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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-57531
3,266,470 SHARES
[i2 LOGO]
i2 TECHNOLOGIES, INC.
COMMON STOCK
(par value $.00025 per share)
This Prospectus relates to the public offering, which is not being
underwritten, of up to 3,266,470 shares (the "Shares") of Common Stock, par
value $.00025 per share (the "Common Stock"), of i2 Technologies, Inc., a
Delaware corporation ("i2" or the "Company"), by the stockholders of the
Company named herein (the "Selling Stockholders") or by pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer. None of the
proceeds from the sale of the Shares will be received by the Company. See
"Selling Stockholders."
The Shares may be offered by the Selling Stockholders from time to
time in transactions in the over-the-counter market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker- dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation to a
particular broker-dealer might be in excess of customary commissions). See
"Plan of Distribution."
The Company has agreed to bear certain expenses (other than fees and
expenses, if any, of counsel and other advisors to the Selling Stockholders and
any brokerage fees or commissions) in connection with the registration and sale
of the Shares. The Company and certain Selling Stockholders have agreed to
indemnify the other and their respective controlling persons against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The Common Stock is quoted on the Nasdaq National Market under the
symbol "ITWO." On July 22, 1998, the last sale price for the Common Stock as
quoted on the Nasdaq National Market was $38.25 per share.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE BY THE SELLING
STOCKHOLDERS UNDER THE SECURITIES LAWS OF ANY STATE AS OF THE DATE OF THIS
PROSPECTUS. BROKERS OR DEALERS EFFECTING TRANSACTIONS IN THE SHARES SHOULD
CONFIRM THE REGISTRATION THEREOF UNDER THE SECURITIES LAWS OF THE STATES IN
WHICH SUCH TRANSACTIONS OCCUR, OR THE EXISTENCE OF AN EXEMPTION FROM
REGISTRATION.
__________________________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 23, 1998.
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, is required to file periodic reports, proxy materials and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at 500 West Madison, Suite 1400,
Chicago, Illinois 60661, and at 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of the Commission's web site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments, exhibits and schedules,
referred to as the "Registration Statement") under the Securities Act with
respect to the Shares offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements made in this Prospectus as to the
contents of any document referred to are not necessarily complete. With
respect to each such document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from such office at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
3. The Company's Current Reports on Form 8-K dated March 24, May
5, June 19 and June 22, 1998; and
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A (File No. 0-28030), as
filed with the Commission on March 20, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus but
prior to the termination of the offering to which this Prospectus relates shall
be deemed to be incorporated by reference in this Prospectus and to be part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus.
Upon written or oral request, the Company will provide without charge
to each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be submitted in writing or by telephone to Investor
Relations, 909 E. Las Colinas Blvd., 16th Floor, Irving, Texas 75039; telephone
(214) 860-6000.
All share amounts in this Prospectus reflect a two-for-one split of
the Common Stock effected as a stock dividend on June 2, 1998.
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THE COMPANY
i2 is the leading provider of client/server-based decision support
software products for supply chain management and related applications. Supply
chain management encompasses the planning and scheduling of manufacturing and
related logistics, including demand forecasting, raw materials procurement,
work-in-process distribution and transportation across multiple enterprises.
i2's client/server software solution, Rhythm, is designed to provide customers
with an end-to-end supply chain management solution, enabling customers to
model complex, multi-site supply chains to rapidly generate integrated
solutions to supply chain challenges such as demand volatility, production
bottlenecks, supply interruptions and distribution alternatives. Rhythm
utilizes a constraint-based methodology which simultaneously considers a broad
range of factors -- from changing revenue forecasts to machine capacities to
individual customer commitments -- to optimize all aspects of the supply chain.
Rhythm's advanced decision-support capabilities enable companies to make better
informed and more timely planning, scheduling and resource allocation decisions
in order to improve throughput, operating efficiency, customer satisfaction and
return on assets. The Company's software products and services are designed to
enable customers to reduce costs, increase market share and enhance their
competitive advantage.
The Company's executive offices are located at 909 E. Las Colinas
Blvd., 16th Floor, Irving, Texas 75039, and its telephone number is (214)
860-6000.
i2's logo and "Rhythm" are registered trademarks of the Company. This
Prospectus also contains or incorporates by reference trademarks and registered
trademarks of companies other than i2.
RISK FACTORS
The following risk factors should be considered carefully in addition
to the other information contained or incorporated by reference in this
Prospectus before purchasing the Common Stock offered hereby. In addition to
the historical information contained and incorporated by reference herein, the
discussion in and incorporated by reference in this Prospectus contains certain
forward-looking statements, within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, that involve risks and uncertainties,
such as statements concerning: growth and future operating results; future
customer benefits attributable to the Company's products; developments in the
Company's markets and strategic focus; new products and product enhancements;
potential acquisitions and the integration of acquired businesses, products and
technologies; strategic relationships; and future economic, business and
regulatory conditions. Such forward-looking statements are generally
accompanied by words such as "plan," "estimate," "expect," "believe," "should,"
"would," "could," "anticipate," "may" or other words that convey uncertainty of
future events or outcomes. The cautionary statements made or incorporated by
reference in this Prospectus should be read as being applicable to all related
forward-looking statements whenever they appear or are incorporated by
reference in this Prospectus. The Company's actual results could differ
materially from those discussed herein and in the incorporated documents.
Factors that could cause or contribute to such differences include those
discussed below as well as those cautionary statements and other factors set
forth elsewhere herein and in the incorporated documents.
POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS; DEPENDENCE ON
SIGNIFICANT INDIVIDUAL SALES
The Company's quarterly revenues, expenses and operating results have
varied significantly in the past and are likely to vary significantly from
quarter to quarter in the future. Because the purchase of a supply chain
management software solution generally involves a significant commitment of
capital, the sales cycle associated with the purchase of the Company's products
varies substantially and is subject to a number of significant risks, including
customers' budgetary constraints, timing of budget cycles and concerns about
the pricing or introduction of new products by the Company or its competitors,
factors over which the Company has little or no control. Additional factors
include foreign currency exchange rate fluctuations, the mix of direct or
indirect sales, changes in joint-marketing relationships, and changes in the
Company's strategy. Furthermore, purchases of the Company's products may be
deferred or canceled in the event of a downturn in any potential customer's
business or the economy in general.
The amount of revenues associated with particular licenses can vary
significantly based upon the number of software modules purchased and the
number of sites and users involved in the installation. The Company generally
derives a significant portion of its software license revenues in each quarter
from a small number of relatively large sales. For example, in each quarter of
1996 and 1997, one or more customers each accounted for
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at least 15% of total software license revenues in such quarter. While the
Company believes that the loss of any of these particular customers would not
have an adverse effect, an inability to consummate one or more substantial
license sales in any future period could have a material adverse effect on the
Company's operating results for that period. Moreover, similar to many other
software companies, the Company typically realizes a significant portion of its
software license revenues in the last month or even the last week of a quarter.
The Company also believes that the tendency of customers to delay placing
orders for software products until near the end of a quarter has become more
pronounced in recent periods. As a result, small delays in customer orders can
cause significant variability in the Company's license revenues and results of
operations for any particular period. For all of the foregoing reasons,
revenues are difficult to forecast.
The Company intends to continue to invest heavily in its sales and
marketing, consulting and research and development organizations, and sets
investment and expense levels based on expected future revenues. If revenues
are below expectations, operating results and net income are likely to be
adversely and disproportionately affected because a significant portion of the
Company's expenses are not variable in the short term, and cannot be quickly
reduced to respond to decreases in revenues. In addition, the Company may
reduce prices or accelerate its investment in research and development efforts
in response to competition or to pursue new market opportunities. Any one of
these activities may further limit the Company's ability to adjust spending in
response to fluctuations in revenue levels. There can be no assurance that
revenues will grow in future periods, that they will grow at historical rates,
or that the Company will maintain positive operating margins in future
quarters.
The Company's quarterly results of operations are subject to certain
seasonal fluctuations. Historically, the Company's revenues have tended to be
strongest in the fourth quarter of the year and to increase only modestly in
the first quarter of the following year. The Company believes that this
seasonality is due to the calendar year budgeting cycles of many of its
customers and to compensation policies that tend to compensate sales personnel
for achieving annual revenue quotas. The Company expects that in future periods
these seasonal trends may cause first quarter revenues to remain consistent
with, or decrease from, the level achieved in the preceding quarter.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company's competitors are diverse and offer a variety of solutions directed at
various segments of the supply chain as well as the enterprise as a whole.
Competitors include: (i) enterprise resource application software vendors such
as SAP AG ("SAP"), PeopleSoft, Inc., Oracle Corporation ("Oracle") and Baan
Company, N.V., each of which currently offers sophisticated enterprise resource
planning ("ERP") solutions that currently or may in the future incorporate
supply chain management modules or advanced planning and scheduling software;
(ii) other suppliers of supply chain software including Manugistics Group, Inc.
and Logility, Inc.; (iii) other business application software vendors who may
broaden their product offerings by internally developing, or by acquiring or
partnering with independent developers of, advanced planning and scheduling
software; (iv) internal development efforts by corporate information technology
departments; and (v) companies offering standardized or customized products for
mainframe and/or mid-range computer systems.
In connection with specific customer solicitations, a number of ERP
vendors have from time to time jointly marketed the Company's products as a
complement to their own systems. The Company believes that as its market share
increases, and as the ranges of products offered by the Company and these ERP
vendors expand and increasingly overlap, relationships which were cooperative
in the past will become more competitive, thereby increasing the overall level
of competition the Company faces. Specifically, in 1997 the Company and SAP
terminated a license and distribution agreement, and SAP has announced its
intention to develop a suite of advanced planning and scheduling products which
are expected to be directly competitive with Rhythm. The Company believes that
additional ERP vendors are focusing significant resources on increasing the
functionality of their own planning and scheduling modules, and at least two
ERP vendors have recently acquired independent developers of advanced planning
and scheduling software which compete with Rhythm.
Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition, a broader range of products to offer and a larger
installed base of customers than the Company, each of which could provide them
with a significant competitive advantage over the Company. In addition, the
Company expects to experience increasing price competition as the Company and
its competitors compete for market share. There can be no assurance that the
Company will be able to compete successfully with existing or new competitors
or that competition will not have a material adverse effect on the Company's
business, operating results and financial condition.
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MANAGEMENT OF GROWTH
The Company's business has grown rapidly in recent years, with
revenues increasing from $38.5 million in 1995 to $100.5 million in 1996 and to
$213.7 million in 1997. The Company's recent expansion has resulted in
substantial growth in the number of its employees (from 330 at December 31,
1995 to 721 at December 31, 1996 to 1,191 at December 31, 1997), the scope of
its operating and financial systems and the geographic distribution of its
operations and customers. This recent rapid growth has placed, and if continued
will continue to place, a significant strain on the Company's management and
operations. Accordingly, the Company's future operating results will depend on
the ability of its officers and other key employees to continue to implement
and improve its operational, customer support and financial control systems,
and to effectively expand, train and manage its employee base. There can be no
assurance that the Company will be able to manage any future expansion
successfully, and any inability to do so would have a material adverse effect
on the Company's business, operating results and financial condition.
PRODUCT CONCENTRATION; DEPENDENCE ON PRODUCT LINE EXPANSION
The Company currently derives all of its revenues from Rhythm licenses
and related services. The Company expects that Rhythm-related revenues,
including maintenance and consulting contracts, will continue to account for
substantially all of the Company's revenues for the foreseeable future. As a
result, the Company's future operating results are dependent upon continued
market acceptance of Rhythm and enhancements thereto. There can be no assurance
that Rhythm will achieve continued market acceptance. A decline in demand for,
or market acceptance of, Rhythm as a result of competition, technological
change or other factors would have a material adverse effect on the Company's
business, operating results and financial condition.
As enterprises increasingly focus on decision support for supply chain
management challenges, they are requiring greater levels of functionality and
broader product offerings from their application software vendors. Moreover,
the market for the Company's software products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, and frequent product introductions and enhancements. The
Company's future success will depend upon its ability to continue to enhance
its current product line and to develop and introduce new products that keep
pace with technological developments, satisfy increasingly sophisticated
customer requirements and achieve market acceptance. There can be no assurance
that the Company will be successful in developing and marketing, on a timely
and cost-effective basis, fully functional product enhancements or new products
that respond to technological advances by others, or that its new products will
achieve market acceptance. The Company's failure to successfully develop and
market product enhancements or new products could have a material adverse
effect on the Company's business, operating results and financial condition.
INTEGRATION OF RECENT ACQUISITIONS; POTENTIAL FUTURE ACQUISITIONS
In April 1998, the Company completed the acquisition of InterTrans
Logistics Solutions Limited ("ITLS"). In May 1997, the Company acquired Think
Systems Corporation ("Think") and Optimax Systems Corporation ("Optimax"). The
success of acquisitions depends primarily on the Company's ability to (i)
retain, motivate and integrate the acquired personnel with the Company's
operations, (ii) integrate multiple information systems and (iii) integrate
acquired software with Rhythm. No assurance can be given that the Company will
not encounter difficulties in integrating the respective operations and
products of the Company, ITLS, Think or Optimax, or that the benefits expected
from such integration will be realized. Failure to successfully integrate
ITLS', Think's and Optimax's respective operations and products into the
Company's operations and products could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company may in the future pursue additional acquisitions of
businesses, products and technologies, or enter into joint venture
arrangements, that could complement or expand the Company's business. The
negotiation of potential acquisitions or joint ventures as well as the
integration of an acquired business, product or technology could cause
diversion of management's time and resources. Future acquisitions by the
Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities, amortization of goodwill and
other intangibles, research and development write-offs and other
acquisition-related expenses. Further, no assurances can be given that any
acquired business will be successfully integrated with the Company's
operations. If any such acquisition were to occur, there can be no assurance
that the Company will receive the intended benefits of the acquisition. Future
acquisitions, whether or not consummated, could have a material adverse effect
on the Company's business, operating results and financial condition.
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INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS
The Company derived approximately 9%, 22% and 31% of its total
revenues from customers located outside of the United States in 1995, 1996 and
1997, respectively. The Company believes that continued growth and
profitability will require expansion of its sales in international markets.
Further penetration of international markets will require the Company to expand
existing foreign operations, to establish additional foreign operations and to
translate its software and manuals into additional foreign languages. This
expansion may be costly and time-consuming and may not generate returns for a
significant period of time, if at all. To the extent that the Company is unable
to expand its international operations or translate its software and manuals
into foreign languages in a timely manner, the Company's ability to further
penetrate international markets would be adversely affected, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company's international operations are subject to risks inherent
in international business activities, including: difficulty in staffing and
managing geographically disparate operations; longer accounts receivable
payment cycles in certain countries; compliance with a variety of foreign laws
and regulations; unexpected changes in regulatory requirements; overlap of
different tax structures; greater difficulty in safeguarding intellectual
property; import and export licensing requirements; trade restrictions; changes
in tariff rates; and general economic conditions in international markets. In
particular, countries in the Asia Pacific region have recently experienced
weaknesses in their currency, banking and equity markets. In the future, these
weaknesses could adversely affect the demand for the Company's products, the
U.S. dollar value of the Company's foreign currency denominated sales and
ultimately the Company's results of operations. There can be no assurance that
the Company's business, results of operations or financial condition will not
be adversely affected by these or other factors that may affect international
operations.
To date, the Company's revenues from international operations have
primarily been denominated in United States dollars. As a result, the Company's
sales in international markets may be adversely affected by a strengthening
United States dollar. Certain sales and the majority of the expenses incurred
by the Company's international operations are denominated in currencies other
than the United States dollar. In addition, with the expansion of international
operations, the number of foreign currencies in which the Company must operate
will increase, resulting in increased exposure to exchange rate fluctuations.
The Company has implemented limited hedging programs to mitigate its exposure
to currency fluctuations. Notwithstanding these hedging programs, exchange rate
fluctuations have caused and will continue to cause currency transaction gains
and losses. While such currency transaction gains and losses have not been
material to date, there can be no assurance that currency transaction losses
will not have a material adverse effect on the Company's business, results of
operations or financial condition in future periods.
RISKS ASSOCIATED WITH STRATEGIC RELATIONSHIPS
The Company has from time to time established relationships with other
companies, including Oracle and System Software Associates, Inc., involving
collaboration in areas such as product development, marketing, distribution and
implementation. The maintenance of these relationships and the development of
other such relationships is a meaningful part of the Company's business
strategy. However, most of the Company's current and potential strategic
partners are either potential competitors of the Company or are currently
competitive with the Company to some degree. In addition, certain of the
Company's cooperative relationships have failed to meet expectations, such as
the Company's terminated license and distribution relationship with SAP. There
can be no assurance that the Company's current collaborative relationships will
be beneficial to the Company, that such relationships will be sustained, or
that the Company will be able to enter into successful new strategic
relationships in the future.
DEPENDENCE UPON KEY PERSONNEL
The Company's future operating results depend in significant part upon
the continued service of a relatively small number of key technical and senior
management personnel, few of whom are bound by an employment agreement. The
Company's future success also depends on its continuing ability to attract,
train and retain other highly qualified technical and managerial personnel.
Competition for such personnel is intense, and the Company has at times in the
past experienced difficulty in recruiting qualified personnel. There can be no
assurance that the Company will retain its key technical and managerial
employees or that it will be successful in attracting, assimilating and
retaining other highly qualified technical and managerial personnel in the
future. Kanna (Ken) N. Sharma, the Company's Vice Chairman of the Board and
Executive Vice President, has been diagnosed with a brain tumor. While Mr.
Sharma is currently providing services to the Company, there can be no
assurance as to how long
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he will be able to continue to do so. The loss of any member of the Company's
key technical and senior management personnel or the inability to attract and
retain additional qualified personnel could have a material adverse effect on
the Company's business, operating results and financial condition.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; USE OF LICENSED TECHNOLOGY
The Company relies primarily on a combination of copyright, trademark
and trade secret laws, confidentiality procedures and contractual provisions to
protect its proprietary rights. In addition, the Company generally licenses
Rhythm products to end users in object code (machine-readable) format, and the
Company's license agreements generally allow the use of Rhythm products solely
by the customer for internal purposes without the right to sublicense or
transfer the Rhythm products. However, the Company believes that the foregoing
measures afford only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Policing unauthorized use of the Company's
products is difficult, and while the Company is unable to determine the extent
to which piracy of its software products exist, software piracy can be expected
to be a problem. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as the laws of the
United States. Furthermore, there can be no assurance that the Company's
competitors will not independently develop technology similar to that of the
Company. The Company may increasingly be subject to claims of intellectual
property infringement as the number of products and competitors in the
Company's industry segment grows and the functionality of products in different
industry segments overlaps. Although the Company is not aware that any of its
products infringes upon the proprietary rights of third parties, there can be
no assurance that third parties will not claim infringement by the Company with
respect to current or future products. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or require the Company to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on
terms acceptable to the Company, which could have a material adverse effect
upon the Company's business, operating results and financial condition.
The Company has in the past and may in the future resell certain
software which it licenses from third parties. There can be no assurance that
these third-party software licenses will continue to be available to the
Company on commercially reasonable terms. The loss of or inability to maintain
or obtain any of these software licenses could result in delays or reductions
in product shipments until equivalent software could be identified, licensed
and integrated, which could adversely affect the Company's business, operating
results and financial condition.
COMPLEXITY OF SOFTWARE PRODUCTS; RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
Rhythm is a client/server solution which can operate on hardware
platforms from Digital Equipment, Hewlett-Packard, IBM and Sun Microsystems
and operating systems from Sun Microsystems and Microsoft, and can access data
from most widely used SQL (structured query language) databases, including
Informix, Oracle and Sybase. To the extent that additional hardware or software
platforms gain significant market acceptance, the Company may be required to
port Rhythm to such platforms in order to remain competitive. Such platforms
may not be architecturally compatible with Rhythm's software product design,
and there can be no assurance that the Company will be able to port Rhythm to
such additional platforms on a timely basis or at all. Any failure to maintain
compatibility with existing platforms or to port to new platforms that achieve
significant market acceptance would have a material adverse effect on the
Company's business, operating results and financial condition.
As a result of the complexities inherent in client/server computing
environments and the broad functionality and performance demanded by customers
for supply chain management products, major new products and product
enhancements can require long development and testing periods. In addition,
software programs as complex as those offered by the Company may contain
undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. While the Company has on
occasion experienced delays in the scheduled introduction of new and enhanced
products and products containing bugs, to date the Company's business has not
been materially adversely affected by delays or the release of products
containing errors. There can be no assurance, however, that errors will not be
found in future releases of the Company's software, or that any such errors
will not impair the market acceptance of these products and adversely affect
the Company's business, operating results and financial condition.
While the Company generally takes steps to avoid interruptions of
sales often associated with the pending availability of new products, customers
may delay their purchasing decisions in anticipation of the general
availability of new or enhanced Rhythm products, which could have a material
adverse effect on the Company's
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business and operating results. Moreover, significant delays in the general
availability of such new releases, significant problems in the installation or
implementation of such new releases, or customer dissatisfaction with such new
releases, could have a material adverse effect on the Company's business,
operating results and financial condition.
DEPENDENCE ON TECHNICAL AND IMPLEMENTATION PERSONNEL
The sales of Rhythm typically involve the utilization of highly
qualified technical sales support personnel. A limitation on the number of
qualified technical sales support personnel could have a material adverse
effect on the Company's ability to expand sales and enter into new vertical
markets. The implementation of Rhythm requires the services of highly trained
implementation personnel working directly for the Company or for independent
consultants. A shortage in the number of trained implementers, either within
the Company or with third-party consulting firms, could limit the Company's
ability to implement its software on a timely and effective basis. Delayed or
ineffective implementation of the Company's software may limit the Company's
ability to expand its revenues and may result in customer dissatisfaction and
damage the Company's reputation, each of which could have a material adverse
effect on the Company's business, operating results and financial condition.
YEAR 2000 COMPLIANCE
Many older computer systems and software products currently in use are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, in less than two years, computer systems
and/or software used by many companies may need to be upgraded to comply with
such "Year 2000" requirements. Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance.
Based on the Company's assessment, the Company believes that its current
versions of its software products are Year 2000 compliant. However, the
Company believes some customers are running earlier versions of the software
products developed by acquired companies that are not Year 2000 compliant, and
the Company has been encouraging such customers to migrate to current product
versions. Moreover, the Company's products are generally integrated into
enterprise systems involving complicated software products developed by other
vendors. Year 2000 problems inherent in a customer's transactional software
programs might significantly limit that customer's ability to realize the
intended benefits offered by Rhythm. The Company may in the future be subject
to claims based on Year 2000 problems in others' products, custom scripts
created by third parties to interface with the Company's products or issues
arising from the integration of multiple products within an overall system.
Although the Company has not been a party to any litigation or arbitration
proceeding to date involving its products or services and related to Year 2000
compliance issues, there can be no assurance that the Company will not in the
future be required to defend its products or services in such proceedings, or
to negotiate resolutions of claims based on Year 2000 issues. The costs of
defending and resolving Year 2000-related disputes, and any liability of the
Company for Year 2000-related damages, including consequential damages, could
have a material adverse effect on the Company's business, operating results and
financial condition.
The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current hardware and software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software
products such as those offered by the Company. Any of the foregoing could
result in a material adverse effect on the Company's business, operating
results and financial condition.
The Company utilizes third-party vendor equipment, telecommunication
products and software products which may or may not be Year 2000 compliant.
Although the Company is currently taking steps to address the impact, if any,
of the Year 2000 compliance issue surrounding such third-party products,
failure of any critical technology components to be Year 2000 compliant may
have an adverse impact on business operations or require the Company to incur
unanticipated expenses to remedy any problems. Management has not yet
determined the cost of achieving Year 2000 compliance.
PRODUCT LIABILITY
While the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential
product liability claims, it is possible that such limitation of liability
provisions may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any product liability claims to date,
there can be no assurance that the Company will not be subject to such claims
in the future. A successful product liability claim brought against the
Company could have a material adverse effect on the
8
<PAGE> 9
Company's business, operating results and financial condition. Moreover,
defending such a suit, regardless of its merits, could entail substantial
expense and require the time and attention of key management personnel, either
of which could have a material adverse effect on the Company's business,
operating results and financial condition.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been volatile at times and in
the future can be expected to be significantly affected by factors such as
quarterly variations in the Company's results of operations, the announcement
of new products or product enhancements by the Company or its competitors,
technological innovations by the Company or its competitors, and general market
conditions or market conditions specific to particular industries. In
particular, the stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such fluctuations may
adversely affect the market price of the Common Stock.
CONTROL BY MANAGEMENT
As of May 31, 1998, the Company's executive officers beneficially
owned approximately 57% of the Company's outstanding Common Stock.
Consequently, the Company's executive officers are able to control the outcome
of all matters submitted for stockholder action, including the election of
members to the Company's Board of Directors and the approval of significant
change in control transactions, and effectively control the management and
affairs of the Company, which may have the effect of delaying or preventing a
change in control of the Company. In addition, Messrs. Sanjiv S. Sidhu,
Chairman of the Board and Chief Executive Officer, Kanna (Ken) N. Sharma, Vice
Chairman of the Board, Executive Vice President and Secretary and Sandeep
(Sandy) R. Tungare, President, Demand Management, constitute three of the five
members of the Board of Directors and, therefore, have significant influence in
directing the actions of the Board of Directors.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, as amended (the
"Charter"), and Bylaws, as amended (the "Bylaws"), contain certain provisions
that may have the effect of discouraging, delaying or preventing a change in
control of the Company or unsolicited acquisition proposals that a stockholder
might consider favorable, including provisions: authorizing the issuance of
"blank check" preferred stock; providing for a Board of Directors with
staggered, three-year terms; requiring super-majority voting to effect certain
amendments to the Charter and Bylaws; limiting the persons who may call special
meetings of stockholders; prohibiting stockholder action by written consent;
and establishing advance notice requirements for nominations for election to
the Board of Directors or for proposing matters that can be acted upon at
stockholder meetings. Certain provisions of Delaware law and the Company's
stock incentive plans may also have the effect of discouraging, delaying or
preventing a change in control of the Company or unsolicited acquisition
proposals.
9
<PAGE> 10
SELLING STOCKHOLDERS
This Prospectus relates to the sale by the Selling Stockholders named
below from time to time of up to 3,266,470 shares of Common Stock. Of the
offered Shares, (i) 3,159,166 Shares were originally issued by the Company in
connection with the Company's acquisition of all of the outstanding capital
stock of InterTrans Logistics Solutions Limited, an Ontario corporation
("ITLS"), (ii) 6,846 Shares were originally issued in connection with the
exercise of options assumed by the Company in connection with the acquisition
of ITLS, (iii) 76,680 Shares were originally issued in connection with the
Company's acquisition of Innomat OY, a Finnish corporation ("Innomat"), and
(iv) 23,778 Shares were originally issued in connection with the Company's
acquisition of Think Systems Private Limited, an Indian corporation. The
Shares described in (i) are being registered by the Company pursuant to a
Registration Rights Agreement entered into by and among the Company and the
former shareholders of ITLS as a condition to the ITLS acquisition. Except as
described herein, the Company is unaware that any Selling Shareholder has had a
material relationship with the Company within the past three years other than
as a result of the ownership of Shares or other securities of the Company.
The following table provides certain information with respect to the
number of shares of Common Stock currently owned, offered hereby and to be
owned by the Selling Stockholders after this offering assuming all offered
shares are sold in this offering.
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE
NUMBER OF SHARES OWNED AFTER
OWNED NUMBER OF THE OFFERING
BEFORE THE SHARES BEING -------------------
NAME OF SELLING STOCKHOLDER OFFERING OFFERED(1) NUMBER PERCENT
--------------------------- ---------------- ------------- ------ -------
<S> <C> <C> <C> <C>
Former ITLS Shareholders:
1244433 Ontario Limited . . . . . . . 231,888 231,888 0 *
1244520 Ontario Limited . . . . . . . 159,186 159,186 0 *
1244519 Ontario Limited . . . . . . . 81,798 81,798 0 *
1244518 Ontario Limited . . . . . . . 36,418 36,418 0 *
La Hougue Financial Management 0 *
Services Limited . . . . . . . . . 579,800(2) 579,800 0
Advent Atlantic and Pacific III L.P. 201,412 201,412 0 *
Advent New York L.P. . . . . . . . . 52,438 52,438 0 *
Advent VII L.P. . . . . . . . . . . . 523,912 523,912 0 *
TA Venture Investors Limited 0 *
Partnership . . . . . . . . . . . . 7,864 7,864
The Schwarzwald Trust . . . . . . . . 463,772 463,772 0 *
The Garabaldi Trust. . . . . . . . . . 318,378 318,378 0 *
The Santarini Trust . . . . . . . . . 163,602 163,602 0 *
The Wailea Trust . . . . . . . . . . . 163,602 163,602 0 *
The Freiburg Trust . . . . . . . . . . 72,832 72,832 0 *
The Emerald Cedar Trust . . . . . . . 18,206 18,206 0 *
1244432 Ontario Limited . . . . . . . 9,104 9,104 0 *
Argentum Enterprises Inc. . . . . . . 81,800 81,800 0 *
Former Innomat Shareholders:
Kalle Valimaa . . . . . . . . . . . . 56,448 56,448 0 *
Sami Lahti . . . . . . . . . . . . . . 3,960 3,960 0 *
Juhani Malmivuori . . . . . . . . . . 3,600 3,600 0 *
Seija Valimaa . . . . . . . . . . . . 3,600 3,600 0 *
Harri Rajala . . . . . . . . . . . . . 2,520 2,520 0 *
Mikko Leppanen . . . . . . . . . . . . 1,080 1,080 0 *
Pekka Valimaa . . . . . . . . . . . . 1,080 1,080 0 *
Jari Hietala . . . . . . . . . . . . . 720 720 0 *
Jarmo Juhola . . . . . . . . . . . . . 720 720 0 *
Katja Rantasalo . . . . . . . . . . . 720 720 0 *
Juha Nylund . . . . . . . . . . . . . 540 540 0 *
Hannele Lindell . . . . . . . . . . . 360 360 0 *
Tommi Malmivuori . . . . . . . . . . . 360 360 0 *
Klas Monni . . . . . . . . . . . . . . 360 360 0 *
Mika Valimaa . . . . . . . . . . . . . 360 360 0 *
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
Marika Lehtonen . . . . . . . . . . . 180 180 0 *
Tapio Lepisto . . . . . . . . . . . . 36 36 0 *
Minna Luusalo . . . . . . . . . . . . 36 36 0 *
Other Selling Stockholders:
Ravi B. Reddy . . . . . . . . . . . . 1,947,210(3) 23,778 1,923,432 2.8%
</TABLE>
_____________________________
* Indicates less than 1%.
(1) There is no assurance that the Selling Stockholders will sell any or all
of the offered Shares.
(2) Includes 6,846 shares issued upon the exercise of options assumed by the
Company in connection with the acquisition of ITLS and (ii) 572,954
shares held for the benefit of De Vijver B.V.
(3) Includes 90,000 shares held by the Reddy Family Foundation, of which
34,390 shares are subject to currently exercisable options. Mr. Reddy
may be deemed to be the beneficial owner of such shares. Also includes
887,634 shares held by such stockholder's spouse.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Stockholders, or by pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer, from time to time
in transactions in the over-the-counter market, in negotiated transactions, or
a combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Stockholders may effect
such transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Stockholders and/or the purchasers of the
Shares for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company
during a period beginning one or five business days prior to the commencement
of such distribution. In addition and without limiting the foregoing, each
Selling Stockholder will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Rule 102, which provisions may limit the timing of purchases and sales of
shares of Common Stock by the Selling Stockholders.
The Company will pay all costs and expenses incurred in connection
with the registration under the Securities Act of the Shares, including,
without limitation, all registration and filing fees, printing expenses and
fees and disbursements of counsel and accountants for the Company. The Selling
Stockholders will pay any brokerage fees and commissions, fees and
disbursements of legal counsel for the Selling Stockholders and stock transfer
and other taxes attributable to the sale of the Shares. The Company also has
agreed to indemnify the Selling Stockholders (who are former shareholders of
ITLS) and their respective officers and directors and each person who controls
(within the meaning of the Securities Act) such Selling Stockholders against
certain losses, claims, damages and expenses arising under the securities laws
in connection with this offering. Each such Selling Stockholder has agreed to
indemnify the Company, its officers, directors and each person who controls
(within the meaning of the Securities Act) the Company against other losses,
claims, damages and expenses arising under the securities laws
11
<PAGE> 12
in connection with this offering with respect to written information furnished
to the Company by such Selling Stockholder.
There is no assurance that the Selling Stockholders will sell any or
all of the Shares.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison LLP, Austin, Texas.
EXPERTS
The supplemental consolidated financial statements of i2 Technologies,
Inc. included in the Company's Current Report on Form 8-K dated June 19, 1998
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such supplemental consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
12
<PAGE> 13
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING STOCKHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
================================================================================
================================================================================
3,266,470 SHARES
i2 TECHNOLOGIES, INC.
COMMON STOCK
[i2 LOGO]
-----------------------
JULY 23, 1998
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================================================================================
