Metasolv (MSLV) DEF 14A Definitive proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

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¨	Preliminary Proxy Statement	¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material Pursuant to §240.14a-12

METASOLV, INC.

(Name of Registrant as Specified In Its Charter)

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METASOLV, INC.

5556 Tennyson Parkway

Plano, Texas 75024

April 28, 2004

TO THE STOCKHOLDERS OF METASOLV, INC.

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of MetaSolv, Inc. (the “Company”), which will be held at the Company’s headquarters located at 5556 Tennyson Parkway, Plano, Texas 75024, on Wednesday, June 16, 2004, at 10:00 a.m.

Details of the business to be conducted at the Annual Meeting are given in the attached Proxy Statement and Notice of Annual Meeting of Stockholders.

It is important that your shares be represented and voted at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND the Annual Meeting, please COMPLETE, sign, date and PROMPTLY return the ACCOMPANYING proxy in the ENCLOSED POSTAGE- PAID envelope. Returning the proxy does NOT deprive you of your right to attend the Annual Meeting. If you decide to attend the Annual Meeting and wish to change your proxy vote, you may do so automatically by voting in person at the meeting.

On behalf of the Board of Directors, I would like to express our appreciation for your continued interest in the affairs of the Company. We look forward to seeing you at the Annual Meeting.

Sincerely,

T. Curtis Holmes, Jr.

Chief Executive Officer, President, and Director

YOUR VOTE IS IMPORTANT

All stockholders are invited to attend the Annual Meeting in person. However, to ensure your representation at the meeting, you are urged
to complete, sign, date and return, in the enclosed postage paid envelope, the enclosed Proxy as promptly as possible. Returning your
Proxy will help the Company assure that a quorum will be present at the meeting and avoid the additional expense of duplicate proxy
solicitations. You may revoke your Proxy at any time prior to the Annual Meeting. Any stockholder attending the meeting may vote in
person even if he or she has returned the Proxy.

METASOLV, INC.

5556 Tennyson Parkway

Plano, Texas 75024

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held June 16, 2004

The Annual Meeting of Stockholders (the “Annual Meeting”) of MetaSolv, Inc. (the “Company”) will be held at the Company’s headquarters, located at 5556 Tennyson Parkway, Plano, Texas, 75024, on Wednesday, June 16, 2004, at 10:00 a.m. for the following purposes:

1. To elect two directors to the Board of Directors to serve until their three-year term expires or until their successors have been duly elected and qualified or until their earlier death, resignation, or removal from office; and

2. To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.

The foregoing items of business are more fully described in the attached Proxy Statement.

Only stockholders of record at the close of business on May 6, 2004 are entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof. A list of such stockholders will be available for inspection at the Company’s headquarters located at 5556 Tennyson Parkway, Plano, Texas, during ordinary business hours for the ten-day period prior to the Annual Meeting, and also at the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

Jonathan K. Hustis

Executive Vice President—Legal, General

Counsel and Corporate Secretary

Plano, Texas

April 28, 2004

METASOLV, INC.

5556 Tennyson Parkway

Plano, Texas 75024

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

To be held June 16, 2004

These proxy materials are furnished in connection with the solicitation of proxies by the Board of Directors of MetaSolv, Inc., a Delaware corporation (the “Company”), for the Annual Meeting of Stockholders (the “Annual Meeting”) to be held at the Company’s headquarters, located at 5556 Tennyson Parkway, Plano, Texas 75024, on Wednesday, June 16, 2004, at 10:00 a.m., and at any adjournment or postponement of the Annual Meeting. These proxy materials were first mailed to stockholders on or about May 13, 2004.

PURPOSE OF MEETING

The specific proposals to be considered and acted upon at the Annual Meeting are summarized in the accompanying Notice of Annual Meeting of Stockholders. Each proposal is described in more detail in this Proxy Statement.

VOTING RIGHTS AND SOLICITATION OF PROXIES

The Company’s Common Stock, par value $0.005 per share (“Common Stock”), is the only type of security entitled to vote at the Annual Meeting. On May 6, 2004, the record date for determination of stockholders entitled to vote at the Annual Meeting, there were 39,189,765 shares of Common Stock outstanding. Each stockholder of record on May 6, 2004 is entitled to one vote for each share of Common Stock held by such stockholder. Shares of Common Stock may not be voted cumulatively. All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

Quorum Required

The Company’s bylaws provide that the holders of a majority of the Common Stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining the presence of a quorum.

Votes Required

Directors are elected by a plurality of the affirmative votes cast by those shares present in person, or represented by proxy, and entitled to vote at the Annual Meeting. The two nominees for director receiving the highest number of affirmative votes will be elected. Abstentions and broker non-votes will not be counted toward a nominee’s total. Stockholders may not cumulate votes in the election of directors. Representatives of Mellon Investor Services will tabulate the vote and act as inspector of the election.

Proxies

Whether or not you are able to attend the Annual Meeting, you are urged to complete and return the enclosed proxy, which is solicited by the Company’s Board of Directors and which will be voted as you direct on your proxy when properly completed. In the event no directions are specified, such proxies will be voted FOR

the nominees to the Board of Directors (as set forth in the Proposal), and in the discretion of the proxy holders as to other matters that may properly come before the Annual Meeting. You may also revoke or change your proxy at any time before the Annual Meeting. To do this, you must send a written notice of revocation or another signed proxy with a later date to the Secretary of the Company at the Company’s principal executive offices before the beginning of the Annual Meeting. You may also automatically revoke your proxy by attending the Annual Meeting and voting in person. All shares represented by a valid proxy received prior to the Annual Meeting will be voted.

Solicitation of Proxies

The solicitation of proxies is made by the Company’s Board of Directors. The Company will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this Proxy Statement, the proxy, and any additional soliciting material furnished to stockholders. Copies of solicitation material will be furnished to brokerage houses, fiduciaries, and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. In addition, the Company may reimburse such persons for their costs of forwarding the solicitation material to such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by telephone, telegram, or other means by directors, officers, employees or agents of the Company. No additional compensation will be paid to these individuals for any such services. Except as described above, the Company does not presently intend to solicit proxies other than by mail.

CORPORATE GOVERNANCE

The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and achieving compliance with these responsibilities and standards. The Company monitors developments in the area of corporate governance, and the Company is committed to good business practices, transparency in financial reporting and the highest level of corporate governance.

Corporate Governance Guidelines

The Company’s directors and executive management team are governed by MetaSolv, Inc. Corporate Governance Guidelines, published in the Corporate Governance section of the Company’s website atwww.metasolv.com.

Corporate Committee Charters

Each of the Company’s three standing board committees (the Governance Committee, Audit Committee, and Compensation Committee) has its own charter, and these are published in the Corporate Governance section of the Company’s website at www.metasolv.com.

Board and Committee Self-Evaluation

The Board and each of its three standing Committees performs an annual self-evaluation.

Director Independence

Five of our seven directors are independent directors. Each of our standing board committees is made up exclusively of independent directors. Director independence is determined under our Corporate Governance Guidelines, and the qualifications include meeting the definition of “independent director” as such term is defined in Rule 4200 of the Nasdaq Marketplace Rules.

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Code of Ethics

The Company’s directors, officers and employees are subject to the MetaSolv, Inc. Code of Ethical Business Conduct. Our Chief Executive Officer is subject to a MetaSolv, Inc. and MetaSolv Software, Inc. Code of Ethics for the Chief Executive Officer. Our Chief Financial Officer and Corporate Controller are subject to a MetaSolv, Inc. and MetaSolv Software, Inc. Code of Ethics for Senior Financial Officers. All three of these documents are published in the Corporate Governance section of the Company’s website at www.metasolv.com.

PROPOSAL

ELECTION OF DIRECTORS

The Company currently has authorized seven directors to serve on its Board of Directors. In accordance with the terms of the Company’s Certificate of Incorporation, the Board of Directors is divided into three classes: Class I, with directors whose term will expire at the 2006 Annual Meeting; Class II, with directors whose term will expire at the 2004 Annual Meeting; and Class III, with directors whose term will expire at the 2005 Annual Meeting. At the 2004 Annual Meeting, two directors will be elected to serve as Class II directors until the Annual Meeting to be held in 2007 or until such directors’ respective successors are elected and qualified, or until their earlier death, resignation, or removal from office. The Board of Directors has selected two nominees as the nominees for Class II. The proxy holders intend to vote all proxies received by them in the accompanying form for the nominees for directors listed below. In the event a nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them for the nominees listed below. As of the date of this Proxy Statement, the Board of Directors is not aware of any nominee who is unable or will decline to serve as a director.

Nominees for Term Ending in 2007

Set forth below is information regarding the nominees, including their ages, the period during which they have served as directors, and information furnished by them as to principal occupations and directorships held by them in corporations whose shares are publicly registered.

Name	Director Since	Age
Lawrence J. Bouman	2000	57
T. Curtis Holmes, Jr.	2001	42

Lawrence J. Bouman has served as a director of the Company since November 2000. Since January 1999, Mr. Bouman has served as a technology advisor and independent consultant to several private communications and technology companies. From June 1998 to January 1999, Mr. Bouman served as a member of the acquisition transition team following Qwest Communications International, Inc.’s acquisition of LCI International. From October 1995 to June 1998, Mr. Bouman was Senior Vice President and Chief Technology Officer of LCI International, Inc., a communications services provider. Prior to 1995, Mr. Bouman held several senior positions with MCI Telecommunications Corporation. From September 2001 to June 2003 Mr. Bouman served as a director of Broadwing, Inc., a communications services provider. From September 1999 to October 2000, Mr. Bouman served as a director of Net-Tel, a competitive local exchange carrier.

T. Curtis Holmes, Jr. has served as our President and Chief Executive Officer since August 2003. He served as President and Chief Operating Officer from January 2001 to July 2003. He has served as a director since May 2001. From December 1996 to December 2000, Mr. Holmes served as Vice President and General Manager of the Intelligent Network Unit of Lucent Technologies, Inc., where his responsibilities included strategic planning,

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product marketing, product management, and development and deployment of enhanced services applications. From July 1994 to December 1996, Mr. Holmes served as Applications Group Director for Operations Support Systems for Lucent Technologies/AT&T Network Systems.

Directors

Set forth below is information regarding the continuing directors of the Company, including their ages, the period in which they have served as directors, and information furnished by them as to principal occupations and directorships held by them in corporations whose shares are publicly registered.

Name	Director Since	Term Ending	Age
John E. Berndt	2002	2005	63
Royce J. Holland	2000	2006	55
James P. Janicki	1994	2005	48
Terry L. Scott	2003	2006	53
John W. White	1998	2005	65

Mr. Berndt has served as a director of the Company since May 2002. On April 28, 2004 the Company announced that on June 16, 2004, Mr. Berndt will become Chairman of the Board of Directors, effective with Mr. Janicki’s retirement from that position. Mr. Berndt retired from Sprint Corporation on September 30, 2000. From 1998 to September 2000, Mr. Berndt was President of Sprint International, an operating unit of Sprint Corporation. From 1997 to 1998, Mr. Berndt was President of Fluor Daniel Telecom, an operating company of Fluor Daniel, Inc. Mr. Berndt was President of AT&T New Business Development/Multimedia Ventures from 1993 until the spin-off of Lucent Technologies from AT&T occurred in 1996. Mr. Berndt serves as a director and member of the audit and compensation committees of Telular Corporation, a designer, developer and manufacturer of products for the cellular fixed wireless telecommunications industry and as a director of Calence, Inc., a privately held communications networking consulting company. Mr. Berndt also serves as a member of the advisory board of One Touch Systems, a private company which designs, develops and manufactures interactive distance learning systems.

Mr. Holland has served as a director of the Company since May 2000. Mr. Holland co-founded Allegiance Telecom, a telecommunications services provider, in 1997 and has served as its Chairman of the Board and Chief Executive Officer since then. Allegiance Telecom filed for bankruptcy on May 14, 2003. Previously, Mr. Holland was at MFS Communications Company, Inc., a communications services provider, as a Co-founder and a Director from its inception in 1988, and also as President from 1990 through the completion of its merger with WorldCom in December 1996. In January 1993, President George Bush appointed Mr. Holland to the National Security Telecommunications Advisory Committee. Mr. Holland has over twenty-five years experience in the telecommunications, independent power and engineering/construction industries.

Mr. Janicki co-founded the Company in July 1992 and since such time has served in various capacities. Mr. Janicki has served as Executive Chairman of the Board of Directors and as Chief Software Architect of the Company since July 2003. He served as Chief Executive Officer of the Company from May 1999 until July 2003, as the Company’s Chief Technology Officer from April 1994 until July 2003, and as President of the Company from April 1994 until January 2001, and he has served as a director of the Company since April 1994. On April 28, 2004, the Company announced that Mr. Janicki will retire as Executive Chairman, effective June 16, 2004, and that he will retire as Director and Chief Software Architect effective July 30, 2004. From June 1982 to July 1992, Mr. Janicki was at Texas Instruments where he served in many capacities, including as manager of the Texas Instruments’ CASE consulting practice from July 1987 to August 1990 and as manager of the Template software business from August 1990 until July 1992. Texas Instruments develops and manufactures semiconductors and other products in the electrical and electronics industry.

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Mr. Scott has served as a director of the Company since February 2003. Since March 2004, Mr. Scott has been President, Chief Executive Officer and a director of Airimba Wireless, Inc., a wireless Internet access service provider. From June 2003 until March 2004, he served as Vice President – Finance and Chief Financial Officer of CMI Holding Company, Inc., a general partner of Chase Medical L.P., a privately held company that develops, manufactures and markets products for the treatment of congestive heart failure. He also has served as an outside director and chairman of the audit committee for Chameleon Technology, Inc., a privately held company that develops intelligent networking software, since October 2002. From November 1995 to August 2002, Mr. Scott served at various times as an independent director and audit committee member for five companies, including Terion, Inc., a wireless application service provider. In addition, from November 1995 to September 1997, he was President and Chief Executive Officer of Terion and from September 1997 to July 1999 he was its Chairman of the Board and Chief Executive Officer. Mr. Scott was with Paging Network, Inc. from 1981 through 1995 where he held various senior executive positions including serving as its Senior Vice President of Finance and Chief Financial Officer, and then as President and Chief Executive Officer from 1993 to November 1995.

Mr. White has served as a director of the Company since December 1998. He served as Lead Outside Director from July 2003 until April 2004. On April 28, 2004 the Company announced that the position of Lead Outside Director would be terminated, effective June 16, 2004, with Mr. White continuing as a director of the Company. Mr. White also served as Chairman of the Company’s Board of Directors from August 1999 until July 2003. He was Vice President and Chief Information Officer for Compaq Computer, a developer and marketer of computer hardware and software, from February 1994 to October 1998, where he served as a member of the executive management team, overseeing Compaq’s worldwide information systems activities. Prior to February 1994, Mr. White was President of the Information Technology Group and Chief Information Officer for Texas Instruments. Mr. White serves as a director and member of the Compensation Committee of Citrix, a provider of server-based computing solutions. He also serves as a director of Siebel Systems, Inc., a provider of business applications software.

Each of Messrs. Berndt, Bouman, Holland, Scott and White is an “independent director,” as such term is defined in Rule 4200 of The Nasdaq Marketplace Rules.

Board of Directors Meetings and Committees

During 2003, the Board of Directors held 9 meetings and acted by written consent on 2 occasions. For the fiscal year, each of the directors during the term of his tenure attended or participated in at least 75% of the aggregate of (i) the total number of meetings or actions by written consent of the Board of Directors and (ii) the total number of meetings held by all committees of the Board of Directors on which each such director served. Under the policies of the Board, the Company’s directors are expected to attend regular Board meetings and Board committee meetings. There is no Company policy regarding directors’ attendance at annual stockholder meetings. All of the Company’s directors attended the 2003 Annual Meeting of Stockholders. The Board of Directors has three standing committees, the Audit Committee, the Compensation Committee and the Governance Committee (formerly the Nominating Committee).

During 2003, the Audit Committee of the Board of Directors held 10 meetings. The Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the selection of the Company’s independent accountants, the scope of the annual audits, fees to be paid to the independent accountants, the performance of the Company’s independent accountants and the accounting practices of the Company. The members of the Audit Committee are Messrs. Berndt, Scott and White. The Board of Directors has designated Terry L. Scott as the Company’s Audit Committee financial expert. Mr. Scott is an independent director as defined in the Securities and Exchange Act of 1934. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available through the Corporate Governance section of the Company’s website atwww.metasolv.com. Each member of the Audit Committee is an “independent director,” in accordance with the requirements of Exchange Act Rule 10A-3, and as such term is defined in Rule 4200 of The Nasdaq Marketplace Rules and applicable law, including the Sarbanes-Oxley Act of 2002.

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During 2003, the Compensation Committee held 3 meetings and acted by written consent on 3 occasions. The Compensation Committee is responsible for (i) establishing compensation programs designed to attract, motivate and retain key executives responsible for the Company’s success; (ii) administering and maintaining such programs in a manner that will benefit the long-term interests of the Company and its stockholders; and (iii) determining the compensation of the Company’s Chief Executive Officer and other executive officers. The members of the Compensation Committee are Messrs. Bouman and Holland. The Board of Directors has adopted a written charter for the Compensation Committee, a copy of which is available through the Corporate Governance section of the company’s website atwww.metasolv.com. Each member of the Compensation Committee is an “independent director,” as such term is defined in Rule 4200 of The Nasdaq Marketplace Rules and applicable law, including the Sarbanes-Oxley Act of 2002.

During 2003, the Governance Committee held 4 meetings. The Governance Committee is responsible for (i) making nominations to fill vacancies on the Board of Directors, (ii) making recommendations to the Board of Directors regarding board policies and structure, (iii) overseeing the development and periodic review of corporate governance guidelines for the Company, (iv) director compensation, (v) leading the Board of Directors in its annual performance review and (vi) other issues of corporate governance. The members of the Governance Committee are Messrs. Berndt, Bouman and White. Each member of the Governance Committee is an “independent director,” in accordance with the requirements of Exchange Act Rule 10A-3, and as such term is defined in Rule 4200 of The Nasdaq Marketplace Rules and applicable law, including the Sarbanes-Oxley Act of 2002. The Board of Directors has adopted a written charter for the Governance Committee, a copy of which is available through the Corporate Governance section of the Company’s website atwww.metasolv.com. The Governance Committee will consider nominations by stockholders of persons for election to the Board upon adequate written notice to the Company’s Secretary. To be adequate, the nomination notice must be delivered in writing to the Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s Annual Meeting, and must be directed to: Governance Committee, c/o Jonathan K. Hustis (Corporate Secretary), MetaSolv, Inc., 5556 Tennyson Parkway, Plano, TX 75024 USA. The Governance Committee reviews candidates for director nominees in the context of the current composition of the Board of Directors, the operating requirements of the Company and the long-term interests of the stockholders. In conducting this assessment, the Governance Committee considers experience, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board of Directors and the Company. Certain specific minimum qualifications relating to persons to be considered for a position on the Board of Directors have been adopted by the Committee and can be reviewed in the MetaSolv, Inc. Corporate Governance Guidelines, a copy of which is available through the Corporate Governance section of the Company’s website atwww.metasolv.com. The Governance Committee uses the same criteria for evaluating candidates nominated by stockholders as it does for those proposed by other Board members, management and search companies. During 2003, the Committee received assistance from a third party, SSA Executive Search International, who performed the initial identification and evaluation of prospective nominees for the open director position that was filled by Terry L. Scott in February 2003; the Company paid a fee to SSA Executive Search International for its services to the Committee.

Director Compensation

Non-employee directors receive $1,500 for each Board of Directors meeting attended in person, and for each standing committee meeting attended in person (other than on a Board of Directors meeting day) and $300 per meeting attended by teleconference. All directors are reimbursed for reasonable expenses incurred by them in attending Board of Directors and committee meetings.

In addition to the meeting fees, non-employee directors also receive an annual retainer for service on the Board of Directors and for service as the chairman of the board or any standing board committee. Each non-employee director may elect to receive the annual retainer, which is paid quarterly, in either cash ($15,000 annually), or restricted stock of the Company ($20,000 annually in restricted stock). The chairman of the Board of Directors and the chairman of the Audit Committee each receive an additional annual retainer, paid quarterly,

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which they may elect to receive in either cash ($7,500 annually), or restricted stock of the Company ($9,000 annually in restricted stock); and any director serving as the chairman of any other standing committee of the Board of Directors receives an annual retainer, paid quarterly, which they may elect to receive in either cash ($5,000 annually), or restricted stock of the Company ($6,500 annually in restricted stock). Restricted stock granted to non-employee directors will have a price equal to the fair market value of the Common Stock of the Company on the date of grant and will vest one year following the date of grant.

Each non-employee director is also granted a one-time option to purchase up to 30,000 shares of Common Stock under the Company’s Long-Term Incentive Plan on the date he or she is first elected to the Board of Directors (applicable to non-employee directors first elected in 2003 and later). A non-employee director is granted an additional option to purchase up to 15,000 shares of Common Stock under the Long-Term Incentive Plan for each successive year that he or she serves as a member of the Board of Directors. Each option will have an exercise price equal to the fair market value of the Common Stock on the date of grant, will have a term to be determined by the Governance Committee and will generally terminate within a specified time, as defined in the Long-Term Incentive Plan, following the date the option holder ceases to be a director. With respect to the option grant of 30,000 shares upon a non-employee director’s initial election to the Board of Directors, 15,000 of the shares are immediately vested and the remaining 15,000 vest in equal monthly installments over the director’s first 12 months of service. With respect to the option grant of 15,000 shares for each successive year that a non-employee director serves as a member of the Board of Directors, the shares vest in equal monthly installments over the 12 months following such grant.

Stockholder Communications with the Board of Directors

The Company’s Board of Directors has adopted a formal process by which stockholders may communicate with the Board. Stockholders who wish to communicate with the Board may do so by sending written communications addressed to the Board of Directors of MetaSolv, Inc., at 5556 Tennyson Parkway, Plano, TX 75024 U.S.A., attention of Jonathan K. Hustis (Corporate Secretary). The Company’s process for handling stockholder communications with the Board has been approved by the independent directors of the Company.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED HEREIN.

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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 27, 2004, certain information with respect to shares beneficially owned by (i) each person who is known by the Company to be the beneficial owner of more than five percent of the Company’s outstanding shares of Common Stock, (ii) each of the Company’s directors and the executive officers named in the Summary Compensation Table and (iii) all current directors and executive officers as a group. Unless otherwise indicated, each person named below has an address in care of the Company’s principal executive offices. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within sixty days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date. Applicable percentage of ownership as of February 27, 2004 is based upon 39,022,254 shares of Common Stock outstanding.

	Shares Beneficially Owned as of February 27, 2004
Beneficial Owner	Number of Shares	Percentage of Class
Private Capital Management, L.P. (1)	5,207,830	13.35	%
William N. Sick, Jr.	4,463,447	11.44
Business Resources International, Inc. (2)
FMR Corp. (3)	3,824,766	9.80
Austin Ventures (5).	2,784,864	7.14
Michael J. Watters (4).	2,768,969	7.10
James P. Janicki (6).	1,574,607	3.90
T. Curtis Holmes, Jr. (7)	891,165	2.24
Glenn A. Etherington (8)	587,739	1.49
Anthony Finbow	46,250	*
Sam L. Kelley (9)	367,785	*
Phillip C. Thrasher (10)	256,655	*
Royce W. Holland (11).	84,750	*
Lawrence J. Bouman (12)	93,679	*
John W. White (13).	75,417	*
John E. Berndt (14)	62,943	*
Terry L. Scott (15)	32,500	*
All directors and executive officers as a group (13 persons) (16)	4,877,702	11.25

* Less than 1%

(1) The address of Private Capital Management, L.P. is 8889 Pelican Bay Blvd., Naples, Florida 34108. Information with respect to such beneficial ownership was obtained from a Schedule 13G filed with the Securities and Exchange Commission and reflects shares beneficially owned by Private Capital Management, L.P. as of December 31, 2003.

(2) Consists of 1,555,590 shares held directly by Mr. Sick, plus the following: 2,333,967 shares held by Business Resources International, Inc., 229,536 shares held by Jill Melanie Sick 1991 Trust, 229,536 shares held by David Louis Sick 1991 Trust, and 114,818 shares held by Louis Pitchlyn Williams 1992 Trust. The address of William N. Sick, Jr. is 565 Sheridan Road, Winnetka, Illinois 60093.

(3) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109. Information with respect to such beneficial ownership was obtained from a Schedule 13G filed with the Securities and Exchange Commission and reflects shares beneficially owned by FMR Corp. as of December 31, 2003.

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(4) Consists of shares held by The Watters’ Children Trust, the Michael and Carole Watters Charitable Remainder Trust and MCDA International Partnership, Ltd. The address of Mr. Watters is 101 E. Park Blvd., Suite 600, Plano, Texas 75024. Information with respect to such beneficial ownership was obtained from a Schedule 13G filed with the Securities and Exchange Commission and reflects shares beneficially owned by Mr. Watters as of December 31, 2003.

(5) Includes 581,003 shares held by Austin Ventures IV-A, L.P., 1,218,997 shares held by Austin Ventures IV-B, L.P., 957,922 shares held by Austin Ventures VI, L.P., and 26,942 shares held by Austin Ventures VI Affiliates Fund, L.P. Does not include 555,790 shares held by certain individuals affiliated with Austin Ventures. The address of the Austin Ventures entities is 300 West 6^th Street, Suite 2300, Austin, Texas 78701. Information with respect to such beneficial ownership was obtained from a Schedule 13G filed with the Securities and Exchange Commission and reflects shares beneficially owned by entities affiliated with Austin Ventures as of December 31, 2003.

(6) Consists of (i) 181,730 shares owned by Mr. Janicki and his spouse as joint tenants and (ii) 1,392,877 shares subject to stock options held by Mr. Janicki that are exercisable within 60 days of February 27, 2004. On April 28, 2004, the Company announced that Mr. Janicki will retire as Executive Chairman, effective June 16, 2004, and will retire as Director and Chief Software Architect effective July 30, 2004.

(7) Consists of (i) 47,415 shares owned by Mr. Holmes and (ii) 843,750 shares subject to stock options held by Mr. Holmes that are exercisable within 60 days of February 27, 2004.

(8) Consists of (i) 91,135 shares owned by Mr. Etherington and (ii) 496,604 shares subject to stock options held by Mr. Etherington that are exercisable within 60 days of February 27, 2004.

(9) Consists of (i) 7,103 shares owned by Mr. Kelley and (ii) 360,682 shares subject to stock options held by Mr. Kelley that are exercisable within 60 days of February 27, 2004.

(10) Consists of (i) 11,465 shares owned by Mr. Thrasher and (ii) 245,190 shares subject to stock options held by Mr. Thrasher that are exercisable within 60 days of February 27, 2004.

(11) Consists of (i) 1,000 shares owned by Mr. Holland and (ii) 83,750 shares subject to stock options held by Mr. Holland that are exercisable within 60 days of February 27, 2004.

(12) Consists of (i) 19,929 shares owned by Mr. Bouman and (ii) 73,750 shares subject to stock options held by Mr. Bouman that are exercisable within 60 days of February 27, 2004.

(13) Consists of 75,417 shares subject to stock options held by Mr. White that are exercisable within 60 days of February 27, 2004.

(14) Consists of (i) 9,193 shares owned by Mr. Berndt and (ii) 53,750 shares subject to stock options held by Mr. Berndt that are exercisable within 60 days of February 27, 2004.

(15) Consists of 32,500 shares subject to stock options currently held by Mr. Scott that are exercisable within 60 days of February 27, 2004.

(16) Consists of (i) 540,312 shares owned by all directors and executive officers as a group, and (ii) 4,337,390 shares subject to stock options that are exercisable within 60 days of February 27, 2004.

COMPENSATION COMMITTEE REPORT

Responsibilities and Composition of the Committee

The Compensation Committee of the Company’s Board of Directors (the “Committee”) is responsible for (i) establishing compensation programs designed to attract, motivate and retain key executives responsible for the Company’s success; (ii) administering and maintaining such programs in a manner that will benefit the long-term interests of the Company and its stockholders; and (iii) determining the compensation of the Company’s Chief

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Executive Officer and other executive officers. The Committee also makes recommendations to senior management with respect to the Company’s compensation policies and practices generally. The Committee is composed of two directors, currently Mr. Holland and Mr. Bouman. The members of the Committee are “independent directors” (as defined under Nasdaq rules), as well as “outside directors” (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended). Neither of these directors has ever served as an employee of the Company.

This report describes the philosophy that underlies the cash and equity-based components of the Company’s executive compensation program. It also describes the details of each element of the program, as well as the rationale for compensation paid to the Company’s Chief Executive Officer and its executive officers in general.

For the 2003 fiscal year, the process used by the Committee in determining executive officer compensation levels was based on the subjective judgment of the Committee. However, the recommendations of the Company’s Chief Executive Officer were considered by the Committee when making the final compensation decisions concerning each other officer.

Compensation Philosophy and Objectives

The Committee believes that the Company’s executive officer compensation should be determined according to a competitive framework and based on overall financial results, individual contributions and teamwork that help build value for the Company’s stockholders. Within this overall philosophy, the Committee bases the compensation program on the following principles:

• Compensation levels for executive officers are benchmarked to the outside market, using published industry data relevant to the officers’ positions. Compensation decisions are made by referring to information regarding two groups of companies: companies with which the Company is expected to compete for executive talent; and companies within the industry groups with which the Company can expect to compete for investors. The Company obtained salary information on these companies through Culpepper & Associates, Inc. and William M. Mercer, independent organizations that provide comprehensive salary survey data for U.S. high technology and software companies. The benchmark companies against whom the Committee gauged the Company’s executive compensation may occasionally overlap those contained in the Morgan Stanley Index, which was used for comparison in the stock performance graph. The Committee, however, does not consider other companies’ performance in awarding executive compensation. Nor does the Committee refer to the Morgan Stanley Index as a guide for such compensation. Rather, the Committee examines several factors when setting salaries for executive officers, including:

• the compensation of officers at software and technology companies generally;

• the revenues of comparable software companies;

• the types of software products sold by the comparable companies;

• the geographic location of the comparable companies;

• whether the comparable companies are publicly or privately held; and

• the job responsibilities of the officers in the comparable companies.

• The total compensation opportunity is targeted to be competitive with the compensation offered by these companies. The Committee considers it essential to the vitality of the Company that the total compensation opportunity for executive officers remains competitive with similar companies in order to attract and retain the talent needed to manage and build the Company’s business.

• Compensation is tied to performance. A significant part of the total compensation opportunity is at risk, to be earned only if specific goals are met.

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• Incentive compensation is designed to reinforce the achievement of both short-and long-term corporate objectives.

Compensation of Executive Officers Generally

The Company’s executive compensation program is designed to link executive pay to Company performance and to provide an incentive to executives to manage the Company with a principal view to enhancing stockholder value.

Generally, the Company’s executive compensation program makes a significant portion of each executive’s cash compensation contingent upon growth and improvement in the Company’s results of operations, with the potential to earn exceptional rewards for exceptional performance. More specifically, the program is designed to provide compensation for meeting and exceeding internal goals and to provide incentives to increase the market value of the Common Stock. The program also is designed to attract and retain talented executives who are essential to the Company’s long-term success within a highly competitive industry that demands unique talents, skills and capabilities.

Compensation criteria are evaluated annually to ensure they are appropriate and consistent with the business objectives that are important in meeting the Company’s earnings per share, operating profit and revenue goals and in enhancing stockholder value. The Company’s executive compensation policies and programs are intended to (i) provide rewards contingent upon Company and individual performance, (ii) link executive compensation to sustainable increases in stockholder value, (iii) promote teamwork among executives and other Company employees, and (iv) effect retention of a strong management team.

The primary components of the Company’s executive compensation program are salary, performance bonuses, stock options, and restricted stock.

Base Salary.    The Committee reviews the salary of each of its executive officers annually. The Committee’s review takes into consideration the Company’s revenue, earnings per share and operating profits and the duties and performance of each executive. In making salary recommendations or decisions, the Committee exercises its discretion and judgment based on the foregoing criteria, without applying a specific formula to determine the weight of each factor considered. The Committee also considers equity and fairness when comparing base salaries of executives.

Incentive Bonuses.    The Company has established a bonus system for executive officers based on financial performance criteria, including revenue growth, profitability and percentage performance compared to established targets. During fiscal 2003, executive officers could earn annual bonuses targeted between 50% and 89% of their respective base salaries. Bonuses payable, if any, are paid semi-annually and are contingent upon the attainment of six-month objectives determined by the Committee. Other senior managers have similar bonus arrangements. Bonuses are typically determined based on the achievement of certain financial and operational goals for the Company including:

• revenue achievement;

• operating income;

• operating cash flow; and

• achievement of departmental objectives.

No incentive bonuses were earned during fiscal 2003.

Retention Bonuses.    The Company executed a retention bonus award program for roughly 10% of its employees in fiscal 2003, which included retention bonus awards to executive officers based on their maintaining employment with the company from October 25, 2002 until the bonus payment date of July 15, 2003. During

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fiscal 2003, executive officers received retention bonuses under this program in amounts between 13.5% and 22.3% of their respective base salaries, with the percentage varying according to each officer’s potential target incentive bonus.

Stock Options and Equity Compensation.    The Committee believes that granting stock options and other forms of equity compensation to executive officers and other key employees is an important method of enhancing long-term profitability and stockholder value. The Committee views the Long-Term Incentive Plan as a vehicle to attract and retain experienced employees and to align the employee’s economic incentives with those of the Company’s stockholders. Under the Long- Term Incentive Plan, the Committee may grant options and other forms of equity compensation to executive officers who are expected to contribute materially to the Company’s future success. In determining the size of stock option and other equity grants, the Committee focuses primarily on the Company’s performance and the perceived role of each executive in accomplishing such performance objectives, as well as the satisfaction of individual performance objectives. In addition, the Committee examines the option holdings of the executives and the competitive market for qualified executives. The Committee’s primary objectives in granting awards are the retention of its executives and to incentivize officers to improve the Company’s performance.

The Committee intends to continue using stock options and other forms of equity compensation as the primary long-term incentive for the Company’s executive officers. Because they generally provide rewards to executives only to the extent the Company’s stock price increases after the options or other equity awards are granted, the Committee feels that stock options and other equity awards granted under the Long-Term Incentive Plan are an appropriate means to provide executives with incentives that closely align their interests with those of stockholders and thereby encourage them to promote the ongoing success of the Company.

Policy on Deductibility of Compensation

It is the responsibility of the Committee to address the provisions of Section 162(m) of the Internal Revenue Code which, except in the case of “performance-based compensation” and certain other types of compensation, limits to $1,000,000 per person the amount of the Company’s federal income tax deduction for compensation paid to the Chief Executive Officer and the other four most highly paid executive officers. In that regard, the Committee must determine whether any actions with respect to Section 162(m) should be taken by the Company. In fiscal 2003, the Company did not pay its executive officers compensation that would not be deductible as a result of the Section 162(m) deductibility limit. The Company expects that the compensation paid to executive officers in fiscal 2004 will qualify for income tax deductibility under Section 162(m) of the Internal Revenue Code. The Committee will take appropriate action when it is warranted in the future.

Chief Executive Officer Compensation

The Chief Executive Officer’s salary, bonus and long-term awards follow the policies set forth above. Mr. Janicki served as Chief Executive officer through July 2003. For 2003 Mr. Janicki’s base salary was $315,000. He also received $3,000 in matching contributions under the Company’s 401(k) Plan. A retention bonus of $70,000 was earned by Mr. Janicki in 2003. Mr. Janicki’s salary was not linked to any set corporate or personal performance goals. For 2003 Mr. Holmes’ base salary was $291,667, which includes salary as President and Chief Operating Officer up through August 2003, and salary as Chief Executive Officer and President following his being named to that office in August 2003. He also received $3,000 in matching contributions under the Company’s 401(k) Plan. A retention bonus of $48,750 was earned by Mr. Holmes in 2003. Mr. Holmes’ salary was not linked to any set corporate or personal performance goals.

The foregoing report has been approved by all of the members of the Committee.

THE COMPENSATION COMMITTEE

Royce J. Holland, Chairman

Lawrence J. Bouman

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Neither of the members of the Compensation Committee is currently or has been, at any time since the formation of the Company, an officer or employee of the Company. No executive officer of the Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board of Directors or Compensation Committee.

Mr. Royce Holland, a director of the Company and member of the Compensation Committee, is Chairman of the Board, CEO and a 5% stockholder of Allegiance Telecom, a customer of the Company. Purchases by Allegiance from the Company in fiscal year 2003 accounted for approximately $600,000 in revenue to the Company.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent auditors are responsible for expressing an opinion on the conformity of our audited financial statements to generally accepted accounting principles.

In this context, the Audit Committee has reviewed and discussed with management and the independent auditors the audited financial statements. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). In addition, the Audit Committee has received from the independent auditors the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and discussed with them their independence from the Company and its management.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on SEC Form 10-K for the year ended December 31, 2003, for filing with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

John E. Berndt

Terry L. Scott

John W. White

FEES PAID TO INDEPENDENT ACCOUNTANTS

Fees for all services provided by KPMG LLP, the Company’s independent auditors, for years 2003 and 2002 are as follows:

Audit Fees

Fees for services for years 2003 and 2002 related to the annual financial statement audits, review of and assistance with quarterly and annual financial statements filed in the reports 10-Q and 10-K with the SEC, consents related to such reports filed with the SEC, and statutory audits approximated $188,000 and $176,500 respectively.

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Audit-Related Fees

Fees for audit-related services for years 2003 and 2002, primarily related to audits of financial statements of certain employee benefit plans, acquisition due diligence assistance, regulatory filings, the review of registration statements and the issuance of consents, approximated $25,500 and $47,848 respectively.

Tax Fees

Fees for tax services for years 2003 and 2002, which included tax compliance services (other than those related to Audit Fees) in both years, approximated $64,800 and $59,500 respectively.

All Other Fees

Fees for other services were $20,396 in 2003, which included a stock compensation study, and there were no such fees in 2002.

Pre-Approval of Independent Auditor Services

The Audit Committee has adopted guidelines for pre-approval by that committee of independent auditor services. These guidelines are set out in Appendix A of this proxy statement.

The Audit Committee has considered, in accordance with its charter, whether the independent auditor’s provision of the services described above is compatible with maintaining the independent auditors’ independence.

INDEPENDENT PUBLIC ACCOUNTANTS

The Audit Committee, comprised of independent members of the Board of Directors, has selected KPMG LLP as the Company’s independent auditors for the fiscal year ending December 31, 2004. The Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee feels that such a change would be in the Company’s and its stockholders’ best interests. KPMG LLP has audited the Company’s financial statements for each of the fiscal years ended December 31, 1997 through December 31, 2003. KPMG LLP’s representatives are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.

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MANAGEMENT COMPENSATION

General

The following table sets forth all compensation awarded or earned during the last three fiscal years by the Company’s Chief Executive Officer, which position was held by James P. Janicki for a portion of 2003 and by T. Curtis Holmes, Jr., for the remainder of 2003, and the four other most highly paid individuals who were executive officers at the end of 2003 (the “Named Executive Officers”):

Summary Compensation Table

		Annual Compensation									Long-Term Compensation
Name and Principal Position	Fiscal Year	Salary			Bonus			Other Annual Compensation			Securities Underlying Options (#)	All Other Compensation (1)
James P. Janicki Chief Software Architect (2)	2003 2002 2001	$	315,000 310,000 265,625		$	70,000 —   78,797		$	—   —   —		25,000 90,000 250,000	3,000 3,000 2,625
T. Curtis Holmes, Jr. President and Chief Executive Officer (3)	2003 2002 2001		291,667 271,875 245,353			48,750 —   219,213	(4)		—   —   21,052	(5)	270,000 215,000 700,000	3,000 3,000 2,625
Anthony C. Finbow Managing Director, EMEA	2003		224,763			49,039			—		215,000	11,238
Glenn A. Etherington Chief Financial Officer	2003 2002 2001		225,000 221,875 197,688			31,250 —   40,052			—   —   —		15,000 170,000 75,000	3,000 3,000 2,625
Sam L. Kelley Executive Vice President – Services	2003 2002 2001		220,000 212,917 91,667			33,000 —   119,484	(6)		—   —   —		15,000 135,000 300,000	3,000 3,000 1,771
Phillip C. Thrasher Executive Vice President – Americas and Asia Pacific Sales	2003 2002		190,696 190,953	��		85,747 35,000	(7) (8)		—   —		65,000 300,000	3,000 —

(1) Represents contributions made by the Company to each of our Named Executive Officers, except Mr. Finbow, under the Company’s 401(k)/ profit sharing plan. Mr. Finbow’s sum includes pension contributions and payments for private health insurance.

(2) Mr. Janicki served as Chief Executive Officer of the Company from May 1999 until July 2003. On April 28, 2004, the Company announced that Mr. Janicki will retire as Executive Chairman effective June 16, 2004, and will retire as Director and Chief Software Architect effective July 30, 2004.

(3) Mr. Holmes has served as President and Chief Executive Officer of the Company since August 2003.

(4) Includes a one-time relocation bonus in the amount of $160,000.

(5) Represents moving expenses paid to a third party.

(6) Includes a one-time signing bonus in the amount of $50,000.

(7) Includes an individual retention bonus in the amount of $50,000, related to the acquisition of the Service Commerce Division of Nortel Networks in February 2002.

(8) Includes an individual retention bonus in the amount of $35,000, related to the acquisition of the Service Commerce Division of Nortel Networks in February 2002.

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Executive Option Grants

The following table contains information concerning the stock option grants made to each of the Named Executive Officers in 2003.

Option Grants in Fiscal 2003

	Individual Grants						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(3)
Name	Number of Securities Underlying Options Granted(1)	Percentage of Total  Options Granted to Employees in Fiscal 2003(2)		Exercise Price Per Share		Expiration Date	5%		10%
James P. Janicki	25,000	1.0	%	$	1.33	2/25/08	$	9,186	$	20,299
T. Curtis Holmes, Jr.	20,000	0.8			1.33	2/25/08		7,349		16,240
	250,000	9.8			2.40	7/30/08		165,769		366,306
Anthony Finbow	125,000	4.9			1.34	2/04/08		46,277		102,260
	15,000	0.6			1.33	2/25/08		5,512		12,180
	75,000	3.0			2.15	8/04/08		44,550		98,445
Glenn A. Etherington	15,000	0.6			1.33	2/25/08		5,512		12,180
Sam L. Kelley	15,000	0.6			1.33	2/25/08		5,512		12,180
Phillip C. Thrasher	50,000	2.0			1.30	2/13/08		17,958		39,683
	15,000	0.6			1.33	2/25/08		5,512		12,180

(1) Generally, shares under option grants become exercisable in near equal installments over four years. However, a substantial number of the options listed in the table become exercisable in one year. The option shares listed in the table above will be fully vested upon the dissolution or liquidation of the Company, or on certain reorganizations where there is no plan to convert or exchange the options into option shares of the surviving entity. In addition, the options vest in connection with a termination of a Named Executive Officer’s employment under certain circumstances. See the discussion under “Employment Agreements and Termination and Change in Control Agreements” below. Each of the options has a five-year term, subject to earlier termination in the event of the optionee’s cessation of service with the Company.

(2) Based upon options to purchase an aggregate of 2,539,660 shares of Common Stock granted to employees of the Company in 2003 under the Long-Term Incentive Plan.

(3) The potential realizable value is calculated based on the term of the option at the time of grant (five years). Annual stock price appreciation of 5% and 10% is assumed pursuant to rules promulgated by the Securities and Exchange Commission and does not represent the Company’s prediction of its stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by assuming that the estimated fair market value on the date of grant appreciates at the indicated rate, compounded annually, for the entire term of the option and that the option is exercised at the exercise price and sold on the last day of its term at the appreciated price.

Option Exercises and Holdings

The following table sets forth information concerning stock options exercised by the Named Executive Officers during 2003, as well as the value of unexercised options held by such persons on December 31, 2003. The values for in-the-money options (which represent the positive spread between the exercise price of any existing stock options and $2.43 per share, the closing price of the Common Stock as reported by the Nasdaq National Market on December 31, 2003) also are included.

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Aggregate Option Exercises in Fiscal 2003

and Fiscal Year-End Option Values

	Shares Acquired upon Exercise	Value Realized	Number of Securities Underlying Unexercised Options at December 31, 2003(1)		Value of Unexercised In-the-Money Options at December 31, 2002
Name			Vested	Unvested	Vested		Unvested
James P. Janicki	—	—	1,907,500	257,500	$	2,143,898	$	27,500
T. Curtis Holmes, Jr.	—	—	478,750	706,250		51,750		81,250
Glenn A. Etherington	—	—	480,500	226,500		43,125		59,625
Anthony Finbow	—	—	—	215,000		—		173,750
Sam L. Kelley	—	—	171,250	278,750		34,500		51,000
Phillip C. Thrasher	—	—	100,000	265,000		34,500		107,500

(1) Some of the unvested options are immediately exercisable, but such options are considered to be unvested because any shares purchased under those options will be subject to repurchase by the Company, at the original exercise price paid per share, upon the optionee’s cessation of service with the Company, before the lapsing of the Company’s repurchase right in such shares. For those immediately exercisable options, the heading “Vested” refers to shares no longer subject to repurchase; the heading “Unvested” refers to shares subject to repurchase as of December 31, 2003. Those option shares that are not immediately exercisable will typically become exercisable as to 25% of the option shares upon completion of 12 months of service from the grant date of the options, with the balance vesting in a series of equal annual installments over the next three years of service.

Employment Contracts and Termination and Change in Control Arrangements

For the period through July 28, 2003, James P. Janicki’s employment agreement provided for his employment as Chief Executive Officer and Chief Technology Officer of the Company at an annual base salary of $315,000, with a target bonus of 89% of his base salary in 2003 pursuant to the terms of the Company’s performance bonus plan; as of July 29, 2003, Mr. Janicki’s employment agreement provided for his employment as Chief Software Architect of the Company at the same salary, with a target bonus of 70.91% of his base salary in the second half of 2003 pursuant to the terms of the Company’s performance bonus plan. For the period through July 28, 2003, T. Curtis Holmes, Jr.’s employment agreement provided for his employment as President and Chief Operating Officer of the Company at an annual base salary of $275,000, with a target bonus of 71% of his base salary in 2003 pursuant to the terms of the Company’s performance bonus plan; as of July 29, 2003, Mr. Holmes’s employment agreement provided for his employment as Chief Executive Officer and President of the Company at an annual base salary of $315,000 with a target bonus of 88.89% of his base salary in the second half of 2003 pursuant to the terms of the Company’s performance bonus plan. Glenn A. Etherington’s employment agreement provided for his employment as Chief Financial Officer of the Company at an annual base salary of $225,000 in 2003, with a target bonus of 56% of his base salary in 2003 pursuant to the terms of the Company’s performance bonus plan. Anthony Finbow’s employment agreement provided for his employment as Managing Director, EMEA (Europe, Middle East and Africa) for the Company at an annual base salary of £150,000 in 2003, with a target bonus of 50% of his base salary in 2003 pursuant to the terms of the Company’s performance bonus plan. In addition to the Company’s performance bonus plan, Mr. Finbow had a personal retention and performance bonus opportunity with a target bonus of 50% of his salary. 70% of this additional target bonus opportunity was based on the achievement of specific revenue levels in EMEA, and the remaining 30% was based on the achievement of other specific operational and sales milestones; under this additional plan, in the event of a specified level of overachievement on the EMEA revenue target, Mr. Finbow was also eligible for an overachievement bonus of 50% of his overall target bonus opportunity amount. Sam L. Kelley’s employment agreement provided for his employment as Executive Vice President – Professional Services of the Company at an annual base salary of $220,000 in 2003, with a target bonus of 52% of his base salary in 2003 pursuant to the terms of the Company’s performance bonus plan. Phillip C. Thrasher’s

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employment agreement provided for his employment as Executive Vice President – Americas and Asia Pacific Sales of the Company at an annual base salary of $190,650 in 2003, with a target bonus of 75% of his base salary in 2003, pursuant to an arrangement under which 25% of his target bonus was based on the achievement of certain corporate objectives under the terms of the Company’s performance bonus plan, and the other 75% of his target bonus was based on the achievement of specific revenue levels in the Americas and Asia Pacific regions. In addition to the target bonus, in the event that the Company overachieved certain targets each Named Executive Officer was eligible to receive an additional overachievement bonus equal to 25% of his target bonus amount (and in the case of Mr. Thrasher 25% of that portion of his target bonus that was based on the achievement of certain corporate objectives under the Company’s bonus plan). Each of the Named Executive Officers’ compensation is subject to annual review by the Compensation Committee of the Board of Directors. Under the employment agreements, each Named Executive Officer is subject to non-competition, non-solicitation and non-disclosure covenants.

The information in the following two paragraphs as it refers to Named Executive Officers applies to all Named Executive Officers other than Anthony Finbow. Mr. Finbow’s severance arrangements are described specifically, with reference to Mr. Finbow, at the end of the next paragraph.

The employment agreement for each Named Executive Officer provides severance benefits in the event that his employment is terminated (1) by the Company other than for cause, or (2) by the Named Executive Officer for good reason (e.g., a change in his status, title, position or responsibilities; the Company’s requiring him to be based outside of the location of the Company’s corporate headquarters; or any material breach by the Company of a provision of the employment agreement). Upon such termination without cause or with good reason, the Named Executive Officer shall receive an amount equal to one times his base salary plus his annual target performance bonus. In addition, any stock options granted up to the date of termination vest immediately upon termination under such circumstances. The Company will also pay for COBRA benefits for the period of eligibility under COBRA. In addition, effective July 28, 2003, Mr. Janicki’s employment agreement provides such severance benefits in the event he terminates his own employment, even other than for good reason, provided that there are not grounds for his dismissal for cause under his employment agreement. On April 28, 2004 the Company announced that Mr. Janicki intends to terminate his employment in this manner, by resigning his position as Chief Software Architect effective July 30, 2004. Mr. Finbow’s employment agreement provides for termination by either party on twelve months’ written notice, unless (i) the Company terminates on grounds of breach as specified in the agreement, or (ii) the termination is the result of a liquidation or amalgamation where he is offered employment with a resulting company on equally favorable terms for the remaining period of the employment. Where such twelve months’ notice is required, the Company may make a payment of base salary to Mr. Finbow in lieu of notice, with certain permitted deductions related to taxes and national insurance.

The employment agreement for each Named Executive Officer also provides severance benefits in the event that, at any time during the twenty-four month period following a change in control of the Company, (1) his employment is terminated by the Company without cause, or by the Named Executive Officer for good reason (which includes the reasons set forth above, and also the failure by the Company to continue in effect the Named Executive Officer’s compensation or employee benefits in which he was participating prior to the change in control, or the failure of the Company to obtain an agreement from its successor to assume the employment agreement), or (2) his employment agreement is not renewed by the Company. Upon such termination, and in lieu of the severance benefits described in the preceding paragraph, the Named Executive Officer shall receive an amount equal to two times his base salary plus two times his annual target performance bonus. The Company will also pay for COBRA benefits for the period of eligibility under COBRA. In the event that the amount paid to the Named Executive Officer exceeds a threshold set forth in the employment agreement and is subject to the excise tax provisions of the Internal Revenue Code of 1986, the employment agreement provides that the Named Executive Officer shall be paid a gross-up payment to cover the payment of the excise tax. In addition, any stock options granted up to the date of termination vest immediately upon termination, and the Named Executive Officer shall have one year following the date of termination to exercise any unexercised options held by him. A

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change in control is defined to include the acquisition by any person or group of, or the completion by any person or group of a tender or exchange offer for, more than 50% of the outstanding voting securities of the Company; a merger or consolidation of the Company which results in those stockholders of the Company prior to such merger or consolidation holding less than 50% of the total voting securities of the surviving or resulting entity; a transfer of substantially all of the property or assets of the Company; or the election to the Board of Directors of the Company, without the recommendation or approval of the incumbent Board of Directors, of the lesser of three directors, or directors constituting a majority of the number of the directors of the Company then in office.

Each of the Named Executive Officers (including Mr. Finbow) received options in 2003 to purchase shares of Common Stock. Under the terms of their respective option agreements, in addition to the vesting rights set forth above, if their employment terminates after a change in control occurs, they also will immediately vest in all shares that otherwise would have vested during the twenty-four months following the date their employment terminates.

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STOCK PERFORMANCE GRAPH

The graph set forth below compares the cumulative total stockholder return on the Common Stock between November 18, 1999 and December 31, 2003 with the cumulative total return of the Nasdaq National Market Composite Index and the Morgan Stanley High Tech Index (the “MS High Tech Index”) over the same period. This graph assumes an investment of $100.00 on November 18, 1999 in the Common Stock, in the Nasdaq National Market Composite Index and the MS High Tech Index, and assumes the reinvestment of dividends, if any.

The comparisons shown in the graph below are based upon historical data. The Company cautions that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential future performance of the Common Stock. Information used in the graph was obtained from Morgan Stanley Dean Witter, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.

COMPARISON OF CUMULATIVE TOTAL RETURN*

AMONG METASOLV, INC.,

THE NASDAQ STOCK MARKET (U.S.) INDEX

AND THE MORGAN STANLEY HIGH TECH INDEX

*$100 INVESTED ON 11/18/99 IN STOCK OR INDEX—INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.

	11/18/99		12/31/99		12/29/00		12/31/01		12/31/02		12/31/03
MetaSolv, Inc.	$	100.00	$	430.26	$	48.03	$	41.36	$	7.26	$	12.79
Nasdaq National Market Composite Index		100.00		121.58		73.81		58.27		39.90	$	59.85
Morgan Stanley High Tech Index		100.00		117.60		135.63		64.75		36.74	$	60.77

20

The Company effected its initial public offering of its Common Stock on November 17, 1999 and trading of the Common Stock commenced on November 18, 1999. The price to the public on November 18, 1999 was $19 per share.

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filings made by the Company under those statutes, the Compensation Committee Report and Stock Performance Graph shall not be deemed filed with the Securities and Exchange Commission and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under those statutes.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company’s Certificate of Incorporation limits the liability of its directors for monetary damages arising from a breach of their fiduciary duty as directors, except to the extent otherwise required by Delaware law. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission.

The Company’s Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. The Company has also entered into indemnification agreements with its officers and directors containing provisions that may require the Company, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Mr. Royce Holland, a director of the Company and member of the Compensation Committee, is Chairman of the Board, CEO and a 5% stockholder of Allegiance Telecom, a customer of the Company. Purchases by Allegiance from the Company in fiscal year 2003 accounted for approximately $600,000 in revenue to the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The members of the Company’s Board of Directors, the executive officers of the Company and persons who hold more than 10% of the Company’s outstanding Common Stock are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, which require them to file reports disclosing their ownership of the Common Stock and their transactions in such Common Stock. Based upon the copies of Section 16(a) reports that the Company received from such persons for their 2003 fiscal year transactions in the Common Stock and their Common Stock holdings, the Company believes that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner.

FORM 10-K

THE COMPANY WILL MAIL TO YOU WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR 2003. REQUESTS SHOULD BE SENT TO METASOLV, INC., 5556 TENNYSON PARKWAY, PLANO, TEXAS 75024, ATTN: JONATHAN K. HUSTIS, CORPORATE SECRETARY.

21

STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING

Stockholder proposals that are intended to be presented at the 2005 Annual Meeting that are eligible for inclusion in the Company’s proxy statement and related proxy materials for that meeting under the applicable rules of the Securities and Exchange Commission must be received in writing by the Company’s Secretary not later than December 28, 2004 in order to be included. Such stockholder proposals should be addressed to MetaSolv, Inc., 5556 Tennyson Parkway, Plano, Texas 75024, Attn: Jonathan K. Hustis, Corporate Secretary.

OTHER MATTERS

The Board of Directors knows of no other matters to be presented for stockholder action at the Annual Meeting. However, if other matters do properly come before the Annual Meeting or any adjournments or postponements thereof, the Board of Directors intends that the persons named in the proxies will vote upon such matters in accordance with their best judgment.

BY ORDER OF THE BOARD OF DIRECTORS,

Jonathan K. Hustis

Executive Vice President, General

Counsel and Corporate Secretary

Plano, Texas

April 28, 2004

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.

THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.

22

APPENDIX A

Guidelines of the MetaSolv, Inc. Audit Committee

for Pre-Approval of Independent Auditor Services

The Committee has adopted the following guidelines regarding the engagement of the Company’s independent auditor to perform services for the Company:

For audit services (including statutory audit engagements as required under local country laws), the independent auditor will provide the Committee with an engagement letter during the January-March quarter of each year, or such other time as is determined by the Chair, outlining the scope of the audit services proposed to be performed during the fiscal year. If agreed to by the Committee, this engagement letter will be formally accepted by the Committee at either its February or April Audit Committee meeting, or at such other time as may be determined by the Chair.

The independent auditor will submit to the Committee for approval an audit services fee proposal after acceptance of the engagement letter.

For non-audit services, Company management will submit to the Committee for approval (during July or October of each fiscal year, or at such time as may be determined by the Chair) the list of non-audit services that it recommends the Committee engage the independent auditor to provide for the fiscal year. Company management and the independent auditor will each confirm to the Committee that each non-audit service on the list is permissible under all applicable legal requirements, and that it does not jeopardize the auditor’s independence. In addition to the list of planned non-audit services, a budget estimating non-audit service spending for the fiscal year will be provided. The Committee will approve both the list of permissible non-audit services and the budget for such services. The Committee will be informed routinely as to the non-audit services actually provided by the independent auditor pursuant to this pre-approval process.

To ensure prompt handling of unexpected matters, the Committee delegates to the Chair the authority to amend or modify the list of approved permissible non-audit services and fees. The Chair will report action taken to the Committee at the next Committee meeting.

The independent auditor must ensure that all audit and non-audit services provided to the Company have been approved by the Committee. The Controller will be responsible for tracking all independent auditor fees against the budget for such services and report at least annually to the Audit Committee.

A-1

PROXY PROXY

METASOLV, INC.

5556 Tennyson Parkway, Plano, Texas 75024

This Proxy is Solicited on Behalf of the Board of Directors of MetaSolv, Inc.

for the Annual Meeting of Stockholders to be held June 16, 2004

The undersigned holder of Common Stock, par value $.005, of MetaSolv, Inc. (the “Company”) hereby appoints Jonathan K. Hustis and Glenn A. Etherington, or either of them, proxies for the undersigned, each with full power of substitution, to represent and to vote as specified in this Proxy all Common Stock of the Company that the undersigned stockholder would be entitled to vote if personally present at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, June 16, 2004 at 10:00 a.m. local time, at the Company’s headquarters located at 5556 Tennyson Parkway, Plano, Texas 75024, and at any adjournments or postponements of the Annual Meeting. The undersigned stockholder hereby revokes any proxy or proxies heretofore executed for such matters.

This proxy, when properly executed, will be voted in the manner as directed herein by the undersigned stockholder.IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS (AS SET FORTH IN PROPOSAL 1) AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. The undersigned stockholder may revoke this proxy at any time before it is voted by delivering to the Corporate Secretary of the Company either a written revocation of the proxy or a duly executed proxy bearing a later date, or by appearing at the Annual Meeting and voting in person.

PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED RETURN ENVELOPE. If you receive more than one proxy card, please sign and return ALL cards in the enclosed envelope.

Address Change/Comments (Mark the corresponding box on the reverse side)

Ù  FOLD AND DETACH HERE  Ù

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE DIRECTORS (AS SET FORTH IN PROPOSAL 1).	Please Mark Here for Address Change or Comments	¨
	SEE REVERSE SIDE

1.	To elect the following directors to serve for a term ending upon the 2007 Annual Meeting of Stockholders or until their successors are elected and qualified:
		FOR the nominees listed below (except as marked to the contrary below)	WITHHOLD AUTHORITY to vote for all nominee(s) listed below		In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. The undersigned acknowledges receipt of the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
		¨	¨
Nominees: 01 T. Curtis Holmes, Jr., and 02 Lawrence J. Bouman Instruction: To withhold authority to vote for any individual nominee, write that nominee’s name on the space provided below.)
					Dated:                                                                                  , 2004
					Signature                                                                                                                                                                                                      Signature (if held jointly)
					Please date and sign exactly as your name(s) is (are) shown on the share certificate(s) to which the Proxy applies. When shares are held as joint tenants, both should sign. When signing as an executor, administrator, trustee, guardian, attorney-in fact or other fiduciary, please give full title as such. When signing as a corporation, please sign in full corporate name by President or other authorized officer. When signing as a partnership, please sign in partnership name by an authorized person.

Ù  FOLD AND DETACH HERE  Ù