whole or in part  without  regard  to the  installment
provisions  of  Paragraph  2(a)  above,  unless  this  Option is  assumed by the
surviving or acquiring corporation, or its parent.


     c. In the event of a change in the Common Stock of the Company as presently
constituted,  which is limited to a change of all of its authorized  shares with
par value into the same number of shares  with a different  par value or without
par  value,  the shares  resulting  from any such  change  shall be deemed to be
Shares within the meaning of this Option.

     5. Notice of Exercise.  The Option shall be  exercisable  upon the Employee
giving (a) written notice to the Company of such exercise  specifying the number
of Shares to be purchased, (b) payment of the Purchase Price of the Shares being
purchased and any  applicable  withholding  taxes as provided in Paragraph  1(b)
above,  and,  subject to applicable  federal and state securities laws, shall be
effective upon actual receipt of the foregoing (a) and (b).

     6. Failure to Exercise.  If the Employee  fails to exercise any part of the
Option in  accordance  with the terms of this  Agreement  within  the period set
forth in Paragraph 2(a) above,  then such part and all rights  attached  thereto
shall  automatically and immediately  terminate  without notice.  This Agreement
does not impose any  obligation  on the  Employee to exercise  the Option or any
part  hereof nor does it modify the other  terms of  Employee's  employment  set
forth  in the  Employment  Letter.  The  Employee  shall  have  no  rights  as a
stockholder  of the  Company  with  respect to the Shares  covered by the Option
unless  and  except to the  extent  that the  Option  shall  have  been  validly

     7. Notices. Any and all notices or other writings, which are required to be
served, or which may be served under the provisions of this Agreement,  shall be
in writing,  and shall be sufficiently served if delivered  personally or mailed
by registered or certified mail (return receipt requested),  postage prepaid, to
the parties at the addresses set forth on the first page of this


Agreement,  or at such other  address for a party as shall be  specified by like
notice;  provided,  that notices of a change of address shall be effective  only
upon receipt thereof.  If mailed as aforesaid,  three (3) days after the date of
mailing shall be the date notice shall be deemed to have been received.

     8. Entire  Agreement.  This Agreement and the Employment  Letter constitute
the entire agreement between the parties hereto pertaining to the subject matter
hereof, and supersede all prior and contemporaneous  agreements,  understandings
and discussions,  whether written or oral between the parties and may be amended
only by a written document signed by the parties hereto.

     9. Governing Law. This Agreement  shall be governed by and construed  under
the laws of the State of Delaware,  without reference to principles of conflicts
of laws.

     10.  Headings.   The  headings  and  captions   contained  herein  are  for
convenience  only and shall not control or affect the meaning or construction of
any provision hereof.

     11.  Corporate  Action.  No  provision of this Option shall be construed to
prevent the Company from taking any corporate action deemed by the Company to be
appropriate  or in its best  interest,  whether or not such action could have an
adverse  effect on this  Option,  and  neither the  Employee  or the  Employee's
estate, personal representative,  beneficiary or permitted transferee shall have
any claim against the Company as a result of taking such action.


     IN WITNESS WHEREOF, the patties hereto have executed this Option on the day
and year first above written. MANUGISTICS GROUP, INC.

By: /s/ Terry A. Austin
Title: EVP Electronics & High Technology
/s/ Terry A. Austin
Terry A. Austin